Articles Posted in Idea Phase

By Pictofigo (Own work) [CC BY-SA 3.0 (], via Wikimedia CommonsGreat business successes often begin with a single idea, or so we often hear from people who have succeeded in business. It is certainly true that an idea can mark the beginning of a process that, hopefully, results in “success” by whatever metric a business owner wants to measure it. That process has many steps, and it requires the assistance and involvement of many other people, businesses, and organizations. How does a business owner or entrepreneur embark on this path while keeping others from stealing their idea? Intellectual property laws are not much help for something that is still in the “idea” phase, but New Jersey’s trade secrets law may provide some protection. Caution is still a good strategy, however, and no business venture is free of this sort of risk.

The first question to address, of course, is what we mean by a “business idea.” In order to qualify for legal protection, a business idea cannot be too general or vague. New Jersey law states that a “trade secret” must be kept secret, must have “actual or potential” economic value, and must not be something that a competitor could easily figure out on their own. N.J. Rev. Stat. § 56:15-2. New Jersey law allows a person to obtain injunctions and recover damages, including actual damages and unjust enrichment, for misappropriation of trade secrets.

If an idea must be kept secret in order to have protection under the trade secrets law, how does anyone ever work with other people on their business ideas? This is the part that involves some inherent risks. A person may ask other people, prior to meeting to discuss the idea, to sign a non-disclosure agreement (NDA). This can be effective, since it is enforceable both under the trade secrets law and breach of contract law. Some larger companies, however, may refuse to sign NDAs, often on the grounds that they do not want to risk exposure to a legal claim if they reject the idea, but then later develop a similar idea entirely on their own.

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Ford_1921.jpgAccording to most U.S. corporate laws, a for-profit corporation may be established for nearly any lawful purpose, subject to restrictions in particular industries or professions. One of the primary purposes of a for-profit business has long been held to be making profits for the company’s shareholders, and this causes many people to perceive the interests of American businesses as being at odds with the interests of society. New York, New Jersey, and more than 20 other states now allow the creation of “benefit corporations,” or “B corporations,” which allow business owners to direct for-profit enterprises towards one or more specified public benefits. See N.Y. Bus. Corp. L. § 1701 et seq., N.J. Rev. Stat. § 14A:18-1 et seq. B Labs, the nonprofit organization that developed the model legislation for most B corporation statutes, offers private certification for B corporations that meet certain standards.

The Michigan Supreme Court once held that “[a] business corporation is organized and carried on primarily for the profit of the stockholders.” Dodge v. Ford Motor Company, 170 N.W. 668 (Mich. 1919). While this is no longer held by law to be a corporation’s sole purpose, that perception of the business world endures for many people. In situations where a corporation’s shareholders want to direct resources towards a particular cause, minority shareholders might be able to stop them if it would have a negative impact on their shares.

B corporations must identify one or more “general public benefits” that they intend to support through their activities. “General public benefit” is defined as something that makes a “material positive impact on society and the environment” as determined in comparison to “a third-party standard.” N.Y. Bus. Corp. L. § 1702(b), N.J. Rev. Stat. § 14A:18-1. Existing corporations may amend their formation documents to become B corporations, or new entities may incorporate as B corporations. Many well-known businesses, such as the New York-based e-commerce company Etsy, are organized as B corporations.
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761822_61461701.jpgFor businesses with a unique product or service, keeping their ideas, designs, and plans secure is critical to their success. During business formation, a business owner must consult with numerous people, from designers and marketers to accountants and business attorneys. Once a business has begun developing its product, it needs employees and contractors. Non-disclosure agreements are often effective in the protection of trade secrets, but a business needs some form of recourse in the event of misappropriation of proprietary information. Most states, including New Jersey, have enacted the Uniform Trade Secret Act (UTSA), which enables holders of trade secrets to recover damages for breaches, and to restrain others from disclosing confidential information.

The term “trade secret” refers to information in any form that has actual or potential economic value, in part because it is not widely known or easily discoverable by others, and which would have economic value to someone who did discover it. The information must also be subject to reasonable efforts by its holder to keep it secret. N.J. Rev. Stat. § 56-15-2. This may include data, formulas, drawings, designs, business plans, techniques, processes, or prototypes. “Misappropriation” includes any means of obtaining secret information by a person who knows or should know that it is secret, or the unauthorized disclosure of such information to others. Id. It does not infringe on someone’s trade secret rights to discover the same information entirely independently, or to reverse-engineer information from a legitimately-obtained product. Unlike patents and other forms of intellectual property, no official procedure exists to register or declare something a trade secret.

