Get Ready for the California Consumer Privacy Act (CCPA)

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California’s new privacy rights and consumer protection law will change the internet and provide Californians with greater control over their data.

On January 1, 2020, AB-375, which is now titled the California Consumer Privacy Act (CCPA), came into effect and revolutionized how companies across the globe interact with consumer data. Specifically, the law dictates how businesses are permitted to collect, access, delete, and share California consumer’s personal information. Despite only being a state law, worldwide compliance from companies has already started due in part to California’s population of nearly 40,000,000 as well as the CCPA’s broad definition of the who constitutes a “California resident.”

Who does the CCPA apply to?

California Consumer Privacy Act applies to companies collecting data from California consumers.

The law only applies to companies who meet the following criteria:

  1. Is a business that actively or passively collects, buys, rents, gathers, obtains, receives, or accesses information that identifies, relates to, describes, is associated with, or could reasonably be directly or indirectly linked with a particular California consumer or household; AND
  2. Is a business that meets one or more of the the following requirements:
  • Has gross annual revenues in excess of $25 million;
  • Buys, receives, or sells the personal information of 50,000 or more consumers, households, or devices; OR
  • Derives 50% or more of annual revenues from selling consumers’ personal information.

As you’ve likely noticed, many of the major websites that you visit or are subscribed to have all recently announce updates that have been made to their Privacy Policy. These changes are being done by companies that meet the above criteria as well as those who are taking precautionary measures to become compliant, due to the severity of consequences which may result from noncompliance.

What does CCPA require companies to do?

The CCPA requires companies who collect personally identifiable information from California residents to comply with the law’s various requirements. Importantly, the company does not have to be located in, do business with or otherwise carry out operations in California, since the law’s application focuses on the user’s residency.

  • Notice – Provide consumers with advanced detailed notice of the type of information that the site collects from users and visitors.
  • Respond – Establish a procedure for responding to consumer’s requests and responses to notices.
    • Opt-Out – Consumers may request that the company will not sell their personal information. Companies are required to include a “Do Not Sell My Info” link.
    • Know – Businesses must disclose the personal information that is being collected, stored, used or sold. Consumers may request to know what type of personal information has been collected.
    • Delete – Requires businesses to comply with a consumer’s request to delete personally identifiable information.
  • Act – Compliance is achieved by responding to a user’s request and by acting in accordance with the CCPA’s requirements. Additionally, businesses are required to verify the identity of a person who submits a request to know or to delete collected personal data and can deny requests.
  • Disclose – Companies must disclose any financial incentives that the company receives in connection with the transfer or sale of personally identifiable information. Companies must also disclose any third parties who receives (through transfer, disclosure, sale or otherwise) personally identifiable information from the company as well as any related financial transactions.
  • Maintain – Establish and keep records, particularly of every request the company receives and how the company responds.

Which consumers can take advantage of the CCPA’s rights and privileges?

In addition to the law applying to company’s with or without California connections, the law is also applied to a broad definition of persons who are physically located both in and out of California . The definition of “resident” is provided in Title 18 of the California Code of Regulations § 17014 and applies to individuals who are considered to be a resident whether or not they are domiciled in California as well as non-residents who are domiciled in California.

How does the CCPA compare with the GDPR?

California Consumer Privacy Act versus General Data Protection Regulation

The California Consumer Protection Act is set to be a digital game changer when it comes to how companies and consumers interact with one another. Recently. the European Union (EU) raised the bar for requirements for sites that collect personally identifiable data have to adhere to. The new EU law is the General Data Protection Regulation (GDPR).

Matter GDPR
(General Data Protection Regulation)		 CCPA
(California Consumer Privacy Act)
Who
[The law applies to]		Consumer: Persons who are identifiable from data that’s collected.

Company: Person or entity who determines the means and purposes of processing activities.		Consumer: California residents.

