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Dana Howard Shultz

Dana Shultz’s Answers

4,076 total

  • A newly incorporated DE corp has 10m authorized shares at a start value of 0.00001. Can the shares be sold for a higher price?

    The 3 founders would get 2m shares each at a price of 0.005. 2 of the founders would bring in their IP as asset. 1 founder would pay 10k for the 2m shares.

    Dana’s Answer

    As my colleagues have noted, (a) the consideration paid for shares can be greater than the shares' par value, and (b) you need to make sure that you carry out the process of issuing those shares properly (an experienced business lawyer can help you).

    The post at the link provided below summarizes the share issuance process.

    Given that one founder will pay $10K for 2m shares, the other founders' IP (which should be transferred pursuant to an appropriate assignment agreement) should be valued at $10K each because each, too, will receive 2m shares.

    The corporation's balance sheet (i hope you have an accountant advising you) will include accounts for both common stock (the par value portion of the capital contributions) and paid-in capital in excess of par value (the remainder of the capital contributions).

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  • How would one protect an idea that would be used as a business strategy; rather than an actual patent for a product?

    I have a strategy that if implemented could make a company lots of money. Though I have concerns due to the fact that much of what I have read and heard. Ideas are not protected like a product for patent.

    Dana’s Answer

    If your business strategy provides an economic advantage but does not qualify for patent protection - whether because it is a mere idea or for any other reason - you protect it by treating it as a trade secret.

    This means, most importantly, that you do not disclose the strategy to anyone else until that person has signed an agreement with appropriate confidentiality provisions (stating, for example, that the person will not disclose confidential information to a third party and will not use it other than for a business relationship with you).

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  • What does it mean when I read that the LLC has had its status with the Franchise Tax Board surrender or forfeited?

    I am looking up this "LLC" as it advertises as the same on ts webpage but its email address ends in "inc" @***com. So the owner is commissioned as a notary public but every time I try to contact him no response and then I see suspended and forfeit...

    Dana’s Answer

    I blogged about this topic several years ago - please see the post at the link provided below.

    Quoting a portion of that post:


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  • Setting up LLC in California for Indian based online service company.

    My business partner lives in India and has an online service business where he would like to expand into the US market. He would like to appoint me as being the point of contact for setting up his LLC, opening bank accounts, etc on his company's b...

    Dana’s Answer

    Assuming that you have a suitably-experienced lawyer in California help you, legal compliance is reasonably straightforward.

    Taxation - both domestic and international - is a major issue. You will need to retain a tax advisor with relevant expertise.

    I have helped dozens of international clients bring their businesses to the U.S. and have blogged extensively about the challenges that they face. I recommend that you start at the link provided below and follow links from there.

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  • When a person is issued a SS # and the number indicates it is not an ITIN but a SS# issued out of CALIFORNIA, does this also

    indicate the person is a citizen too?

    Dana’s Answer

    Social security numbers can be issued to non-citizens as well as citizens. (The area number specified by the first three digits - please see the page at the link provided below - is irrelevant.)

    For example, a foreign national legally working for a U.S. employer will have a social security number.

    So, no, SSN does not indicate citizenship.

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  • How do I end an S corp wihen the buyers are paying the s corp monthly (for 60 months) for the purchase?

    Buyer bought all assets to the S corp and the S corp is just a shell with a note from the buyers. We are trying to end the S corp so we don't have to pay California corporate tax and file taxes for the S corp. Any Ideas? Thanks Tom

    Dana’s Answer

    If I understand the question correctly, you want to dissolve the corporation, but you cannot do so because payments will be made to the corporation for the purchase of its assets.

    The straightforward approach from the business perspective would be to have the payments assigned from the corporation to its shareholders. However, (a) a lawyer would need to examine the asset purchase and sale agreement to determine which requirements must be satisfied for an assignment to be effective, and (b) you should check with your tax advisor to determine whether such an assignment would have undesirable tax consequences.

    In summary, this situation is too complicated for a definitive answer on Avvo. You need to engage qualified professionals to help you.

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  • I have a novel idea not directly related to my line of work at a tech giant. How can I launch a business and protect the idea ?

    I have an idea for a new invention. My day job is work for a large tech firm in the silicon valley / bay area. Their HR department state "they own anything I invent". This idea is indirectly connected to the products and services my employer makes...

    Dana’s Answer

    My colleagues are correct that your agreement with your employer governs (and the HR Department would be incorrect in stating that your employer owns anything you invent).

    However, rights to your inventions ultimately are governed by Labor Code Section 2870 (link provided below), and the protections of that Section typically would be reflected in an employee's invention assignment agreement.

    Summarized briefly, that Section states that inventions developed entirely on the your own time without using the company’s equipment, supplies, facilities or trade secrets, belong to you (subject to certain exceptions).

    If this matter is important enough, you should retain a lawyer to advise you.

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  • Foreign Individual or Foreign Entity setting up business in DE

    1) Foreign individuals or foreign entity wish to set up a company (LLC or C-Corp) in DE. Will set up sales office in CA, hire staffs in CA & other states as well. What would be the difficulties in terms of paperwork? Which one is an easier route, ...

    Dana’s Answer

    1. I have helped dozens of foreign clients set up businesses in the U.S. The process you have described is not too difficult (if one knows what he or she is doing). There is no difference concerning paperwork or process if the founder is a foreign individual vs. a foreign entity.

    2. Advantages of having an owner residing in the U.S. potentially include (a) making it easier to obtain an EIN if he is a principal officer and has a social security number (please see the post at the first link provided below) and (b) making it easier to open a bank account if he is authorized by the corporation to do so and if he lives near the relevant bank branch (please see the post at the second link provided below) - it will not be necessary for all directors / owners to be present.

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  • My brother disposed in his Will our entire business partnership without mention of my share.

    My brother died with a will disposing our entire business partnership and all the assets in favor of his daughter. How do i protect my interest now that no mention was made in the will about my share and they are now doing court proceedings about ...

    Dana’s Answer

    Your brother can bequeath only his portion of the partnership.

    You should retain a probate lawyer to represent you. Using the Find a Lawyer link at the top of the page, you can identify probate lawyers in S.F. to contact.

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  • When dissolving a 2 partner California LLC with no debts, do both partners get a copy of the software?

    This California LLC has developed a software code base that has no value to an outsider, but it can continue to be developed for future use in operations of an entity. The LLC is being dissolved, and I am curious what the default action will be in...

    Dana’s Answer

    As my colleagues have noted, the two members need to enter into an agreement by which the LLC assigns to them, in equal measure, rights to the software.

    There is a subtle issue with respect to intellectual property rights. If the copyright in the software is jointly owned by the two former members, then, absent an agreement to the contrary, any profits that one makes from the software must be shared with the other joint owner. (Please see the post at the link provided below.)

    Given that the individuals will have gone to the trouble of dissolving the LLC, they probably will not want to account to one another for future profits arising from the software.

    Accordingly, they should include in their agreement provisions by which either joint owner may exploit the software and its copyright in any way without any obligation to account to the other joint owner.

    It is unlikely you can prepare such an agreement properly on your own. You should retain an experienced business lawyer to advise you.

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