The Restatement of Torts § 757 defined the tort of improper use of disclosure of a trade secret belonging to another. It provides that a person is liable for using or disclosing a trade secret if the person knows that it is a secret, regardless of how the person learned about it. Keeping trade secrets secure is critical to the viability and success of many businesses, and theft or disclosure of trade secrets results in substantial business losses.
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file0002062790027.jpgNew York and New Jersey are among the best places in the country to start a small business–at least, that is what we believe. A wealth of talent in the tech sector means a wealth of tech startups in the Greater New York area. While a business needs support ranging from sound financial advisors to skilled business attorneys, entrepreneurs need support as well. Each and every business begins as a collection of people and ideas, and the people who give form to these ideas must care for themselves as well as their businesses. At a recent gathering of the NJ Tech Meetup, a group of “entrepreneurs, software developers and tech industry enthusiasts of all stripes,” “serial entrepreneur” Ari Meisel described his efforts at improving efficiency and reducing stress in his own life, and how he turned that into a business. New Jersey Tech Weekly‘s Esther Surden reported on Meisel’s advice, which provides useful guidance for New York and New Jersey businesses and business owners alike.

“Optimize, Automate, and Outsource”

Some tasks require the direct involvement of a business owner, director, or officer. Most do not. Identifying the tasks that do not require your constant attention is key to optimizing how your business runs. Meisel cautioned his audience, however, that outsourcing does not, by itself, increase efficiency, if the outsourced task is itself inefficient. His advice is to divide a business task into its fundamental parts, to determine which tasks are necessary, which are wasteful, and which are outsourceable. Meisel recommends the use of virtual assistants for routine tasks, many of which are available online.
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1375057_40170684.jpgStartup businesses in New York and New Jersey always begin with enthusiasm and excitement. A new business is an opportunity to create and explore, but also requires careful planning and attention. Certain risks, if not managed effectively, can sink a new business before it has a chance to succeed. Here are five errors that new businesses often make, and tips on how to avoid them.

1. The Wrong Business Entity. Identifying the right type of business organization is critical to a company’s success. Owners must consider how they want business income to be taxed, and how they want to handle the liabilities of the business. Corporations, limited liability companies (LLCs), and partnerships each offer unique advantages. “C” corporations and “S” corporations offer similar liability protections, but different tax advantages. Partnerships offer tax benefits in some circumstances, as well as flexibility in the company’s governance. LLCs offer a great deal of flexibility, but may not be right for fast-growing companies.

2. Insufficient Planning and Agreement Among Owners. Business owners must consider not only how to start their business, but also how they plan to either end or exit it. They must plan for contingencies, like the early departure or death of an owner, with regard to how the company will handle that owner’s equity share. Any promises or contingent offers regarding additional stock or equity should be in writing. Agreement among owners at the start of the business is no guarantee of continued harmony.
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493668_69476274_12272011.jpgAs the economy makes what we are told is a slow recovery, unemployment remains at uncomfortably high levels in many parts of the country, New Jersey included. With a 9.1 percent unemployment rate, some New Jersey workers have sought out alternative solutions. As the Asbury Park Press reports, entrepreneurship may soon become an appealing option for many as jobs remain scarce.

The Press tells the story of Charles Schlapfer of Lavallette, New Jersey, who worked as general manager of a building supply company when the 2008 financial crisis hit. He survived a massive round of layoffs but suffered a fifty percent pay cut. Although he looked around for other jobs, he could not find anything that met his family’s financial needs. Rather than continue with his reduced salary and no clear job security, he rolled the dice, quit his job, and started his own company. He now runs a “manufacturers’ sales representation firm” that helps businesses in the construction industry take advantage of public-sector opportunities, which he sees as a huge and relatively untapped market for local companies. The business draws on his work experience and contacts and, he hopes, has great growth potential.

New Jersey offers resources and support for entrepreneurs looking to start their own venture. The state’s Department of Labor and Workforce Development (LWD) operates several Small Business Development Centers (SBDC’s), which have begun hosting training courses and counseling for unemployed individuals who want to pursue an entrepreneurial path. A six-week training program, the “Entrepreneurial Training Program for the Unemployed” (ETPU), instructs aspiring business owners in how to develop a business idea and handle the many aspects of the business start-up process. It also includes one-on-one counseling and assistance with applications for start-up financing. The program is free, financed by grants from the LWD), and requires applicants to meet certain criteria related to employment and receipt of unemployment benefits.

Starting a business requires careful planning and attention. Every business is unique, but all have common questions at the outset. The question of initial capital is perhaps the most important. Some businesses can be run from a laptop computer and cell phone in a corner of your home or the neighborhood cafe, while others require significant equipment purchases and office space. This also affects the questions of how to structure a business. An entrepreneur must consider whether to operate a business as a sole proprietor, to form a corporation, or to create some other business organization. That leads to questions of whether to hire staff, and so on.
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Finding the right business idea, of course, can be as difficult as finding the right spouse. But if you have the urge but lack the idea, interviews with experts on entrepreneurship suggest the following steps: Make absolutely sure you want to be an entrepreneur.

1338212_business_man.jpgAs an experienced New Jersey Business Attorney I can tell you, “Simply being tired of working for someone else isn’t reason enough to start your own business.” Likely you’ll work longer hours, do more dirty work, not less, and, for a good while anyway, earn less money. What’s more, most successful entrepreneurs have a burning desire to do something quite specific.

Determine your strengths and weaknesses.