Company: Person or entity who collects personally identifiable information from California resident and meets one or more requirements.
What
[Information is covered] 		Personal data is any information relating to an identified or identifiable data subject.Personal information that identifies, relates to, describes, is capable of being associated with, or may reasonably be linked, directly or indirectly, with a particular consumer or household.
Where
[Consumers or Companies are located]		Applies to organizations outside the EU if they monitor the behavior of persons in the EU or offer goods or services to persons within the EU.Consumer: California residents regardless of where they are located. Non-residents who are located in California.

Company: California location not required.
Requirements • Notice to be sent within 1 month following collection of personally identifiable information,.
• Notice to include specifics about type of data collected, how it was collected and why it was collected.
• Consumers may request removal or information.		 • Notice to be sent prior to or upon collecting personally identifiable information.
• Notice must include specifics of the type of information collected.
• Consumers may request a copy of collected information or request its deletion.
SecurityCompanies must implement appropriate security measures when processing data.Companies have a duty to implement and maintain reasonable security procedures and practices.
EnforcementAdministrative fines up to €20 million or up to 4% of company’s annual worldwide revenue.Civil actions brought and enforced by Attorney General. Penalties of up to $7,500 per violation.

What happens now?

Implementing precautionary measures.

An impact report prepared for the California Attorney General office estimates the total cost of CCPA compliance will be approximately $55 billion. The CCPA’s broad definitions concerning the type of information that’s being collected, along with an expansive class of consumers that the law applies to has resulted in a majority of major online sites and services to rush towards becoming compliant with the CCPA’s requirements. Additionally, other states around the U.S, such as Illinois, Texas, Maine, Vermont and others have either passed or have introduced new laws to govern the collection of personally identifiable information so as to increase the protection of consumer data privacy.

Applying universal changes.

So far, the trend has been for companies to become compliant by adopting data management and consumer interaction procedures for all users and visitors, as opposed to being dedicated for visitors and users who meet the CCPA’s definition of being a “California resident.” This practice is anticipated to ultimately be more cost and resource effective given the CCPA’s broad and encompassing language as well as the likelihood that other jurisdictions are anticipated to follow in California’s trend of protection over the gathering of consumer’s personally identifiable information.

Compliance with CCPA’s requirements.

By taking an early stance towards becoming compliant with the CCPA, you may be saving your business from exposure to liability for the CCPA’s fines and penalties. Consult with a CCPA Attorney today and learn more about the internet’s latest breakthrough in protecting consumer privacy.

Contact us today: Joshua@biletskylaw.com | 424-256-5075

California Just Released Your Personal Information

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In connection with your California business entity, that is…


Last week, Alex Padilla, California’s Secretary of State, announced the launch of the newly designed California Business Search engine. Over 5,300,000 records were made public, which now includes potentially private information, such as certain names and addresses. For limited liability companies (LLCs), the names and addresses of the owners or the managers are now listed. For corporations, select officer positions now have the names and addresses listed of those who fill such positions. Given the sudden and drastic disclosures, although many are likely to see the move as a step towards transparency, others may otherwise see the change as an invasion of their privacy.

The updated site features; expanded search criteria, improved search capabilities, a new mobile-friendly design, daily data updates and the addition of information relating to Statements of Information of Records. Given the improved functionality of the system, the overhaul of the seemingly out-dated database appears to be an upgrade to the California Business Search division.

Although the updated user-friendly interface and easily accessible information will be welcomed by many, the publicizing of over 5 million filings may be less welcomed by others. This is not to say that such ownership information about a company that is registered to do business in California was not public before. Previously, it was possible to obtain more detailed information such as the names and addresses of the managers and officers of a business entity. However, to accomplish this, the only two options were to either submit a request by mail, or to show up in-person to the Sacramento office.

That’s now a thing of the past as the recent renovation publicizes an entities’ Statement of Information filing. This mandatory annual/biannual formality requires companies to list certain information regarding the identifying information of the managers or members of an LLC, along with information about the LLC’s management structure. Likewise, corporations are required to list some of the key officers of a corporation. All of this information and more is now just a click away from being accessible by anyone on the internet.

