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What You Need to Know About Service Disabled Veteran-Owned Business Certification

Thursday, October 23rd, 2014

Service Disabled Veteran-Owner Business (“SDVOB”) Certification Requirements:  

1. The service-disabled veteran must have a service-connected disability that has been determined by the Department of Veterans Affairs or Department of Defense

2. The service-disabled veteran-owned small business concern must be small under the North American Industrial Classification System (NAICS) code assigned to the procurement;

 3.The service-disabled veteran-owned small business concern must also be at least 51% owned by one or more service-disabled veterans or, in the case of any publicly owned business, at least 51% of the stock of which is owned by one or more Service-Disabled Veterans.

 4.Management and daily business operations of the service-disabled veteran-owned business concern must be controlled by one or more Service-Disabled Veterans or, in the case of a veteran with a permanent and severe disability, the spouse or permanent caregiver of such a veteran.

5. The service-disabled veteran must hold the highest officer position in the small business concern.

 6.Further:

 To be an eligible SDVOSBC the following must be met:

  • The management and daily business operations of the concern must be controlled by one or more service-disabled veterans.
    • Control by one or more service-disabled veterans means that both the long-term decision making and the day-to-day management and administration of the business operations must be conducted by one or more service-disabled veterans
    • The management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a service-disabled veterans or, in the case of a service-disabled veteran with permanent and severe disability, the spouse of permanent caregiver of such veteran
  • Service-disabled veteran means a veteran with a disability that is service-connected.
  • Ownership must be direct. Ownership by one or more service disabled veterans must be direct ownership.
    • A concern owned principally by another business entity that is in turn owned and controlled by one or more service-disabled veterans does not meet this requirement.

GSA Certification as SDVOB:

GSA does not require formal certification, instead they allow a business to self-certify.  Go to www.sam.gov for more information. 

 SDVOSB program — bidding firm is responsible for self-certifying or representing to the contracting officer that it is a service disabled veteran owned small business concern.

 -Self-certification can be achieved through SAM

 -Under the SDVOSB program, the bidding firm is responsible for self-certifying or representing to the contracting officer that it is a service disabled veteran owned small business concern. A firm can do this by simply self-certifying through the government’s System for Award Management (SAM) – by declaring that it meets the definition of a service disabled veteran owned small business.

 Dept. of Veterans Affairs (“VA”) Certification

 Veterans First Contracting Program requires verification of veteran status and placement in VetBiz database.  Agencies cannot require certification by the VA.

 The Veterans First Contracting Program, which applies only to VA acquisitions and requires verification of veteran status through the VA in its Vendor Information Pages or VetBiz database. Agencies, other than VA, cannot require certification by the VA or placement in the VetBiz database.

 Veterans First Contracting Program:

 -Applies only to VA acquisitions

 -Provides sole-source authority to the VA and permits restricted set-asides to both SDVOSBs and VOSBs

 -Establishes contracting goals unique to the VA

 -7% for veteran owned businesses; 10% for service disabled veteran owned businesses

 -Requires veteran status to be verified by the VA

 

 

 

 

Sample Confessed Judgment Note for Commercial Use

Thursday, October 23rd, 2014

CONFESSED JUDGMENT NOTE

[SAMPLE]

 Amount –

Date –

            The undersigned __________________________ (hereinafter referred to as “Maker”) hereby promises to pay ________________________________(“______________”), located at [Address], the sum of ___________________ ($_______________) to resolve a dispute over monies owed to ______________________ related to _________________________________.

 NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Maker hereby agrees as follows:

 1.   Payment by Maker Upon Execution of this Note. Maker agrees to pay the sum of $_________________ to ____________________ upon execution of this Note.

 2.   Balance of Sum to be Paid by Maker. Maker agrees to pay the balance owed of the Sum in the amount of $_______________ on or before _________________ (the “Due Date”).  

 3.   Default. Maker shall be in default of this Note should Maker fail to make any payment due to ______________ under this Note, or fail to pay in full all amounts owed under this Note, on or before the Due Date. Upon default, the Entire Sum owed to ______________ of $__________________ shall be then immediately due and payable by Maker, less any amounts previously paid by Maker to _______________ in settlement of this matter.

