Business Law & Growth

If you're the kind of entrepreneur who wants to make a real difference while you're in business and leave behind a body of work that continues to do good for your family, your customers, and the world after you're gone, you've come to the right place.

Business formation is a pivotal time in your new company's lifecycle. Your choice of entity impacts ownership, liability, taxes, profit sharing, ongoing management, eventual sale, and much, much more. Sky Unlimited can help you make the ideal choice.  

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We help our clients leverage their IP, establish a competitive position for the future, and achieve important milestones for growth.  Our chief goal is to identify key areas in which IP protection is the most critical for achieving the company's business objectives, determine the most effective methods of protection, and create strategies to avoid issues with third-party patents.  

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The traditional law business model is flawed. It incentivizes lawyers to spend more time on matters (since they are billing for every hour in six-minute increments), increase conflict (the more conflict there is, the longer the engagement), and constantly focus on the next new client (one off transactions are the norm in most legal practices). Plus, the world has shifted and quite a lot of legal work has become commoditized into online legal drafting software, documents on demand and do-it-yourself lawyering. 

 

Lawyers, not being entrepreneurs, tried to compete and became mere shadows themselves - document drafters, doing one-off transactions for clients, such as incorporating business, and then went on the hunt for the next new client.

 

Not us! We build lifetime relationships with our clients. Because a legal relationship not built upon a lifetime foundation is worthless. Really. If you want a transaction, go online and find a document drafting service. If you want someone great that will help you move your awesome idea into a revenue generating business, take your existing business to the next level of excellence, and prepare you and your business to leave behind a legacy of significance, you've come to the right place.

 

Sky Unlimited Legal Advisory will work with you to grow your business from day one. We support startups and small businesses through their exciting lifecycle, from business formation to sale - and every challenge and opportunity in between.


Entrepreneur Weekly

Articles from the Chief Counsel's desk.  Sign up for our newsletter to receive these in your email!

Transferring LLC Membership Interests Part 1—An Overview

Say you are a member of an LLC. You own membership interests in the LLC. But what if you want to leave the LLC?

What if you get a divorce? What if you have creditors seeking immediate repayment? What can you do with your membership interests? The answer depends on how transferable those membership interests are.

 

A transfer of LLC membership interests can mean selling, donating, assigning, or gifting—basically one LLC member turning over his or her membership interests to another individual or entity. The transfer can be voluntary or involuntary.

  • Examples of voluntary transfers include selling membership interests to a third party or to the remaining members, donating membership interests to a charity, or leaving membership interests to a trust upon death.
  • Examples of involuntary transfers include those prompted by divorce, bankruptcy, and termination of employment.

The transferability of LLC membership interests is subject to competing interests.  On the one hand, freely transferable membership interests can be more attractive to members because they are easier to dispose of or cash out of—in other words, the membership interests are more liquid and marketable.

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Managing the Money Aspect of Your New Business: It’s Easier Than You Think

Coming up with a great idea that can be turned into a prosperous business venture takes a certain talent.

Knowing how to get your great idea financed and properly managed, takes another.  However, it may be easier than you think.

 

What You Need, What You’ve Got, and Where to Get the Rest

If you think you’re in over your head when it comes to the financial aspects of your business, you’re probably not.  Really. In fact, all you need to do is sit down with an experienced business lawyer and determine what money you need, what you’ve got, and where to get the rest.  According to the U.S. Small Business Administration (SBA), the following are some of the financial areas in which to focus on when financing your new business:

 

Estimating Startup Costs.  While the most important startup cost will likely be “seed” money (the funds necessary to bring your idea to life), others include:

  • ongoing costs – such as insurance, inventory, and utilities;
  • one-time costs – such as incorporation fees;
  • essential costs – such as fixed expenses (rent, utilities, administrative, etc.) and variable expenses (inventory, shipping, packaging,  commissions, etc.); and
  • optional costs – such as advertising, signage, or grand opening activities.
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Making an S Corporation Election as a Married Business Owner

If you’re a married business owner and you want your business to be taxed as an S corporation, there are several things you need to know.

The difference between community property and co-ownership of an asset

 

Let’s take the example of owning a car. If you and your spouse are both on the title to a car, you co-own the car. This means both of you have the right to use the car, sell the car, or do anything you’d like with the car. It also means you are both responsible for paying off any debt or liabilities that arise from the car.  If one of you passes away, the survivor automatically becomes the sole owner of the car, without needing to take any additional actions.

 

But let’s say only one spouse has his or her name on the title. That spouse is the only owner of that car and is the only one (with certain exceptions) with rights and responsibilities attached to the car. When the owner spouse dies, the car would have to be transferred to the surviving spouse via the applicable estate plan or post-death or probate proceeding; it isn’t already owned by the other spouse like in the previous example.