As has been the standard in the majority of states, and what has been the growing trend in other states, the details of a business entities‘ ownership/management information is usually easily accessible online by the public. Prior to California’s revamp of their Business Search database, the only information that was publicly displayed through a simple search was only the company’s; name, entity number, status, agent for service of process information and the company’s business address. This information is pretty much universally available in almost every other state as well.

Triumphed as a step towards greater transparency, the type of information that is now readily available to the public also includes the entity’s; principal office address and mailing address, the management structure of limited liability companies and the names and addresses of an LLC’s managers (or members if the company has no managers) and Chief Executive Officer, as well as the names and addresses for certain officers of a corporation such as the CEO, Secretary and Chief Financial Officer.

Of course, not everyone who’s a manager or an officer of a California business entity is affected by the change. California’s Secretary of State offers the option of providing a manager’s or officer’s “name and complete business or residential address” along with the Statement of Information. So, for those who had from the start always utilized a business address, rather than their home address, no records of their more personal information has been made publicly accessible.

The purpose behind wanting privacy when it comes to the information that is listed with your business varies from person to person and from industry to industry. Some business owners simply just don’t want their information on the internet; others may see it as a competitive strategy with hopes of keeping the company’s business structure hidden from a competitor. Whatever the reason, the truth is that there is not really an absolute way to make a businesses’ information completely private or anonymous. If someone has a purpose or desire to find out certain information, they will find it. It just may take more than just a quick database search.

California has never quite been seen as a “corporate haven”, especially when compared to other states, such as Delaware. This is due in part to California’s minimum annual franchise tax of $800. Now, the addition of easily accessible detailed information of a businesses’ ownership and management structure is likely to be considered as a step backwards from being able to lure out-of-state businesses to the nation’s most populated state.

Delaware, Nevada and Wyoming were once seen as the top privacy trio when it came to states that did not publicly provide the information of the owners or managers of a business entity in an easily accessible manner. Nevada has since made the names and addresses of directors, officers and managers public. However, Nevada is still seen as a favorable state with respect to preserving privacy, as the state allows “nominees” to be listed on the required Initial and Annual List, in place of the names of those who own and/or manage the business entity.

One state that has also been gaining plenty of attention among those who prioritize privacy concerns, strictly speaking towards a focus on the public listing of an entity’s owners or managers, is New Mexico. Going largely unnoticed by many entrepreneurs, New Mexico offers a wide range of unique and substantial benefits with respect to incorporating a business in the state.

One caveat to this is that the true benefit of privacy only exists with respect to New Mexico limited liability companies (with other entities such as corporations and limited partnerships not falling under this notion). In addition to New Mexico’s low filing fees ($50 for domestic LLCs), New Mexico does not record the names and/or addresses of the members or managers of LLCs on their initial filing, and New Mexico LLCs do not file Annual Reports. So, for an LLC in New Mexico, no member or manager information is ever listed on the state database.

Circling back to California, although it may be ideal to be able to choose which state you form your business entity in, choosing a state besides the one that the business will operate in, or in which the owner of the business lives in, is often not the optimal decision. Instead, this can often result in undesired consequences if the entity is not then registered in the proper state.

Before choosing which state to form your business entity in, it is important that you obtain all of the necessary information for you to be able to make an educated decision. Even if you do feel confident in your choices and even if you feel that you have done all of the research, it’s important that you contact a qualified business or corporate attorney to help guide you through the often complex legalities surrounding the formation of a valid and sustainable business entity.

For more information or to get started, contact Biletsky Law to help you with all your business and legal needs.

Business Entity Choices

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Biletsky Law - Start your businessDeciding which type of entity is right for your business can be a tough decision. There are many factors to take into consideration such as costs, taxes, liability, and legal fees. With the different choices that are available to you, it can sometimes be daunting to try to figure out which entity type is ideal for your business.

But don’t worry, you’re not alone. While entity specifics do vary from state to state, there are general similarities and differences between the states. This article will provide you with a brief description of some of the different entity types that are available to you. Although this article will give you a breakdown of the common characteristics of each type of entity, it is always best to consult a business or corporate attorney to help you decide on the best entity type to choose.