 4.     Prepayment. Maker may prepay the principal amount outstanding in whole or in part at any time without penalty. 

5.  Confession of Judgment. Should Maker default under this Note, Maker appoints _______________________ as its duly authorized attorney-in-fact with authority, in its name, place, and stead, to confess judgment in the office of the clerk of any Court of any city or county in the state of ____________________ against Maker, in the amount of the $________________, less any amounts previously paid by Maker to _________________ in settlement of this matter.

 6.  Waiver. Maker waives presentment and demand of payment. The failure of ______________________ to exercise any of its rights hereunder in any instance shall not constitute a waiver thereof in that or any other instance. Any notice to Maker shall be given by mailing such notice by first class mail, postage prepaid, addressed to Maker at ____________________________________, or to such other address as Maker may designate by written notice to _____________________. Notice of non-payment is not required by the terms of this Note.

 7.  Costs and Expenses. Maker shall pay __________________ for all costs and expenses, including, but not limited to filing fees, investigative costs and reasonable pre- and post-judgment attorney fees, incurred by __________________ in enforcing and collecting this Note.

 8.  Obligations and Benefits. The obligations and benefits of this Note shall be binding upon and inure to the benefit of the Maker, _____________________ and their respective heirs, successors and assigns.

MAKER

____________________________             

By: _________________________

Title: ________________________

Date: ________________________

 

Here is a Sample Document for a Corporate Supplier Diversity Program

Thursday, October 23rd, 2014

COMPANY NAME

Supplier Diversity Program

COMPANY NAME takes its social and environmental responsibilities seriously. A good example is our strong and longstanding commitment to a diverse supplier base.

The businesses we categorize as diverse suppliers are Minority-Owned, Women-Owned, Veteran-Owned, and Service-Disabled Veteran-Owned Small Businesses, as well as businesses located in Historically Underutilized Business regions (HUBZone) and Small Disadvantaged Businesses (SDB).

A business joins our Supplier Diversity Program by contacting _________ at ______________________ and requesting an application. Following a verification and screening process to ensure a good fit between supplier strengths and capabilities and our current and future requirements, we review the supplier information. The business then becomes a potential supplier who may be used in the procurement process as business needs dictate.

Use the IRS 20 Factor Test to Determine Employee or Independent Contractor Status

Thursday, October 23rd, 2014

Before your company can legally classify a worker as an independent contractor instead of an employee, serious research and analysis must be undertaken. Be sure to review and apply the IRS guidelines below to the specific job which you are considering independent contractor status for. Go through each factor and analyze the job on a step by step basis before arriving at a conclusion. Remember, this is a balancing act, so make sure the scale tilts significantly in your favor before solidifying IC status for your personnel:

IRS 20 Factor Test

  1. Instructions.  Workers who must comply with your instructions as to when, where, and how they work are more likely to be employees than independent contractors.
  2. Training.  The more training your workers receive from you, the more likely it is that they’re employees. The underlying concept here is that independent contractors are supposed to know how to do their work and, thus, shouldn’t require training from the purchasers of their services.
  3. Integration.  The more important that your workers’ services are to your business’s success or continuation, the more likely it is that they’re employees.
  4. Services rendered personally. Workers who must personally perform the services for which you’re paying are more likely employees. In contrast, independent contractors usually have the right to substitute other people’s services for their own in fulfilling their contracts.
  5. Hiring assistants. Workers who are not in charge of hiring, supervising, and paying their own assistants are more likely employees.
  6. Continuing relationship. Workers who perform work for you for significant periods of time or at recurring intervals are more likely employees.
  7. Set hours of work. Workers for whom you establish set hours of work are more likely employees. In contrast, independent contractors generally can set their own work hours.
  8. Full time required.  Workers whom you require to work or be available full time are likely to be employees. In contrast, independent contractors generally can work whenever and for whomever they choose.
  9. Work done on premises.  Workers who work at your premises or at a place you designate are more likely employees. In contrast, independent contractors usually have their own place of business where they can do their work for you.
  10. Order or sequence set.Workers for whom you set the order or sequence in which they perform their services are more likely employees.
  11. Reports.  Workers whom you require to submit regular reports are more likely employees.
  12. Payment method.  Workers whom you pay by the hour, week, or month are more likely employees. In contrast, independent contractors are usually paid by the job.
  13. Expenses.  Workers whose business and travel expenses you pay are more likely employees. In contrast, independent contractors are usually expected to cover their own overhead expenses.
  14. Tools and materials.  Workers who use tools, materials, and other equipment that you furnish are more likely employees.
  15. Investment.  The greater your workers’ investment in the facilities and equipment they use in performing their services, the more likely it is that they’re independent contractors.
  16. Profit or loss.  The greater the risk that your workers can either make a profit or suffer a loss in rendering their services, the more likely it is that they’re independent contractors.
  17. Works for more than one person at a time. The more businesses for which your workers perform services at the same time, the more likely it is that they’re independent contractors.
  18. Services available to general public.  Workers who hold their services out to the general public (for example, through business cards, advertisements, and other promotional items) are more likely independent contractors.
  19. Right to fire.  Workers whom you can fire at any time are more likely employees. In contrast, your right to terminate an independent contractor is generally limited by specific contractual terms.
  20. Right to quit. Workers who can quit at any time without incurring any liability to you are more likely employees. In contrast, independent contractors generally can’t walk away in the middle of a project without running the risk of being held financially

