Forums: Discussions for entrepreneurs and small business.

I hope I can explain this they way I need to, and I hope this has not been covered previously but here goes.  My current company, club5150.com is only one business entity that my partner and I have.  We are attempting to open a new type of service in the `pre-paid services` type of field.  We are about to launch this business in the Sacramento CA area, but still have a few questions. 

First, is there anyway to copywrite or patent or whatever our type of service?  It is not a physical product or image, but more of a service concept.  Is there anyway to keep other people from deciding to duplicate what we want to do in other areas before we can launch in those areas (such as New York or basically anywhere outside of Sacramento for now).  This is difficult to explain, as I am very reluctant to give too much information regarding this concept until I know for certain if we can protect it or if it is just something we may have competition for in the future.

Second question- what is the best way to structure our business?  We are looking into another company, one that will present all our ‘inventions’, which will make 3 completely separate companies.  Is it better to form one corporation (Enterprise) and place the three companies under that umbrella or keep each company totally separate from each other?  We are basically looking for the safest route while spending the least on corporate taxes and all those other fees.

Again, I may not have explained myself correctly but if anyone has any ideas or suggestions but require additional information, I would be more than happy to give all that I know.  We were working with a business consultant but he was a flake and one day he disappeared with all our documents and business papers, along with fees that were pre-paid for services not rendered.

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Cal Henry
www.club5150.com   (Currently offline - see profile for details)
www.twinfishcreations.com     (Coming soon!)
www.(not ready to disclose).com   (Coming soon!)

Hey Cal:  I know there`s a way to patent a business process or method.  Not sure of the specifics or if it applies to a service.  I`m sure one of the patent/trademark experts here can tell you if your idea qualifies. 

I`d also like to hear advice on whether 3 or 4 small businesses should be under one umbrella and the recommendations for structuring. 

From your breif description it sounds like you meet the legal criteria for a business method patent.  To determine whether your idea meets the criteria for novelty and non-obviousness would require a patent search.  Would be glad to provide more information and/or help you search and file a patent application.  Contact me at (310) 743-1188.

Today in the United States there are actually a number of different ways to form a business entity.  There are Corporations (S and C), Limited Liability Companies, Limited Partnerships and Limited Liability Partnership.  Corporations have been around for many years.  The others are quite new.  There are many good summaries on the web about the advantages and disadvantages of each type.  Also, there is a book written by a lawyer, Fred (I think) Steingold.

In my view, you form one of these entities primarily to provide asset protection (in case of a lawsuit) and anonymity and for tax and inheritance purposes.  Don`t forget, you can provide considerable asset protection with insurance.  You should consult your tax advisor about the best business entity to form for your particular situation. 

Also, beware of forming a business entity in a state that is not your home state.  Several States, notably Delaware and Nevada, have laws favorable to business entities and have low or no taxes.  (Forming a Nevada Corporation has been much touted on the radio of late.)  The dirty little secret is that if you do not live in that State you have to appoint an agent and have a bank account in that state (which is costly) and your home State may require you to register as a foreign business entity, which will probably cost you in taxes also.

Once you have decide which entity to form, forming it is not all that complicated.  Advice is available on the web.  The most complicated part is probably preparing the operating agreeement, which should be written for your specific situation.  You can probably form the entity yourself, but you can hire a lawyer if you are intimidated.

I may be able to provide referral to an attorney who does business entity formation, depending where you live. 

I am concerned when you say that you are going to work with a compamy that will present your inventions.  This sounds like an invention promotion company.  Invention promotion is a massive scam in this country.  Inventors are annually bilked of millions of dollars by these companies.  What they do is promise a lot and do very little.  They might do a patent search but always conclude that the the invention is the best thing since sliced bread.  Even when they get patents for the inventors, they get weak or improper patents.  Then the do very little in the way of marketing.  And I suspect, from the clients I have had, that they actually might steal ideas. 

The USPTO (www.uspto.gov) offers some guidance about how to pick legitimate companies and has been tasked by Congress to gather complaints.  The FTC frequently prosecutes these companies and shuts them down.  But often, they open up again in the same location with a different name.  I wish there was a good way to stop these companies.

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Norton R. Townsley
Patent Attorney/Professional Engineer
The above message is provided for general information purposes only and is not to be construed as legal advice.

This is just my opinion.  If it`s patentable do it!  But, on the other hand if you start now and refine your concept there is definiately gonna be alot of proprietary information you will develop through trial and error,etc.  Alot of that information, the info that is integratl to the success of your methodology will not be readily available to people outside of the venture.  Be careful with the people you let in, and ou should be okay.

look at it this way.  If you start today putting the methodolgy into action you are one day ahead of the person that copies you tomorrow.  No matter what, he will have to learn some of the same mistakes you have so he will have difficulty catching up to your level of expertise.