Sole Proprietorship

Regardless of the reasons that you may choose to go solo, a sole proprietorship is certainly the easiest business entity to set up in that you are the company. If you are operating your business using your last name, the process is even more simple. This is because you will only need to file a Doing Business As (DBA) of Ficticious Business Name with the county if you are using a name in which the owner is not easily identifiable. While the cost and ease of a sole proprietorship is alluring, one of the biggest downfalls is that there is no protection from personal liability. Since you are the company, there’s nothing to shield you from liability.

Partnership

A partnership can come in several different forms but the most common is a general partnership. One thing that you may not know is that although a partnership agreement is highly recommended, there does not need to be any kind of agreement between the parties for a partnership to exist. Rather, partnerships can be implied based on the actions of the parties (such as the sharing of profits and losses). General partnerships do not provide protection from liability for the partners, however there are several types of partnerships which do offer such protection. Without going into too much detail, there are limited partnerships where there is a general partner who is subject to liability and the rest of the limited partners who are shielded from liability. Depending on the state, there are also limited liability partnerships, and limited liability limited partnerships. The important aspect of each type of partnership is that there are two or more parties who are working together and either dividing profits, losses, or workload in such a way that a partnership can be implied.

Another aspect of a partnership is the manner of taxation. Partnerships have a “pass-through” taxation structure in that they are treated as disregarded entities and you will only be taxed once. This is in comparison to some forms of corporations where there is a double taxation, which will be discussed more in the corporation section below.

Limited Liability Companies

Recently, one of the most common entity choices are limited liability companies (LLCs). LLCs are attractive entity types because they offer the protection that a corporation offers, but also offers more flexibility in the structure of the company than what is possible to do with a corporation. LLCs are also unique in that you are able to elect how the LLC is taxed. This means that you can either be subject to double taxation, like a corporation (see below) or you can be taxed as a partnership or disregarded entity would be taxed.

Other forms of flexibility that an LLC has is the structure of the company itself. LLCs can be structured or managed in a variety of ways which helps the business be controlled in a customized manner that is best for the company.

Corporations

Corporations are generally divided into two different types of entities a C-corp and an S-corp (there are other types of corporations, such as a B-corp, but this article will focus on these general types). C-corps are generally used by larger corporations and do not have the certain limitations that an S-corp has. With an S-corp, you are limited to only 100 shareholders and can only have one class of stock. Whereas a C-corp does not have such restrictions. An S-corp further has some characteristics which are similar to LLCs. Such charecteristics include the option of being taxed as a partnership and therefore having single taxation. C-corps do not have the option of receiving pass-through taxation and are subject to double taxation. Double taxation means that those earning revenue from the corporation are taxed both at the corporate level and then at the personal level.

In addition to the taxation aspect, corporations are generally seen as the most favorable busines entity by investors and shareholders. One of the reasons for this is because of certain formalities that the corporation needs to follow in order for the corporation to retain its liability barrier.

There are many different charactersitics of each entity that is not discussed in this article and it is important to be aware of all of the nuisances of each before deciding on an entity. While the decision of which entity to form is certainly very important, choosing the wrong entity and figuring that out early enough can be a saving factor as many states allow conversions between entity types (for a fee).

For help with your business entity formation needs, contact Biletsky Law.

Terms and Conditions

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Biletsky Law - Terms of UseAlthough you may not be aware of it at the time, by visiting or using many websites and applications you may be agreeing to specific terms and conditions set by the website or application that you are using. These agreements may have different names such as Terms of Use, Terms and Conditions, Code of Conduct, User Agreement, and so on. Despite the different names, each of these agreements are meant to set the conditions for your use of the service and to also provide the owner with protection from liability.

So what’s in these agreements? Besides the names of these contracts, these agreements come in many different variations of length and complexity. Generally speaking, the more interactive the website or application is, the more terms that will be contained within the agreement. Also, what type of content the website or application hosts heavily influences the terms that will be in the agreement.

