Part IV – Initiating
Entrepreneurial Ventures
Chapter 11 – Assessment and Evaluation of
Entrepreneurial Opportunities
Chapter 12 – Legal Structures for New
Business Ventures
Chapter 13 – Legal Issues Related to
Emerging Ventures
Chapter 14 – Sources of Capital for
Entrepreneurs
Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 13 – Legal Issues
Related To
Emerging Ventures
Major Legal Concepts and
Entrepreneurial Ventures
I. Inception of an Entrepreneurial Venture
A. Laws governing intellectual property
1. Patents
2. Copyrights
3. Trademarks
B. Forms of business organization
1. Sole proprietorship
2. Partnership
3. Corporation
4. Franchise
C. Tax considerations
D. Capital formation
E. Liability questions
Major Legal Concepts and
Entrepreneurial Ventures
II. An Ongoing Venture: Business Development and
Transactions
A. Personnel Law
1. Hiring and firing policies
2. Equal Employment Opportunity Commission
3. Collective bargaining
B. Contract Law
1. Legal contracts
2. Sales contracts
3. Leases
Major Legal Concepts and
Entrepreneurial Ventures
III. Growth and Continuity of a Successful
Entrepreneurial Venture
A. Tax considerations
1. Federal, state, and local
2. Payroll
3. Incentives
B. Governmental regulations
1. Zoning (property)
2. Administrative agencies (regulatory)
3. Consumer law
C. Continuity of ownership rights
1. Property laws and ownership
2. Wills, trusts, and ownership
3. Bankruptcy
Patents
• A patent provides the owner with
exclusive rights to hold, transfer, and
license the production and sale of the
product or process. Design patents last
for 14 years; all others last for 20 years.
Securing a Patent
• Rule 1: Pursue patents that are broad, are
commercially significant, and offer a
strong position
• Rule 2: Prepare a patent plan in detail
• Rule 3: Have your actions relate to your
original patent plan
• Rule 4: Establish an infringement budget
• Rule 5: Evaluate the patent plan strategically
A Patent Application Has Two Parts:
1. Specification is the text of a patent and
may include any accompanying
illustrations.
2. Claims are a series of short paragraphs,
each of which identifies a particular
feature or combination of features that
is protected by the patent.
Copyrights
• A copyright provides exclusive rights to
creative individuals for the protection of their
literary or artistic productions.
• Duration: life of the author plus 70 years.
Understanding Copyright Protection
• For the author of creative material to obtain
copyright protection, the material must be in a
tangible form so it can be communicated or
reproduced. It also must be the author’s own
work and thus the product of his or her skill
or judgment.
• Formal registration of a copyright with the
Copyright Office of the Library of Congress.
Understanding Copyright Protection
• Fair Use Doctrine:
[Reproduction of a copyright work for]
purposes such as criticism, comment, news
reporting, teaching (including multiple copies
for classroom use), scholarship, or research is
not an infringement of copyright.
Trademarks
• A trademark is a distinctive name, mark,
symbol, or motto identified with a
company’s product(s) and registered at
the Patent and Trademark Office.
Trademark Duration
The current registrations are good for 10 years
with the possibility for continuous renewal
every 10 years. It is most important to
understand that a trademark may be
invalidated in four specific ways:
1. Cancellation proceedings
2. Cleaning-out procedure
3. Abandonment
4. Generic Meaning
Trade Secrets
• Customer lists, plans, research and
development, pricing information,
marketing techniques, and production
techniques are examples of potential
trade secrets.
Trademark Protection on the
Internet
• The emerging body of law governing
cyberspace is often referred to as
cyberlaw.
Bankruptcy
• Bankruptcy occurs when a
venture’s financial obligations are
greater than its assets.
The 5 Largest Business
Bankruptcies in U.S. History
Company
Worldcom, Inc.
Enron Corp.
Texaco, Inc.
Financial Corp.
of America
Global Crossing
Ltd.
Bankruptcy
Date
Total Assets
Pre-Bankruptcy
7/21/02
12/2/01
4/12/87
9/9/88
$103,914,000,000
$63,392,000,000
$35,892,000,000
$33,864,000,000
1/28/02
$25,511,000,000
Chapter 7: Straight
Bankruptcy
• Sometimes referred to as
liquidation, Chapter 7 bankruptcy
requires the debtor to surrender all
property to a trustee appointed by
the court.
Chapter 11:
Reorganization
• Reorganization is the most common
form of bankruptcy. Under this
format, a debtor attempts to
formulate a plan to pay a portion of
the debts, have the remaining sum
discharged, and continue to stay in
operation.
Chapter 13: Adjustment of
Debts
• Individuals or sole proprietors with
unsecured debts of less than $100,000 or
secured debts of less than $350,000 are
eligible to file under a Chapter 13 procedure.
In the petition the debtor declares an
inability to pay his or her debts and requests
some form of extension through future
earnings (longer period of time to pay) or a
composition of debt (reduction in the
amount owed).