 

However, ownership of the vehicle may look a little different depending upon your state of residence. In many states, such as California, there are rules that make most assets acquired during the marriage “community property” of the married couple. In this situation, each spouse has rights to the property, no matter whose name is on the title.  All assets that are considered community property are split up equally between the divorcing parties. In our car example, if the car is considered community property, it’ll be put into the big pot of community property and split evenly. That can result in either one party getting the car and the other spouse getting something of equal value to offset it, both parties splitting the ownership of the car, or the car being granted to both parties but one buys out the other’s share. The main point of community property is that the parties get an even split for assets acquired during the marriage.

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4 Social Media Mistakes that May Put Your Company’s IP at Risk

Being active on social media is hardly a choice anymore for small to medium-sized businesses—it’s a given.

After all, your customers are there.  Connecting with your target audience in the social web can boost your brand and level the playing field between you and big competitors with larger advertising budgets.  But before you rush out to tweet a deal or share pics of your new logo on Instagram, take a minute to learn about common mistakes smaller businesses make with their intellectual property (or IP)  in social media—and how you can avoid them.

 

Mistake #1: Not having a plan

It’s important to remember that when you tell your customers something on social media, you’re telling your competitors too.  Think through what you want to disclose and whether you have taken the right protective steps to register or claim your branded IP (more on that below).  Make sure you have a social media policy in place both for site visitors and the employees who are able to post to your accounts. Your social media policies must take IP into account and clearly state the ways in which your content, images and logos may and may not be used.

 

Mistake #2: Under protecting your IP

Have you considered filing trademark or trade name applications for the proprietary names or logos you’ll be sharing in social media that are critical to your brand?  While it’s certainly not essential to register every word you write or every image you use, socializing a compelling motto or a trendy logo without protecting it first can be a risk.  Sure, it may go viral. It also may go on your competitor’s next product-- and there will be little you can do about it. Registration heightens your chances of prevailing if you need to ask a third party to cease and desist from using your IP or go a step further and file a Digital Media Copyright Act (DCMA) infringement notice to have the offending website blocked from search engines.

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Can Your Business Survive the Loss of a Key Person?

You’ve likely protected your business with general liability coverage, property insurance, commercial automobile coverage, and workers’ compensation insurance.

But for some businesses, operations would come to a grinding halt without certain essential contributors—key persons as we call them. If your business includes any key persons, key-person insurance should be a part of your business insurance planning.

 

What is a key person?

A key person is someone associated with the business that provides a significant, direct economic benefit. Economic benefit not only includes profits, but also considerations such as cost savings, goodwill, credit access, and customer access.

 

Business owners—particularly those of a small business—are often key persons. Some additional examples of key persons are:

  • A salesperson with well-established or numerous business contacts
  • An employee with specialized expertise
  • The inventor of the product
  • A programmer who wrote the foundational code
  • The owner with relationships that result in favorable credit terms 

How does key-person insurance help?

Key person insurance compensates the business for any financial loss or cost incurred because the key person suffers an insurable event (death or extended disability).

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I’m Starting a New Business - Should I Use an LLC (Taxed as a Partnership) or an S Corporation?

Entrepreneurship has been called the new American dream.

Hanging a shingle starts with an idea that develops into a business plan, but not without careful financial and legal considerations. Among the decisions that new business owners grapple with is whether to form a limited liability company taxed as a partnership (LLC) or a corporation making an S election (S corp).* There are similarities and differences between LLCs and S corps that business owners should understand before choosing between the two.

 

Similarities

-Both entities are created by filing the necessary paperwork with the state. Unlike a sole proprietorship or a general partnership, LLCs and corporations are not recognized under state law until the filing has been made. In addition to state filings required to form the corporation, a special filing on Form 2553 is required for the state-law corporation to elect S status for federal tax purposes.

 

-Both entities provide owners with limited liability, meaning the owner’s personal assets are protected from any business creditors’ claims.

 

-Assuming an LLC does not make an election to be taxed as a corporation, both LLCs and S corps are pass-through tax entities, allowing business profits and losses to flow through and be reported on the owners’ personal tax returns.

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The GDPR—What It Is, Who It Impacts, and How to Comply

Like everyone else, you’ve probably been getting a ton of emails and online notices announcing that companies are updating their privacy policies and/or website tracking tools.

Although businesses do this from time-to-time as part of routine updates, practically all of the latest notices are aimed at complying with a new European Union (EU) law known as the General Data Privacy Regulation (GDPR).