Keep in mind while reading these sections that the purpose or content of the provisions in these agreements are usually written to completely prevent any kind of liability on the owners part. In some cases, these agreements can be so over broad that they may end up being unenforceable. Regardless of the validity or enforceability of these provisions, some basically throw in the kitchen sink hoping that the agreement will be enforceable.

Introducing the Parties

Often, these agreements start out by defining who you are and who they are. Some of these agreements will use “We” and “You” while others will use more formal language such as “User” and “Company.” Regardless of the way that they state the party names, they are separating themselves from the rest of the world and considering anyone who uses or accesses the website or application to be considered the other party.

Also, there are certain services where access is based on a subscription. For these websites or applications, a further distinction between the mere user and a member may also be brought up.

What You Can’t Do

Another provision of these agreements limit what you are allowed to do on the website or application. These lists can go on for pages and include everything from refraining from posting malicious or illegal content to prohibiting hacking, spamming, soliciting, and other actions. These provisions help the owners to have the argument that regardless of the kind of content that you posted, they had previously prohibited such content and should therefore not be held liable.

Disclaimers

A section that could go on for pages are the “Disclaimers” sections. Depending on the use of the service, these disclaimers attempt to reduce or eliminate the owner’s liability for pretty much everything. Some provisions will disclaim any kind of “warranty” that the product or service may come with while other provisions limit what type of remedies you may be entitled to.

Further Protection from Liability

Depending on what type of product or service the website or application is offering, users may have the ability to post any type of content. This can pose a major problem for these websites as everything from stolen property, defamation, child pornography, and malicious content could be posted.

When the laws and regulations surrounding the internet were first evolving, certain laws  such as Section 230 of the Communications Decency Act of 1996 were passed which aimed to protect certain service providers from liability. In order for these kinds of services to be able to be protected, service providers must meet certain requirements. Some of these requirements allow the owners of certain content to be able to contact the owner in order to remove content that is being used without permission or that which is offensive.

And More Boilerplate

These types of agreements can sometimes be filled with endless legal jargon and repetitive clauses meant to ensure that the owners are protected. While at first glance these agreements may seem to limit any hope you have of getting out of the agreement, that may not be the case. Although within the mountains of boilerplate there may be “severability clauses” which allow the rest of the agreement to be enforceable if something is found to be invalid, the terms which are often found to be invalid are usually the most one-sided ones.

For more information on Terms and Conditions documents or to have one prepared for your website or application, contact Biletsky Law.

Where to Incorporate

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IMG_0464When the topic of what state to form your business in comes up, most people immediately say Delaware. In certain situations, this may be the right answer, but the state of Delaware is often thrown around as the answer more than it should. There are many issues to take into consideration when determining which state is the most ideal for your business to be formed in. We will go through a few of these important considerations below.

Where are you located?

Chances are it’s not in Delaware. Delaware certainly has its’ advantages when it comes to the cost of running a business as well as taxes, but it is often forgotten that you will also likely be subject to the fees and taxes of the state that you operate in. For example, a business that is incorporated in Delaware but that is doing business in California will likely need to register as a foreign company in California and will then likely be liable for California fees and taxes. However, Delaware does makes it easy for most small businesses in that if you are registered in Delaware, but are not doing business in Delaware, you will likely not need to pay any Delaware taxes (although certain fees may still apply).

What about the other states?

Delaware has long been held as the state that most people think of when it comes to where companies are from (especially corporations). There are many reasons for this, but one that sets it apart from the other states is called the “Court of Chancery”. Although it’s certainly a fancier name than your normal “Superior Courthouse”, this court’s main focus is business. Cases and controversies that go through this court enjoy expedited case times and are presided over by judges with particular experience in business issues. But at this point, this court is probably not what is convincing you to incorporate in Delaware.

Low and behold, other states saw Delaware’s success in attracting businesses with their low costs, no taxes, and discrete reporting and those states decided to jump on the bandwagon. The two other states who have made a name for themselves as the favorites amongst businesses are Nevada and Wyoming. These states offer similar low or no cost fees and don’t require certain reporting such as shares issued or who the directors are (this can be a big advantage when someone doesn’t want the world to know that they are the owners of the corporation for whichever reasons).

