Protecting Business Information

Employees and independent contractors will often need access to a business’ confidential information in order to perform their job. However, misuse of this information can cause problems. One way to protect your business’ sensitive information is to have every employee and independent contractor agree in writing to keep that information confidential and to only use this information for the benefit of your business. Such agreements are often referred to as “non-disclosure agreements” or “NDAs”.

Sometimes one of the best ways to keep confidential information private is to document with those who have access to it that they have a duty to protect this information. In most cases, merely having a non-disclosure agreement in place is enough to keep an individual from divulging confidential information.

If a person chooses not to honor the terms of the non-disclosure agreement, then the business can bring a breach of contract claim or seek an injunction against this person. A common provision of most non-disclosure agreements is that the person violating the agreement will be responsible for paying the legal costs associated with violating the terms of the agreement.

When it comes to protecting your sensitive business information, non-disclosure agreements are a simple and affordable preventative measure that can save a lot of unnecessary problems and legal expense.

For more information about protecting business information, contact Eric Davis at eric@elliott-davis.com.

Don’t Incorporate in Nevada!

When deciding to incorporate, the state in which you incorporate is an important consideration.  While you may have heard that Delaware or Nevada offer significant advantages to businesses incorporating in those states, this may not be the case in your specific instance.  While some of these business friendly states do not have corporate taxes, this does not mean that you will not have to pay taxes by incorporating in those states.

When you conduct business in a particular state, you will still be required to pay the appropriate amount of tax in that state. You must also register in any state in which you are conducting business. (Also, in addition to paying the fee to incorporate in Delaware or Nevada, you will also have to pay the fee to register as a “foreign corporation” in the state that you are conducting business).   So while you may not be paying any corporate tax to the state that you incorporate in, you are not realizing any tax savings (and in fact may be paying extra to register the foreign corporation).

A further danger is that you may be putting your personal assets at risk.  Unless you are registered in a state that you are doing business in, you may not be protected by the corporate form.  This means that your house, car, or any personal property may be lost in the event that you get sued and lose.

Thirdly, you will raise your administrative costs.   Filing in another state means that it is necessary to file paperwork with that state AND the state that you are doing business in.  This means that you will be paying an additional set of filing fees, not to mention any required reports that must be submitted to both states.

Lastly, Nevada and Delaware no longer keep officer and director information private.  Not only are they no longer confidential, but they will have to be disclosed when registering in the state that you do business in anyway.

Generally, unless there are other, specific circumstances that provide allure to incorporate in another “business friendly” state, small business owners will save time, money, and aggravation by simply incorporating in the state that they do business.

If you have incorporation questions or need help incorporating your business, do not hesitate to call Eric Davis at 412.434.4911 ext 11.

Trademark Lessons for Nonprofits

For most of us, when we think of trademarks, we think of iconic brands such as Nike, Coca-Cola, Apple, or McDonald’s—all of which are for-profit businesses.    But what about the Salvation Army, the United Way, or the infamous “Livestrong” bracelet?   Nonprofits, especially in recent years, have started to realized the importance of protecting their intellectual property and using trademarks to distinguish themselves.

Broadly speaking, there are two things all nonprofits should be aware of when it comes to trademarks.   First, nonprofits should make sure that they are not violating anyone else’s trademark rights.   Second, nonprofits should make sure that they are taking proactive measures to protect their own brands, for example, by applying for trademark registration.

Your brand says a lot about you. Whether it’s through your website, marketing materials, or direct experience with your services, your brand is your first point of contact with the public.  In a competitive, high-tech economy, businesses must do everything they can to distinguish themselves. Trademarks and service marks are the most powerful and effective tools businesses can use in meeting this goal.

This is even truer for a nonprofit, for whom goodwill, reputation, and image are its lifeblood.   Branding will often play an integral role in helping your organization advance its message, raise funds, and fulfill its charitable, educational, or religious purpose.

Finally, it’s important for tax-exempt organizations to remember some unique considerations with respect to trademarks that don’t apply to for-profits.    The following are some examples of IRS-specific rules that raise particular concerns, especially in instances where a nonprofit is generating significant revenue in licensing fees from its trademark(s):

  • UBIT. The IRS levies an “unrelated business income tax” (“UBIT”) on income earned from activities regularly carried on that are not substantially related to the organization’s tax exempt purpose.  Income derived from trademark licensing could, under some circumstances, fall into this category.
  • Joint ventures. When developing licensing or co-branding strategies, nonprofits should be careful to avoid creating a “joint venture” which is regulated by the Internal Revenue Code.
  • Private benefit transactions are those that benefit individuals to the detriment of the tax-exempt organization.  Trademark licensing agreements should be constructed in a way that does not benefit an individual(s) to the detriment of the nonprofit.

The following are some resources that nonprofits can use to get a better idea of whether someone else has trademark rights in a particular name or slogan:   The United States Patent and Trademark Office (USPTO) search engine, various state corporations bureaus, internet search engines such as Google, and domain name availability search engines such as Network Solutions.

Please feel free to contact Elliott & Davis, PC with all of your questions about nonprofit law or trademark law.

We currently offer all of our trademark registration services at affordable flat rates—well below the rates charged by many larger law firms.   Typically, our rate for all-inclusive trademark registration packages is $1200.    Phone consultations are always free, so feel free to give us a call at 412.434.4911 ext. 11 with any questions about trademark law

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