July, 2009

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Issues Surrounding a Maryland Breach of Contract Case

Thursday, July 23rd, 2009

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

Breach of Contract

Breach of Contract

If you are forced to file suit in Maryland for breach of contract, do not let a poorly drafted contract hurt your chance of prevailing. Do not lose a case that you should win simply because of faulty contract language, language that could have been avoided had you retained an experienced Maryland business attorney to assist.

A contract drafted in Maryland with little or no input from a Maryland corporate lawyer can fail to include several necessary components that help to make a contract legally enforceable. These deficiencies can be fatal to your business’s chance of prevailing in a lawsuit. As a result, make sure that an experienced Maryland business attorney reviews your contracts, and that such contracts address, at minimum, the following five points:

1. Jurisdiction: If you want the ability to sue in Maryland courts, your contract must contain language where the parties submit to the jurisdiction of Maryland state and/or federal courts. This language allows you to sue a business in Maryland courts, even if the company is not incorporated in, or have offices in, Maryland. Without this language in your contract, you will most likely be forced to sue the corporation in its home state. Suing out of state can be significantly more expensive and time consuming.

2. Choice of Law: A Maryland choice of law provision states Maryland law will be used to decide the dispute. Many non-lawyers confuse choice of law with jurisdiction, and interpret the phrase “Maryland law will govern this contract” to mean that a dispute has to be heard in Maryland. That is not the case. Rather, this clause simply means that regardless of where a dispute is heard, whether in Maryland Circuit Court or Virginia or anywhere else, Maryland law will be used to decide the matter.

3. Non-compete and non-solicitation clauses: Do you want to prohibit the other party from competing with you entirely, or just stop them from soliciting your clients? If the former, then you are in need of a non-compete clause, which must be limited in geographic scope, limited in duration, and narrowly defined to protect only the interests of your business in order to be enforceable. Maryland courts will typically enforce reasonable non-competes. However, a non-compete that overreaches will often be struck down. If the latter, then you need a non-solicitation agreement, which allows the other party to compete with you, provided they do not solicit your current or former clients. A non-solicitation clause need not have geographic or time limitations so long as it only forbids the solicitation of your clients by the other party.

4. Default and Termination provisions: Make sure that your contract’s default and termination provisions are clear with regard to: a) what breaches may be cured and what breaches cannot be; b) what the time period exists for any cure; and c) whether amounts due over the life of the contract still owed even if the contract is terminated.

5. Dispute Resolution: Choose the type of dispute resolution system that you feel best fits your business. Mediation, arbitration and litigation are options, and they can be used in compliment of one another. Regardless of what method of dispute resolutions you choose, always allow your business the option of filing for emergency injunctive relief in Maryland court when necessary to avoid irreparable injury to your business.

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

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Trademarking Your Business Name and Logo

Wednesday, July 15th, 2009

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

Most business clients who come to me with trademark questions believe that filing a trademark is a complex and expensive process. Nothing could be further from the truth. While it is true that the entire trademark registration process usually takes 12-18 months, the actual filing of a trademark application can be done in a few hours. Once filed, the trademark application works its way through the U.S. Patent and Trademark Office (“USPTO”) with little work needing to be done. The filing fee paid to the USPTO is a mere $325.00. So for a couple hours of work by you or your business attorney along with a $325.00 fee, your business is entitled to have exclusive ownership of a mark, in your business’s line of products or services, across the United States.

What exactly is a trademark? A trademark is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others.  Words that you may trademark are the name which your business operates under and holds itself out to the public as (think ”McDonald’s” or “Microsoft”).  A phrase you may trademark are words that identify or distinguish the source of your product or service (think Nike’s “Just Do It” or Gatorade’s “Is It In You?”).  A symbol or design may also identify or distinguish your business from another (think Apple’s “apple” found on every Iphone, MAC and Ipod, as well as the symbols found on nearly every luxury car like the Lexis, BMW or Mercedes.)

How would your business benefit by obtaining a federal trademark registration? While you are not required to register for trademark protection, doing so provides server advantages, including notice to the public of your claim of ownership of the mark, a legal presumption that you own the mark nationwide, and the exclusive right for you to use the mark on or in connection with the goods or services set forth in your registration.  In other words, you may advertise your name, logo, phrase, symbol or design that identifies your business’s product or services withour fear that someone else could come along and steal those identifiers from you.

You can search the trademark database to check on a trademark’s availability by going to www.uspto.gov.

A trademark registration remains valid for 10 years, provided you file an affidavit that you are continuing to use the mark between the fifth and sixth years following registration.

With all of the above in mind, isn’t it worth it to have the name you do business under, along with any slogan, design or logo your business uses, registered to your business nationwide in the category of goods or services you provide? To me, the answer is a no-brainer.

Visit the USPTO website, as it is a very useful and informative site. It contains a list of frequently asked questions at http://www.uspto.gov/web/offices/tac/tmfaq.htm#Basic001, as well as the basics of what you need to know about trademarks at http://www.uspto.gov/web/offices/tac/doc/basic.

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

Maryland Business Start-Up and Formation Issues

Monday, July 6th, 2009

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

Why incorporate?

The first question a Maryland prospective business owner may ask is “why should I incorporate?” The reason to incorporate one’s business is to achieve limited liability, which means that a business owner is liable to third parties only up to the amount that the individual has invested in the business. A person that owns a business individually puts all of his or her personal assets at risk in the event the business fails. By incorporating, a business owner’s personal assets are shielded from creditors of the business in the event the business is unable to meet its debts as they become due.

What form should my business take?

After making the decision to incorporate, a prospective business owner must ask “what corporate form should my business organization take?”  Businesses can take the form of a corporation, partnership, or limited liability company (LLC). (As an aside, LLCs are creatures of statute that are organized, not incorporated, and therefore are not considered corporations as the term is legally defined. Nevertheless, LLCs do enjoy the same limited liability advantages as corporations and partnerships, and are therefore included as part of the discussion as what form a business should take.)

In order to determine what form your business should take, you should consult an experienced business accountant and corporate attorney, since each form of business has separate advantages and disadvantages, as well as differing tax treatment.  There is no exact answer for every business owner, as each determination can be made only on the unique facts of that business owner’s situation.

Once the choice is made as to corporate form, business owners can search the Maryland SDAT website for name availability at  www.sdatcert3.resiusa.org/ucc-charter/.

After determining whether a corporate name is available, forms for Articles of Incorporation (for corporations), Articles of Organization (for an LLC) and Certificate of Organization (for partnerships) can be found at www.dat.state.md.us/sdatweb/sdatforms.html#entity. The Articles must be filed with the Maryland Department of Assessments and Taxation along with the appropriate fee.

Once filed and approved, a federal tax identification number will usually be required for the business. You can obtain one electronically within 30 minutes in most cases at www.irs.gov.

Finally, with whatever business structure you choose, applicable corporate documents must be drafted to memorialize the agreement between the parties, ie a shareholder agreement for shareholders of a corporation, a partnership agreement for partners in a partnership, or an operating agreement for members of an LLC. These agreements are a pivotal step in the start-up process, as it will in many cases be the only document that defines the exact business relationship between the parties.  Crafting such a document requires the expertise of a business lawyer.  Other tasks that a business attorney may perform at the outset on behalf of business clients are the registration of trademarks and service marks, as well as obtaining fictional (d/b/a) names.

Need an Attorney to help your Maryland or DC business? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

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