Nevada and Wyoming have even upped the ante with Delaware in that neither state instills any personal tax on a corporation owner and has no annual franchise tax. This is a substantial advantage in particular for other states which do have annual franchise taxes, such as California. California requires that an entity pay a minimum of $800 regardless of whether the company is even running or is operating at a loss. Having no such franchise tax in states such as Nevada and Wyoming is a great advantage unless you run into the issue that I mentioned above…where you still may be subject to the fees and taxes from the state you operate in.

So what does this all mean?

States such as Delaware, Nevada, and Wyoming have been designed as being very business friendly in the hopes of attracting your business to incorporate there. Often, many people will recommend one of these states as the state of incorporation. But the biggest issue that tends to be forgotten is that forming your company in another state does not necessarily leave you free and clear from having to pay the state that you operate in.

For more information on what state to incorporate in, contact Biletsky Law.

 

Work-for-Hire

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Biletsky Law - Work for HireIf you take a closer look into your favorite movie, television show, or song, you may come to realize that there are a lot of different components that go into these productions. Even more so, each individual who contributed to the project may have different roles in the production as well. Take a hit song for instance; the music that you are listening to is likely owned by a record label and/or a publisher. Although it is the artist’s song that you are listening to, the song is likely owned by someone other than the artist. Likewise, the important individuals who produced or mastered the song likely have no ownership interest in the song either.

This comes from an important concept in copyright law called a “work-for-hire.” Under the U.S Copyright Act, a work-for-hire is something that is either a work prepared by an employee within the scope of their employment or a “work commissioned for use as a collective work, part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as an answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire” (17 U.S.C 101) .

Before explaining the concept of work-for-hire more, it is essential to understand why it is so important for something to be categorized as a work-for-hire. What it mostly comes down to is ownership. When a work-for-hire is commissioned either by an employer or by someone contracting an individual or a group to create the work, that person is entitled to the complete ownership of the copyright within that work. Since the owner of the copyright is the only one who is legally allowed to exploit the work (without permission or a license otherwise), this means that the owner gets all of the money that comes out of the work.

Now that you see some of the importance of a work-for-hire, we can discuss what it is and when it applies. Normally, a person automatically owns the copyright in the work that someone creates (an artist owns the painting, a writer owns the book, etc.), but when something is designated as a work-for-hire, the employer or the person commissioning the work automatically becomes the owner. As I mentioned above, the work-for-hire concept is often found in an employer-employee relationship. A big issue that the courts have had to deal is when an independent contractor is involved, but that is a topic for another article. The reason that the employer-employee relationship requires that the works that are created by an employee become the property of the employer is simple; the employee is being employed to create the work (note the “within the scope of employment” definition above; whether someone is within their scope of employment is again, another issue).

In addition to the typical employer-employee relationship, there are also the works that are commissioned by another person. This is where we come back to the example of the song, or a movie, or a television show. A movie is a great example because it is even defined in the U.S Copyright Act as something that a work-for-hire may qualify for. Songs often qualify as well under one or more definitions such as “collective work” or “compilation”. The reason songs qualify is because they are actually compilations or collective works. If you think about it, it is not as often that you find an artist that writes, records, producers, and masters their own song (Although these artists still do exist!) and that’s where the compilation part comes in.

So to bring it all together, a work-for-hire is a vital piece of copyright law that allows other people to own and monetize off of the work of others. Of course, the people who make it are often rewarded (think advances, royalties, cash compensation, etc.) and that is just one part of what makes the entertainment industry function.

For more information on the concept of a Work-for-Hire, contact Biletsky Law.

Cuba Trademarks

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Biletsky Law - CubaFor the last 50 years, Cuba has been an almost unreachable destination for U.S citizens. Sure, there were loop holes and ways to get there, but for the majority, Cuba was an off-limits territory. This all changed in December of 2014 when U.S President Obama declared the easing of the embargo that has placed restrictions between the U.S and Cuba. With this announcement came a whole slew of new issue involving U.S and Cuban relations including visitation, immigration, telecommunications, and of course business.

