Methods to Protect Your Intellectual Business Property:

Patents are used for original products, machines, technical processes or methods, manufactured items and chemical compositions.   “Utility patents” for new inventions or functional improvements of existing inventions are effective for 20 years while “design patents” are effective for 14 years.

Copyrights are used for original writing and musical works and other works of expression give the author exclusive rights to use the works.  They are effective for 70 years after the author’s death.

Trademarks are used for words, symbols, names, internet domain names, packaging and labeling that distinguish one businesses product from another’s.  They are effective indefinitely.

Types of Business Bankruptcy:

Declaring bankruptcy is a serious matter that can affect a person’s credit standing for many years. I recommend you learn as much as you can and seek the advice of a professional lawyer. There are two types of business bankruptcies: Chapter 7 and Chapter 11.
Chapter 7 is when the company is completely liquidated and the proceeds are distributed to creditors and shareholders. Under this scenario the company ceases to exist. The proceeds are normally paid in the following order: secured creditors (i.e. a specific property has been pledge to the creditor for example a bank who has the primary mortgage on a building), legal fees and other costs incurred to administer and operate the bankrupt company, wages due workers if earned within three months prior to filing for bankruptcy, taxes due, general and unsecured creditors, preferred stockholder and finally common stockholders.
Chapter 11 is filed to allow a company to reorganize. During this time, the creditor’s ability to foreclose and collect their debt is limited and the company must report everything to the bankruptcy court.

FYI, Individuals file Chapter 13.

5 Items to Evaluate Before Buying a Franchise:

Franchise History: examine the executives overall business backgrounds and their experience in running a franchise. Look at prior litigation involving the franchise and whether the franchisor or any of its executives have been in bankruptcy. Have an accountant review the franchisors financial statements and talk and visit with five to ten current franchisees.
Cost: know the total investment required. In addition to the initial fee, there are often other costs to rent or buy a site and purchase inventory. Some franchises also require royalties based on a percentage of the businesses gross income as well as payments for advertising.
Training and Support: assess whether the initial training and ongoing support offered by the franchisor will provide the necessary skills for running the business. Find out how many employees will be eligible for training. Compare the instructions to other franchisors of a similar product or service.
Terms of the Deal: look at restrictions on what products and services you can sell and to whom. Understand when a franchisor can terminate the franchise and when you can sell it.
Earnings Potential: franchisors are not required to make earnings claims. If they do, they must provide written documents that substantiate the claims. Examine them carefully.

Questions to Ask Before Buying an Existing Business:

– Why is this person selling?
– What is the valuation?
– Are the key customers and employees staying?
– What is the nature/type of transaction to be used for this purchase – asset or stock? Buyers typically want to do an asset sale to reduce their liability while sellers typically want to do a stock sale for favorable tax purposes.
– Will the seller execute a non-compete agreement and for how long? You don’t want the seller setting up shop next door and provide the same product or service.
– Perform a title search on all assets and a background search and credit report on the seller.
– Who will be/are your competitors?
– Compile financial projections to ensure the business will be profitable and can pay the debt service?
– What type of accounting software do they use?
– What type of internal control systems does the seller currently have in place?

Business Start-up “To Do’s”:

– Do your homework
– Do make sure you know what you are getting into in terms of cash commitments and financial obligations
– Do a business plan
– Do consider buying an existing business or a franchise to get your feet wet
– Do pick an industry, product line or service you know something about
– Do start a business to be excellent at what you do.
– Do develop a relationship with a commercial loan officer.