MBE/DBE Certification – Know the Law Before You Apply

Thursday, October 23rd, 2014

Many clients come to me only after their DBE/MBE certification has been denied, or after the application has been filed.  Often times this is too late.  Nevertheless, Federal regulations provide you with a guide on exactly how to achieve MBE/DBE status.  All you need to do is follow it.   What follows is the key provision from the regs, 49 C.F.R. 26.69:

(a) In determining whether the socially and economically disadvantaged participants in a firm own the firm, you must consider all the facts in the record, viewed as a whole.

(b) To be an eligible DBE, a firm must be at least 51 percent owned by socially and economically disadvantaged individuals.

(1) In the case of a corporation, such individuals must own at least 51 percent of the each class of voting stock outstanding and 51 percent of the aggregate of all stock outstanding.

(2) In the case of a partnership, 51 percent of each class of partnership interest must be owned by socially and economically disadvantaged individuals. Such ownership must be reflected in the firm’s partnership agreement.

(3) In the case of a limited liability company, at least 51 percent of each class of member interest must be owned by socially and economically disadvantaged individuals.
 
(c) The firm’s ownership by socially and economically disadvantaged individuals must be real, substantial, and continuing, going beyond pro forma ownership of the firm as reflected in ownership documents. The disadvantaged owners must enjoy the customary incidents of ownership, and share in the risks and profits commensurate with their ownership interests, as demonstrated by the substance, not merely the form, of arrangements.
 
(d) All securities that constitute ownership of a firm shall be held directly by disadvantaged persons. Except as provided in this paragraph (d), no securities or assets held in trust, or by any guardian for a minor, are considered as held by disadvantaged persons in determining the ownership of a firm. However, securities or assets held in trust are regarded as held by a disadvantaged individual for purposes of determining ownership of the firm, if—
 
(1) The beneficial owner of securities or assets held in trust is a disadvantaged individual, and the trustee is the same or another such individual; or
(2) The beneficial owner of a trust is a disadvantaged individual who, rather than the trustee, exercises effective control over the management, policy-making, and daily operational activities of the firm. Assets held in a revocable living trust may be counted only in the situation where the same disadvantaged individual is the sole grantor, beneficiary, and trustee.
 
(e) The contributions of capital or expertise by the socially and economically disadvantaged owners to acquire their ownership interests must be real and substantial. Examples of insufficient contributions include a promise to contribute capital, an unsecured note payable to the firm or an owner who is not a disadvantaged individual, or mere participation in a firm’s activities as an employee. Debt instruments from financial institutions or other organizations that lend funds in the normal course of their business do not render a firm ineligible, even if the debtor’s ownership interest is security for the loan.
 
(f) The following requirements apply to situations in which expertise is relied upon as part of a disadvantaged owner’s contribution to acquire ownership:
(1) The owner’s expertise must be—
(i) In a specialized field;
(ii) Of outstanding quality;
(iii) In areas critical to the firm’s operations;
(iv) Indispensable to the firm’s potential success;
(v) Specific to the type of work the firm performs; and
(vi) Documented in the records of the firm. These records must clearly show the contribution of expertise and its value to the firm.
(2) The individual whose expertise is relied upon must have a significant financial investment in the firm.
 
(g) You must always deem as held by a socially and economically disadvantaged individual, for purposes of determining ownership, all interests in a business or other assets obtained by the individual—
(1) As the result of a final property settlement or court order in a divorce or legal separation, provided that no term or condition of the agreement or divorce decree is inconsistent with this section; or
(2) Through inheritance, or otherwise because of the death of the former owner.
 
