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Detroit & Chicago Business Organizations Legal Blog

Evaluating corporate status and tax options

Entrepreneurs who are looking to start a new business always need to choose an operational stucture. In so doing, they also choose a corresponding tax model and when it comes to C and S corporations, the tax model can vary greatly. Many companies elect to use the S corporation structure in large part due to the tax advantages they enjoy compared to with a C corporation. However, with the new tax code in place, many companies may be re-evaluating this decision.

As explained by Inc. magazine, the Tax Cuts and Jobs Act will see the maximum tax rate for C corporations drop from 35 to 21 percent. This change may make starting a business as a C corporation or switching from an S corporation to a C corporation financially advantageous. Another perk is that this change is permanent where some other elements of the legislation are only temporary.

Teachers' union and school board still at odds over new contract

Many in Detroit may summarily dismiss contract dispute cases as being petty squabbles between professional organizations. This may come from an assumption that all of these disagreements come down to a simple matter of dollars and cents (as in, both sides want more of them). Yet to fail to acknowledge the validity of the claims often made in contract disputes may be (at the same time) ignoring the very real problems being experienced by those involved. While the basis on their disputes may center on compensation and commensuration, the ultimate aims may be to simply allow them to continue to perform the services that their contracts call for. 

That certainly appears to be the case in a standoff between a school district and a teachers' union in New Jersey. The teachers are fighting to secure financial relief from a state law that forced school employees to pay more in health benefit plan contributions. These extra payments have cut into the teachers' take home pay, which some say is now less than it was a few years ago despite them having received raises during that time frame. Despite their desire to continue to support their students' education efforts, the teachers claim they cannot continue to work without this relief and still support their own families. Their hope is that remedies are written in to their new contract with the school district (they have been working without one since last July). 

Preventing family business disputes

The family business plan is well underway, all important deadlines have been met and suddenly, an unexpected challenge lies ahead: a business dispute. These tricky situations happen more than the average Chicago or Detroit business owner might suspect. What are some typical disputes that can arise and how do families go about solving them? 

The American Bar Association acknowledges that family-run businesses serve a crucial role in today's economy. Because of their importance across the nation, a strong system is often necessary to help find solutions to the conflicts that can present themselves unexpectedly. Pointing out that family businesses are often extensions of family relationships, the ABA explains that this characteristic can come with both a blessing and a curse; while families may align on some topics, they may experience discord when it comes to others. Sometimes, traditional ties -- such as one member's choice of religion -- overlap with business affiliations, forming disputes that can be deeply rooted in emotions. In a similar vein, inheritance and divorce can also play a major role in the way a family's business operates. Of course, as with all business partnerships, contract disagreements are another common point of contention. 

Common start-up problems

For many Chicago and Detroit residents who have taken the plunge, there is no better feeling than starting a new business. As thrilling as a new start-up can be, there are often an equal amount of stressors. One of those speed bumps involves the initial stages of the process. The following information goes over some of those common challenges, and what new business owners can do to avoid them.

Knowing the potential obstacles ahead of time can work wonders for new business owners. Financial resource For Entrepreneurs shares a number of reasons why some start-up businesses fail, first mentioning market problems. Many businesses do not consider the existing market for their product; others simply have poor timing. For Entrepreneurs also raises the importance of a strong management team. Without a solid core, businesses often stoop to weak marketing plans or fall short of product expectations. In a similar vein, poor business models are another common way some start-ups suffer -- some business owners are overly optimistic about the number of customers they will acquire, but For Entrepreneurs stresses that thinking critically about this aspect is a must.

Terminating contracts for convenience

When executing contracts in Detroit, most would think that those party to them cannot simply walk away from these agreements for no reason. Yet depending on the type of company or agency involved (or the exact terms of a contract), the law may allow one to do just that. 

The concept of "termination for convenience" applies to all government agencies (as well as private organizations that qualify). This allows such parties to terminate contracts if they do not believe them to be in their best interests. Indeed, Section 52.249-2 of the Code of Federal Regulations (as shared by the Cornell University Law School) reaffirms this fact. It states that any government entity can cite convenience when terminating a contract in whole or from time to time. 

Understanding unfair business competition

As many business owners in Detroit and Chicago are well aware, the advantages to bringing a company idea into fruition can be endless. By the same token, owning a business can come with a long string of challenges and confusion. When a business owner suspects that a rivaling company has presented an unfair competition, there are many aspects to be aware of. 

It is no secret that competition is simply part of the business game. No matter the size of the company, Forbes shares that it is easy for business disputes to arise after an idea appears stolen. Rather than allowing oneself to become immediately defensive, Forbes urges business owners to take an opportunity of competition as a innovative challenge. For example, similarities between businesses are natural; Forbes shares that adding an extra oomph to a product is just one way businesses can stand out from the rest. In addition, maintaining an awareness of competitors' strategies can also prove beneficial. While keeping too close of an eye on another business can be harmful, there is a healthy way of staying in the know of surrounding business methods in order to execute the best ideas.

IP lawsuit potentially connected to takeover attempt

Businesses in Illinois and Michigan who must carefully guard their intellectual property know that this may take many forms at different times. In fact, it is even possible that at times what appears to be a dispute over an intellectual property infringement may actually be just a tactic to another outcome. An example of this can be seen in a lawsuit that has recently been filed by a software app company.

Reports indicate that the Match Group owns multiple dating and social connection apps, one of which is Tinder. Bumble is currently a competitor with which Match Group was said to have been discussing a buyout so that Bumble would become part of the Match portfolio. Talks about a takeover or acquisition were said to have ended after Bumble reportedly refused a $450 million purchase price offer from Match.

Understanding patent protections

With the midwestern portion of the United States being a key region for domestic manufacturing, it stands to reason that many businesses in Michigan or Illinois might need to seek intellectual property protections for certain inventions or developments. The World Intellectual Property Organization indicates that the goal of such protections is to encourage the ongoing innovation and creativity that furthers societal advancements. 

Copyrights, trademarks and patents are common types of intellectual property protections and each is used in select situations. According to the United States Patent and Trademark Office, there are actually three types of patents that may be applied for. One of these is for the invention of a new design for an item to be manufactured and another is for the invention of a new process for manufacturing something. The third type of patent relates to botany for the asexual reproductive invention of a new type of plant.

Employee accused of violating noncompete agreement

Company owners and executives in Chicago, Detroit and other cities around the midwest know that their employees are among some of the most valuable assets they have. The knowledge that people can amass after working for a company for a long time can include very sensitive and competitively essential data. For this reason, the development of noncompete agreements is somewhat a common practice in many industries.

These contracts are designed to prevent employees from leaving one company and immediately going to a competitor where their knowledge of their former employers can help their new employers. In the event that a person does make such a job transition, the noncompete agreement may allow the original employer the right to pursue legal action. An example of this can be seen in a case in which a man once worked as a high-level strategist for a beer company with a noncompete agreement for one year in place.

What should you know about unfair competition?

Chicago business owners like you deserve a fair chance at being able to make your business grow and prosper. While competition is a natural part of the business cycle and should be expected, there are some instances in which that competition can become unfair for you.

The Legal Information Institute defines unfair competition as a business with practices that are deceptive, wrongful, and intentionally confusing for customers. A popular common example is the intentional copying of a famous brand's trademark, signature, or other identifiable markings, used to trick customers into thinking that their own brand is associated with the famous one. Other examples include:

  • Trade libel
  • Substituting one brand for another without authorization
  • Stealing trade secrets
  • Using confidential information to get ahead
  • Falsely representing the service or product

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