 

Some of you probably don’t even know what GDPR is, and for those of you who do, I’m betting only a fraction of you have made serious efforts to comply with the new law.

The good news is—you’re not alone.

 

Surveys have shown that up to 90% of U.S. business owners are currently not in compliance with GDPR, which went into effect on Friday, May 25th. But just because only a few people are following the law doesn’t mean it’s something you should ignore.

 

With the maximum fines for non-compliance as high as 4% of your annual revenue or $24.6 million (whichever is higher), doing nothing could potentially devastate your business. But before you go into panic mode, realize that a lot of the hype surrounding the law has been overblown, particularly for small US-based companies.

 

The GDPR’s vague language, conflicting media reports, and fear-mongering from newly minted “GDPR consultants” have all fanned the flames of anxiety. Fortunately, we’ve thoroughly researched the GDPR, and we’re going to highlight our findings here to clarify what the new law is, who it applies to, and what—if anything—you should do to comply.

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4 Reasons Why an Entrepreneurial Retreat is Just What You Need Right Now

For many entrepreneurs, being a “workaholic” is the default status. Though such drive and dedication can be positive in short bursts, in the long run it leads to stagnation, burnout, and worse.

Just as experts advise us to step away from what we’re working on for short breaks throughout the day to maximize creativity, the same applies on the macro scale. An ideal way to escape the insane pressures of running a company is to attend one of the numerous different entrepreneurial retreats available.

 

Entrepreneurial retreats are specifically designed to remove stressed-out business owners from their demanding daily routines, so they can focus on improving themselves mentally, physically, and/or spiritually. While there are dozens of different retreats to choose from, most offer a blend of personal and professional development activities aimed at giving attendees a chance to relax and recharge their creative batteries.

 

If you’re not sold yet, here are four reasons you should consider taking a little extra “me time” by attending a retreat. They can be one of the most beneficial events you can attend for both yourself and your business.

 

1. You need to regularly step away from your daily duties to see the bigger picture.

It’s far too easy to stay trapped in the “busy bubble” by throwing ourselves into the daily demand of running a business for months—or even years—at a time without a significant break. This can easily lead to tunnel vision, exhaustion, and health issues if you don’t disconnect from those responsibilities on a regular basis.

 

By attending a retreat once or twice a year, you’ll have the much-needed time and space to slow down, relax, and look within to more fully develop yourself, not just your business strategy. Recharging your creative energy in this way frequently results in a renewed sense of motivation, focus, and vision, which you can use to enhance your business upon returning.

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Think Your Corporation or LLC Totally Protects You from Personal Liability? Think Again

One of the primary reasons business owners set up corporations and limited liability companies (LLCs) is to shield their personal assets from debts and other liabilities incurred by the business.

Indeed, corporations and LLCs exist as separate legal entities from their owners, meaning the business itself can acquire assets, enter into contracts, and take on debt. In turn, if a corporate entity is unable to pay its debts, creditors are typically only allowed to go after the company’s assets, not the owners’ personal assets.

 

However, there are several circumstances whereby business owners can be held personally liable for corporate or LLC debts.

 

Sometimes, business owners simply make innocent mistakes when running a business that leave them personally liable.

 

Other times, when business owners take certain actions, such as using the corporation to promote fraud, failing to observe corporate formalities, or even just inadvertently commingling corporate and personal assets, a court can hold the owners personally liable for the debts and liabilities of the corporate entity. When this happens, it’s known as “piercing the corporate veil.”

 

If you’re a business owner who’s thinking of incorporating, or if you already own a corporation or LLC, be aware of the following considerations, which can leave you personally on the hook for business debts.

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4 Vital Legal Agreements All Startups Should Have in Place

When getting a business off the ground, one common mistake business owners make is not establishing a solid legal foundation to protect their company from unforeseen situations and circumstances.

The most effective and efficient way to provide this legal bedrock is by putting a set of key legal agreements in place.

 

Gleaned from years of business experience and advice from seasoned and highly successful entrepreneurs, we’ve outlined the core four legal documents that a company’s founders should put into place as soon as your business “idea” evolves into a reality.

 

Business Entity Agreements

When starting a business, it’s crucial to select the proper business entity structure in order to maximize tax savings and minimize personal liability. Some of the most popular entity structures include sole proprietorships, general and limited partnerships, C corporations, S corporations and limited liability companies (LLC or even an LLC taxed as an S-Corporation).

 

Once you choose the most advantageous structure, you should—and are sometimes legally required to—draft the proper entity agreements to lay the groundwork for how the business will be governed and operated. Different entity structures require different types of agreements. For example, C corporations require corporate bylaws, while LLCs use an operating agreement.

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