(h)  (1) You must presume as not being held by a socially and economically disadvantaged individual, for purposes of determining ownership, all interests in a business or other assets obtained by the individual as the result of a gift, or transfer without adequate consideration, from any non-disadvantaged individual or non-DBE firm who is—
(i) Involved in the same firm for which the individual is seeking certification, or an affiliate of that firm;
(ii) Involved in the same or a similar line of business; or
(iii) Engaged in an ongoing business relationship with the firm, or an affiliate of the firm, for which the individual is seeking certification.
(2) To overcome this presumption and permit the interests or assets to be counted, the disadvantaged individual must demonstrate to you, by clear and convincing evidence, that—
(i) The gift or transfer to the disadvantaged individual was made for reasons other than obtaining certification as a DBE; and
(ii) The disadvantaged individual actually controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non-disadvantaged individual who provided the gift or transfer.
 
(i) You must apply the following rules in situations in which marital assets form a basis for ownership of a firm:
(1) When marital assets (other than the assets of the business in question), held jointly or as community property by both spouses, are used to acquire the ownership interest asserted by one spouse, you must deem the ownership interest in the firm to have been acquired by that spouse with his or her own individual resources, provided that the other spouse irrevocably renounces and transfers all rights in the ownership interest in the manner sanctioned by the laws of the state in which either spouse or the firm is domiciled. You do not count a greater portion of joint or community property assets toward ownership than state law would recognize as belonging to the socially and economically disadvantaged owner of the applicant firm.
(2) A copy of the document legally transferring and renouncing the other spouse’s rights in the jointly owned or community assets used to acquire an ownership interest in the firm must be included as part of the firm’s application for DBE certification.
 
(j) You may consider the following factors in determining the ownership of a firm. However, you must not regard a contribution of capital as failing to be real and substantial, or find a firm ineligible, solely because—
(1) A socially and economically disadvantaged individual acquired his or her ownership interest as the result of a gift, or transfer without adequate consideration, other than the types set forth in paragraph (h) of this section;
(2) There is a provision for the co-signature of a spouse who is not a socially and economically disadvantaged individual on financing agreements, contracts for the purchase or sale of real or personal property, bank signature cards, or other documents; or
(3) Ownership of the firm in question or its assets is transferred for adequate consideration from a spouse who is not a socially and economically disadvantaged individual to a spouse who is such an individual. In this case, you must give particularly close and careful scrutiny to the ownership and control of a firm to ensure that it is owned and controlled, in substance as well as in form, by a socially and economically disadvantaged individual.

 

Time Limits and NDA/Confidentiality Agreements

Friday, June 8th, 2012

It is common for companies to share confidential information with a third party in order to achieve an operational objective, where the third party may be a prospective joint venturer, an acquirer, an investor or even a client.  Prior to disclosing such confidential information, however, these same companies usually require the execution of a confidentiality/non-disclosure agreement by the other party.

This blog has previously discussed issues surrounding confidentiality/non-disclosure agreements.  Today’s topic however is specific: the time limits, if any, that should be considered in such agreements.

Most companies if given a choice would prefer to include in their  NDA/confidentiality agreements a perpetual term, which essentially means that the confidential information can never be disclosed by the third party except in limited circumstances.  Often times however, this desire is diluted in the course of negotiations, leading to a final agreement containing just a limited time for confidentiality, ie, for example, 2, 5 or even 10 years. 

Unbeknownst to such parties, agreeing to this watered-down time limit may lead to substantial future risks with regard to confidential information.  An example is the California case of Silicon Image, Inc. v. Analogk Semiconductor, Inc.   In furtherance of its goal to protect its confidential information, Silicon Image took numerous prudent steps to protect its trade secrets, including: i) requiring its own employees, customers and business partners to sign confidentiality agreements; ii) maintaining a key card access system and by requiring visitors to sign in to protect its trade secrets; iii) protecting computer systems through network security and access control; iv) labeling confidential proprietary information and watermarking all information disclosed outside the company with the name of the individual receiving the information; and, v) providing training sessions to employees on its trade secret protection program.

Yet in spite of its strict adherence to the protection of its confidential information, Silicon Image decided to limit the term of its confidentiality agreements to a set number of years, instead of a perpetual term, due to the fact that that’s what other high-tech companies were doing, and due to the fact that many partners, investors and other third parties pushed back and refused to execute non-disclosure agreements containing a perpetual duration of confidentiality.

