Friday, March 25, 2011

New Startup Visa in the United Kingdom

I would like to share with you a recent article that appeared in TechCrunch about the new visa regulations in the United Kingdom that would allow startup investors to receive visas to start their companies there. This is a brilliant step on the part of the UK to attract top entrepreneur talent to jump start the economy. Does it mean a “brain drain” for the US, where a similar visa is still in Congress? Perhaps not since the two countries are geographically quite remote from each other, however, the other European countries may certainly witness migration of their foreign entrepreneurs to the UK.

I am re-posting the article for your convenience from here

UK beats the US to a tech-friendly Startup Visa by Mike Butcher (March 17, 2011)

“Right now the UK media is making a lot of noise about new Visa rules which mean “super-investors” willing to put £5m into a UK bank account will get the right to stay indefinitely in Britain after only three years. This is two years faster than the average migrant who still has to wait five years. Deposit £10m and the time drops to two years. Clearly the new rules are aimed at high-value investors and entrepreneurs.

However, what the media is missing is the new rules governing entrepreneurs wanting to enter the UK. Now, beginning April 6th, “high-potential” entrepreneurs will be allowed to come to the UK so long as they have £50,000 in funding from a reputable organisation.

That is ridiculously good news for tech startups wanting to set up shop in the UK, and startups in the UK wanting to hire in talent they can’t get locally – CTOs for instance. Plus, entrepreneurs will be allowed to enter the UK with their business partners as long as they have access to joint funds.

These “high-potential” guys will also be allowed to enter the UK on a “visitor visa” in order to secure funding and make arrangements for starting their business before they transfer to a full Tier 1 (Entrepreneur) visa (which is the normal Visa for normal, non- high growth entrepreneurs, who still need £200,000 in funding to qualify).

So a Tier 1 (“Exceptional talent”) applicant will not need to be sponsored by an employer but will need to be endorsed by an “accredited competent body”. Who are these bodies? Well, the list of “competent bodies” will are yet to be announced by the government, but we’re hoping they will include VC, Angels and other investors. But we’re fairly sure this will work out well for tech startups.

The news is very very good for the UK, and will create a huge war for talent in Europe as other countries race to create similarly smart rules.

And in case you were counting, the UK just beat the US to the cherished “startup visa”.

On March 14 this year three powerful US Senators introduced legislation in the Congress which if passed would instantly provide a two-year US visa to any entrepreneur that can obtain an investor to fund his idea. The StartUp Visa Act of 2011 would allow an immigrant entrepreneur to receive a two year visa as long as they can show that a qualified U.S. investor is willing to invest in the immigrant’s venture with a minimum investment of $100,000 or can show that the business has generated at least $100,000 in annual sales from the US.

But that legislation is no where near being passed yet. The UK just beat the US to it.”

Future of Regulation of Investment Advisers Remains Uncertain

There is a lot of talk now in the financial community about the future of regulation of investment advisers. The Securities Exchange Commission, which currently regulates RIAs (registered investment advisers), does not have sufficient funding to effectively conduct such regulation and enforcement. The SEC recently outlined three options to Congress: (i) give FINRA the authority to regulate dually registered firms; (ii) authorize the SEC to impose user fees on advisers to fund examination and enforcement efforts; and/or (iii) designate one or more self-regulatory organizations to oversee investment advisers.

According to a recent InvestmentNews survey of almost 600 advisers, registered representatives, financial planners, insurance agents and others, 78% voted in favor of options (i) and (iii) above, i.e., increasing FINRA’s role in the regulation process. Interestingly, Michael Oxley, a former congressman known for being one of the sponsors of the Sarbanes-Oxley Act of 2002, has recently registered as a lobbyist for FINRA to promote self-regulation of investment advisers. FINRA is currently overseeing 4,560 brokerage firms and may be expanding its authority to investment advisers.

Congress hasn’t yet selected from among the three options presented by the SEC. Stay tuned…

In the meantime, on March 18, 2011, the SEC issued new interpretations to clarify some questions about the new Form ADV requirements for registered investment advisers. See here: http://www.sec.gov/divisions/investment/form-adv-part-2-faq.htm.