Now that the trade lines between the U.S and Cuba are starting to resurface, there is a new realization of the untapped market that lies just 90 miles from the Florida coast. Cuba, which is home to over 11 million people, has not been saturated by any U.S companies for the last half century and as businesses start to pour in, there are several vital issues to take into consideration. One such consideration is the protection of intellectual property and, in particular, trademarks.

Cuba is a “first to file” jurisdiction where the first individual or company to file a trademark will be entitled to the use of that trademark. This is in contrast to the U.S which has a “first in use” policy which makes it that whoever used the mark first is the one that is entitled to continue to use of the mark. Now that U.S companies are permitted to obtain Cuban trademarks, it is essential that companies evaluate whether steps need to be taken in order to protect their intellectual property.

So what does this mean? Well, it doesn’t necessarily mean that without action that your trademark will be taken, but if you are in an industry where there is some likelihood of a cross-over between markets, then it might be a good idea to secure your trademark.

As of now, there are two ways to secure your trademark in the Cuban territory. Which way is appropriate for you depends heavily on your circumstances and it is best to consult an attorney before taking either step. One way to secure your trademark is to register your pre-existing mark with the World Intellectual Property Organization (WIPO) under the Madrid Protocol Treaty. Another way to secure the trademark is to register the mark with the Oficina Cubana de la Propiedad Industrial (OCPI), which is the Cuban equivalent of the US Patent and Trademark Office (USPTO). The new developments in the U.S – Cuba relations also allow U.S companies to pay filing fees, obtaining Cuban registered agents, and to litigate to protect their intellectual property.

For more information on how to protect your intellectual property in the U.S and abroad, contact Biletsky Law.

 

What does the new California law for LLCs mean for me?

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On January 1, 2014 a new law in California was enacted that impacts new and existing limited liability companies (LLCs) alike. So what does this new law mean and does it have any effect on you? This article will explore what the new law aims to achieve and what it means to your business.

Limited Liability Company

Background

The California Revised Uniform Limited Liability Company Act (RULLCA) replaces the Beverly-Killea Limited Liability Company Act. One of the goals of the RULLCA is to put California’s LLC laws on the same page as other states. The new law also aims to provide additional flexibility and enforceability of an LLC’s operating agreement. The RULLCA sets out several default provisions that come into play when an operating agreement is silent. All of the provisions of the RULLCA are automatic and LLCs do not need to file any paperwork or do anything in order for these changes to be made. There are certain provisions of the law that cannot be changed, such as certain fiduciary duties. There are also others that can be changed or removed by way of making changes to the LLC’s operating agreement. So let’s get into what the major changes are:

Operating Agreement

The RULLCA gives the operating agreement of an LLC more fortitude in that the any provisions written in an operating agreement will now supersede any conflicting records filed with the Secretary of State. The RULLCA also gives rise to a new form of operating agreement which is the “implied operating agreement.” This is in addition to the written and oral form of the agreement.

Member Managed

By default, LLCs are now member-managed. In order for an LLC to be manager-managed, the Articles of Organization and the operating agreement must state so. Managers also have equal rights in managing the LLCs. There are also some courses of business that require unanimous approval by members such as a certain sales of assets, mergers, an amendment to the operating agreement, or any acts that are outside the ordinary course of business for the company. These default provisions are amongst those that can be overridden in the operating agreement.

Voting Rights

Under the new law, any activity that is outside the ordinary course of the LLC will require the unanimous approval of all of its members. This provision may also be overridden by specific mention in the operating agreement. Also, what the LLC’s “ordinary course of business” is can be defined more broadly or narrowly in the operating agreement to help in the customization of the LLC’s business.

Biletsky Law -Limited Liability Company

Fiduciary Duties

Another change that the RULLCA makes is that it outlines what fiduciary duties a manager owes to a member. These include the duty of loyalty, the duty of care, and the duty of good faith and fair dealing. These duties are automatic and while some can be changed by doing so in the written operating agreement, others such as the duty of loyalty and the duty of good faith and fair dealing cannot be eliminated.