Despite its best practices described above, Silicon allowed itself to frequently enter into confidentiality agreements with terms of 2 to 4 years, which proved to be a serious error when the time came for Silicon to seek a preliminary injunction in California Court against a competitor it alleged misappropriated its confidential information.

In denying Silicon’s request for a preliminary injunction, the Court analyzed whether Silicon Image made reasonable efforts to protect its confidential information.  One of the key factors the Court focused on was whether or not the non-disclosure agreements between Silicon Image and its customers and distributors provided adequate protection.  Unfortunately for Silicon, the Court concluded that reasonable steps to protect trade secrets were not shown by Silicon, pointing particularly to the time limits included in its confidentiality agreements.

The Court held that “one who claims that he has a trade secret must exercise eternal vigilance,” requiring all persons to whom a trade secret becomes known to acknowledge and promise to respect the secrecy in a written agreement.  A time limit contained in an NDA demonstrated to the Court that Silicon’s own expectations of maintaining its trade secrets were time limited and, thus, a failure to demonstrate “eternal vigilance” over its trade secrets. 

As a result, Silicon lost a serious case in its attempt to protect its confidential information.  The moral of this story is a simple one.  Companies who include time limits in their confidentiality agreements do so at their peril.  In order to avoid the Silicon Image outcome, it is prudent to stand firm and refuse to include a set time limit for the receiving party’s obligations to maintain the confidential information.  The best practices are for the trade secret owner to insist that the obligation to maintain confidentiality survive as long as the information disclosed qualifies as a trade secret under the requirements of applicable law.

The Legal Standard for Fraud in Maryland

Wednesday, March 7th, 2012

To prevail on a claim of fraudulent misrepresentation in Maryland, a plaintiff must establish, by the heightened evidentiary standard of clear and convincing evidence:

“(1) that the defendant made a false representation to the plaintiff, (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth, (3) that the misrepresentation was made for the purpose of defrauding the plaintiff, (4) that the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation.”  VF Corp. v. Wrexham Aviation Corp., 350 Md. 693, 703 (1998), quoting Nails v. S&R, 334 Md. 398, 415 (1994).

The defendant must actually be aware of the falsity, or atleast the potential for falsity.  The requirement concerning knowledge of the falsity or reckless indifference as to the truth of the representation means either the defendant’s actual knowledge that the representation was false or the defendant’s awareness that he does not know whether the representation is true or false. Ellerin v. Fairfax Savings, 337 Md. at 231, 652 A.2d at 1124.  

Negligence or misjudgment, “‘however gross,'” does not satisfy the knowledge element. Ellerin, 337 Md. at 232, 652 A.2d at 1125, quoting Cahill v. Applegarth, 98 Md. 493, 502, 56 A. 794, 796 (1904). See also VF Corporation and Blue Bell, Inc. v. Wrexham Aviation Corp., 350 Md. 693 (1998).

A defendant must have the intent, the scienter, to cheat another: “It is well recognized under Maryland law that an action for fraud cannot be supported … without any design to impose upon or cheat another.”  VF Corp. v. Wrexham Aviation Corp., 350 Md. 693, 703 (1998).  

The complaining party though, must have reasonably relied on the defendant’s representations.  To determine whether one party’s reliance upon the allegedly fraudulent statements of another party is reasonable, a court looks to all the facts and circumstances present in the particular case.  “In determining whether reliance is reasonable, a court is required to view the act in its setting….” Parker v. Columbia Bank, 91 Md. App. At 361-362. 

The One of the most important circumstances in this regard is the plaintiff’s background and experience.  For example, a complaining person who is knowledgeable in the commercial real estate realm could not be said to have reasonably relied on another’s false representations in that realm, as the complainant would have the requisite knowledge and resources to determine whether such statements were true in the first place.

 

 

Foreign LLCs and Corporations That Transact Business in Maryland But Fail to Register in Maryland Cannot File Suit Here

Wednesday, March 7th, 2012

          Before transacting interstate or foreign business in Maryland, a foreign limited liability company (“LLC”) shall register to transact business with the State Department of Assessments and Taxation (“SDAT”) in accordance with Md. Corp. & Ass’ns. Code Ann. § 4A-1002:

“(a) Requirement. — Before doing any interstate, intrastate, or foreign business in this State, a foreign limited liability company shall register with the Department.”