Tuesday, March 22, 2011

Independent Contractors or Employees: California’s “Work For Hire” Contracts

Much has been written (including by me) on the topic of how to distinguish an independent contractor from an employee. I have also written about the importance of “work for hire” or “freelancer” agreements when working with independent contractors to ensure that all intellectual property they create while working on a project is owned by the client rather than the independent contractors themselves.
I recently came across a notable exception to the “work for hire” agreements, and would like to share it with you. It relates to California law, and since I am not licensed there, I urge you to consult with a California-licensed attorney if you think this situation might affect you personally.
In California, if a person enters into a “work for hire” agreement, such person (typically, an independent contractor in New York) is considered to be an employee, and therefore, the employer has to pay appropriate unemployment insurance and workers' compensation. This comes from two local laws, California Unemployment Insurance Code Sections 686 and 621(d) and California Labor Code Section 3351.5(c).
This concept seems to contradict the United States Copyright Act of 1976, which specifically states that the copyright immediately becomes the property of the author who created the work. There are two exceptions. One is if the work is created by an employee within the scope of his or her employment, then the authorship vests in the employer. The other exception is if the work is part of “work made for hire.” This second exception is the one used daily across the United States to allow people hiring freelancers to obtain rights to their work. There are two conditions, though: (1) the work comes within one of the nine categories of works listed in the Act (see my earlier post on this topic) and (2) there is a written agreement between the parties specifying that the work is a work made for hire.
So, in practice, in California, the second exception discussed above just doesn’t work. As soon as you see a “work for hire” agreement, as required by the Copyright Act, the independent contractor becomes an employee. Does it mean that there are NO independent contractors in California? How does everyone deal with a provision like this? One way is, of course, to treat the independent contractors as employees for the purposes of unemployment insurance and workers' compensation. Another way is to omit the “work for hire” language from the independent contractor agreements altogether, and instead include an assignment provision, whereby the independent contractor agrees to assign all intellectual property created as part of the project to the client. A third way is to ask the independent contractor to form an LLC, and then enter into a “work for hire” agreement with that LLC instead of with an individual. LLCs cannot be employees, so the relationship would be that of an independent contractor.
State laws may differ drastically, and this is a good example of why hiring an experienced local lawyer can be important.
This article is not a legal advice, and was written for general informational purposes only.  If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga.  Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.

Sunday, March 13, 2011

Images on Twitter – Extent of Copyright Protection

Agence France Presse v. Morel, a case that is currently in the U.S. District Court for the Southern District of New York, is all about social media. In particular, it is about Twitter and the extent of copyright ownership to the images that get posted and re-posted on Twitter through Twitpic. The case involves a photojournalist Morel who was one of the first to take pictures of the devastation caused by the earthquake in Haiti and post them to his Twitpic account. The issue before the Court was whether Morel was due compensation and attribution for the use by major news organizations of the photographs he posted on Twitpic.

I assume you know how Twitter works: an account user can tweet a short message. The goal is to get “re-tweeted” as many times as possible. Copyright to all content on Tweeter is retained by authors, but Tweeter has a license to use, alter and distribute the content. A related service that allows the tweeting, or sharing of images through links on Tweeter, is called Twitpic. Like on Tweeter, the image creators also retain the copyright to the images and grant Twitpic a license to use and distribute the photos on Twitpic.com and affiliated sites. It means that the links to the photos on Twitpic can be re-tweeted and this would not be a copyright infringement. The question is how far can the images be distributed and what it means for the copyright holder. The Court’s decision to deny the motion to dismiss on the copyright infringement claims by Morel shows that copyright protection depends on the terms of use and the Court’s interpretation of this (sometimes) hard-to-understand boilerplate type of agreement that users agree to (but most typically skip) when they first create an account on the site. The main advice for all users of social media is to read and understand the terms of use of each site, because this is what governs their intellectual property rights.

If you want to read the Court’s decision, you can find it here: http://dockets.justia.com/docket/new-york/nysdce/1:2010cv02730/360858/. This recent publication by Stephen Kramarsky of Dewey Pegno Kramarsky LLP provides a good summary of the case: http://www.dpklaw.com/c/publications/#post-466.

This article is not a legal advice, and was written for general informational purposes only.  If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga.  Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.

Wednesday, March 9, 2011

More corporate law blogs

Bschool recently published their selection of top corporate law blogs. I am grateful to be included in the list. The other winners can be found at this link: http://www.bschool.com/blog/2011/40-best-corporate-law-blogs/ and include the following favorites:

TheCorporateCounsel.net

Wall Street Journal Law Blog (http://blogs.wsj.com/law

Corporate Finance Law Blog (http://www.corpfinblog.com

Corporate & Securities Law Blog (http://www.corporatesecuritieslawblog.com/)

The Conference Board (http://tcbblogs.org/governance/)

Profit and Laws (http://www.profitandlaws.com/)

The Corporate Library Blog (http://blog.thecorporatelibrary.com/)

The Conglomerate (http://www.theconglomerate.org/).