Contributions

The definition of “capital contributions” to the LLC has been expanded beyond money, property, or services rendered to also include “any benefit” provided by a person to the LLC.

Indemnification

The new law has made it mandatory for the LLC to indemnify managing members of the LLC who complies with their statutory duties. This can be overridden by stating so in the operating agreement. The RULLCA also expands indemnification to include the reimbursement of managers for payments made in the course of business, made on behalf of the LLC. Again, this reimbursement is dependent on whether they have met their statutory duties.

Taxes

The RULLCA has eliminated the default provisions for tax allocations. The former law had a default rule whereby the profits and losses were proportionally divided according to the contributions of each member. Now, the operating agreement must specify the how profits and losses are to be allocated amongst the members.

Disassociation

The RULLCA has created certain triggers for the automatic dissociation of a member. These include the death of a member who is an individual, the appointment of a guardian or conservator of an individual, a judicial order stating that the member is incapable of performing their duties, and if a member becomes a debtor-in-bankruptcy. These triggers may also be overridden by changes to the operating agreement

Conclusion

So, there you have it. California’s new LLC law imposes several changes which may, or may not, have an impact on your company. While there are several other changes that the RULLCA has to the former law, these are some of the major changes which may impact your business. As always, it is best to have an attorney review your operating agreement and discuss with you whether any changes should be made in light of the changes made by the new law.

Is an LLC the best option for me?

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Biletsky Law - LLC Benefits
Relatively speaking, LLCs are one of the newer entity choices that companies may be structured as. But just because it’s a popular entity choice doesn’t necessarily mean that it’s the right choice for you. So let’s explore some of the advantages and disadvantages of selecting an LLC.

 

But first, what is an LLC?

An LLC, or a limited liability company, is a unique entity type which combines different characteristics from other types of business entities. Just looking at its’ name gives you a better idea about what this means. The limited liability part is generally a characteristic of corporations which provide the corporation’s owners with protection from liability. Another characteristic that an LLC has is the way that it is taxed, but we’ll get into that a little later.

 

So what’s the deal with the “limited liability”?

Let’s start off by comparing other business entities. A sole proprietorship or a general partnership are business structures where the individual or partners are held liable for the general business, profits, and losses of the company. Now let’s look at LLCs and certain types of corporations. With these entities, the individuals are protected from liability and the company itself is liable for the business of the company. This is generally speaking and there are many situations where the individual owner may become liable.
Biletsky Law - LLC Taxes

And what about the taxes situation?

Here’s another aspect of an LLC that is particularly alluring to business owners. Again, let’s look at some of the other entity choices. Individuals in sole proprietorships and certain types of partnerships are only taxed once, also known as a “pass-through” tax. This is different from certain types of corporations which may be subject to double taxation. This occurs when the corporation is taxed and then the individual is also taxed. In certain states an LLC provides it’s owners with the choice of how to be taxed. These choices can include being taxed either like a sole proprietorship (or a partnership) or as a corporation.

 

Costs and Investors.

One of the downsides of setting up an LLC is the cost. Sole proprietorships and partnerships have minimal to no cost to set up. LLCs and corporations can cost up to several hundred dollars to set up depending on the state the company is being set up in. For some companies, this downside is offset by the fact that LLCs and corporations are attractive to investors whereas sole proprietorships and partnerships are generally not conducive to investors.

 

Decisions and Changes.

Business planning and selecting which structure is best for you and your company can be complex and there are numerous different issues that you need to consider before deciding which one is ideal for your situation. It is highly recommended that you discuss your business plans with a legal professional before making your decision. However, just because you have already chosen or even already set up your business as a particular entity does not mean that everything is set in stone. Depending on the state your business is in, changing the type of entity can easily be done.

Conclusion

So where does this leave us? LLCs can be very flexible and advantageous business structures depending on the state you are attempting to set your business up in and what your overall goals are. The topics discussed above are just a few of the issues to consider when choosing how to set up your business. Remember, planning, research, and knowledge are essential to the success of your company!