           Under § 4A-1002, a foreign LLC is required to complete an application setting forth, among other information, its name, state of organization, business purpose, and resident agent, and pay a filing fee to SDAT.

          Md. Corp. & Ass’ns. Code Ann. § 4A-1007 states that any foreign limited liability company that fails to register with the SDAT in accordance with § 4A-1002 is barred from maintaining a lawsuit in any court of this State, as follows:

“(a) Barred from maintaining suit. — If a foreign limited liability company is doing or has done any intrastate, interstate, or foreign business in this State without complying with the requirements of this subtitle, the foreign limited liability company and any person claiming under it may not maintain suit in any court of this State, unless the limited liability company shows to the satisfaction of the court that:

   (1) The foreign limited liability company or the person claiming under it has paid the penalty specified in subsection (d)(1) of this section; and

   (2) (i) The foreign limited liability company or a successor to it has complied with the requirements of this title; or

     (ii) The foreign limited liability company and any foreign limited liability company successor to it are no longer doing intrastate, interstate, or foreign business in this State.”  

In essence, Md. Corp. & Ass’ns. Code Ann. § 4A-1007 bars a foreign LLC from acting as a plaintiff in any Maryland state or federal court if the LLC is doing or has done “any intrastate, interstate, or foreign business” in Maryland without registering or qualifying with SDAT. 

Foreign corporations face nearly identical Maryland statutes.  See Md. Corp. & Ass’ns. Code Ann. §§ 7-202,  and 7-301, respectively. 

The Maryland Court of Appeals stated the following in Yangming Marine Transport Corporation v. Revon Products U.S.A., Inc., 311 Md. 496 (1988):

“As pointed out above, under § 7-301, a foreign corporation that has not complied with § 7-202 or § 7-203 is barred from suing in Maryland if the corporation “is doing . . . any intrastate, interstate, or foreign business in this State.”  …. Instead, we have held that § 7-301 embodies a test for determining whether a foreign corporation is “doing business” in Maryland. See G.E.M., Inc. v. Plough, Inc., 228 Md. 484, 486, 180 A.2d 478, 480 (1962). Under this test, § 7-301 bars an unqualified or unregistered foreign corporation from suing in Maryland courts only if the corporation is doing such a substantial amount of localized business in this State that the corporation could be deemed “present” here. See, e.g., S.A.S. Personnel Consult. v. Pat-Pan, 286 Md. 335, 339-340, 407 A.2d 1139, 1142 (1979); G.E.M., Inc. v. Plough Inc., supra, 228 Md. at 488-489, 180 A.2d at 480-481.

 

 

Types of Relationships Covered by Federal and State Franchise Laws. [Part 1]

Thursday, April 28th, 2011

Often times I have prospective franchisor clients, that is, clients who believe they have a business concept that can be expanded possibly through licensing or franchising, ask me to explain the differences between licensing and franchising from a legal perspective.  Inevitably, the conversation turns to an explanation from the client as to why the concept is not truly a franchise after all.  As I have explained on this blog previously, while there certainly are relationships that are true licenses, more often than not, many licensing relationships are indeed nothing more than disguised franchises.

 Here is what the FTC Franchise Rule states on the issue, directly from the FTC website found at http://www.ftc.gov/bcp/edu/pubs/business/franchise/bus70.pdf.  The FTC Franchise Rule covers the offer and sale of franchises. As under the original Rule, a commercial business arrangement is a “franchise” if it satisfies three definitional elements.

 “Specifically, the franchisor must: (1) promise to provide a trademark or other commercial symbol; (2) promise to exercise significant control or provide significant assistance in the operation of the business; and (3) require a minimum payment of at least $500 during the first six months of operations.”

 Be aware that the name given to the business arrangement is irrelevant in determining whether it is covered by the amended Rule.

 “With regard to the trademark element, a franchise entails the right to operate a business that is “identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark.” The term “trademark” is intended to be read broadly to cover not only trademarks, but any service mark, trade name, or other advertising or commercial symbol. This is generally referred to as the “trademark” or “mark” element.

 The franchisor need not own the mark itself, but at the very least must have the right to license the use of the mark to others. Indeed, the right to use the franchisor’s mark in the operation of the business – either by selling goods or performing services identified with the mark or by using the mark, in whole or in part, in the business’ name – is an integral part of franchising.

 In fact, a supplier can avoid Rule coverage of a particular distribution arrangement by expressly prohibiting the distributor from using its mark.”