Some other blogs that I like but that didn't make it into the Bschool's list include http://www.startupcompanylawyer.com and http://angelsoft.net/blog/category/entrepreneur.

Also, a great resource for entrepreneurs is quora.com. Quality of answers tends to be pretty high, although a word of advice: beware that none of what is being written on the blogs or on quora should be taken as legal advice.

Enjoy!

11 Steps/Lessons to Starting Your Own Business

In this post, I decided to go over the first steps a founder should take (in my humble opinion) to start his or her own business. What should come next, after you get an idea for a business? Well, you would most likely want to run it by your friends and family to gauge their reaction. Then, follow these steps, not necessarily in this order…

1. Study the market. Research your business idea on the Internet to see whether you have competition. Most likely, you do. This doesn’t mean that the business idea is not viable. If somebody else is doing it, it probably means that there is market for it, all you would need to do is to figure out how to differentiate yourself from the competitors.

2. Prioritize. You probably feel overwhelmed with all the things you need to get done to get the idea implemented. This is where a business plan and a timeline become important. Write down the business idea, how you want to implement it, the steps, the tasks, the funds needed. Where do you want your business to be in the first three months? One year? Three years? There are many free resources available to start-ups in this area. NYC Small Business Solutions, SCORE, Small Business Development Clinic all have seminars and experienced counselors available to you for free to help you design the business plan, marketing plan and identify potential sources of funding.

3. Meet other entrepreneurs. I work a lot with small business owners and start-up founders. To better understand their problems and needs, I started going to meetups and presentations for and by business founders, where they discuss their mistakes, challenges and how they overcame them. The three I groups I would recommend in NYC are Ultra Light Startups, the Hatchery Meetup and the Entrepreneur Roundtable. You can learn from presentations and pitches by start-ups founders as well as from panel discussions by VCs or successful serial entrepreneurs. I personally fully believe in preferably learning from the mistakes of the others rather than my own. There are also many other groups on meetup.com that may be specializing in your industry or technology.

4. Think ahead of time about your brand. Choose a unique name for your business or line of products/services. Make sure that it is available, i.e., no one is using it for the same type of products/services (do a google search); it is available as a business name in your state of incorporation (if you decide to build your brand around your business name); and that a federal trademark is available as well. To be sure, you can order a federal, state and common law trademark search (or ask your attorney to do this for you) to reveal any potential conflicts. In some cases, it makes sense filing federal trademark applications for your business or products/services name even before you file your incorporation papers.

5. Register a domain name for your business before you send in your incorporation papers to the State Department of Corporations.

6. Find a good lawyer and a good accountant. Discuss with both advisors which form of business entity you should choose for your business. The most obvious choice is between an LLC and an S Corporation. I always describe to my clients the legal advantages and disadvantages of both forms, and then refer them to an accountant for a consultation regarding the tax aspects of each business form for this particular client.

7. Be careful what you say and to whom. Ideas get stolen all the time. Beware of this fact when you are talking to other entrepreneurs. On one hand, you want to run your idea by as many people as you can before starting to implement it. On the other hand, there is no guarantee that one of them will not steal it. So, what can you do to protect it? There are several options. First, talk about it just in general terms, no specifics. Second, consider asking them to sign a confidentiality agreement. Third, implement as much of your idea as you can before you start talking about it in details.

8. Learn all you can about the social media networking and marketing. Build your online community, optimize your website, create a blog, start tweeting, join various groups on LinkedIn and create a company profile on Facebook. It is amazing how much you can advertise your business (for free!) using the social media tools. It is like a revolution, and we need to take part in it in order not to be left behind.

9. Join a business referral group/alumni club/special interests club or organization. Expanding your network with meaningful connections is the key to success.

10. If you have partners, please consider entering into a detailed operating or shareholders agreement that would cover all buy sell situations (early exits, disability and death, admission of new shareholders), splitting of profits and losses, corporate governance and decision making mechanism, record keeping and other similar items.

11. Enter into employment or freelancer agreements with each person you hire. I can’t even begin to tell you about all the bad things that can happen if you do not. Please refer to some of my earlier posts.

By now, your business is well underway. Good luck, and do not get discouraged by all the challenges that you may encounter on the way. Dealing with obstacles is an important part of the learning process. Rely on your advisors and please, delegate!