I'm a Lawyer, ask me anything about business law - I'll try my best to answer.

[DarkMasterMX]

Hmm this is a great thread to get some general ideas about things!

I have a current issue that recently came to my attention. My company is incorporated (in case that makes a difference or not).

My company deal in sporting costumes that use customized designs etc... There are always companies in this industry that copy designs whether knowingly or unknowingly as customers bring the designs to the companies to make or other companies just steal the ideas and make slight adjustments to them, to the call them their own design.

I found a company who not only have they copied some of our designs and changed them a bit, they've literally taken pictures off of my website, photoshopped out the heads/legs of the models we used and stuck a mannequin head on it then posted on their website as their own product. The company is based out of Spain it seems so I'm not sure if we can really do anything about it. I was primarily wondering if there is any grounds at all for copyright infringement or something of that sort.

[adeel]

Adeel, you actually nailed the "problem" with that scenario, so long story short, it's a lot trickier than just adding a new shareholder.

The biggest issue is that of the current retained earnings in the corporation, in that by bringing on a new shareholder, you've essentially given them title to earnings prior to them being involved with the company. What is usually involved in such a scenario is a share "freeze" and a corporate reorganization, with the intention of "locking in" the original retained earnings value to the original shareholders while at the same time bringing on new shareholders who will have a say in future retained earnings. The "difficulty" of such a situation lies in that this is a tax issue rather than a corporate structuring issue.

The main things to consider in such a scenario are (1) current retained earnings in the corp and (2) the estimated future income/lifespan of the corp. If you have a corp with 5 years of retained earnings, but 30 more years to go in operation, then a freeze makes sense. If you have 30 years of retained earnings, with 2 more years before retirement, then a freeze might not be such an attractive option.

(The above is one of the more complex areas of tax, so consider this explanation more of a coles-notes blurb, as there are a lot of options/things to consider depending on the specific scenario.)

Assuming the sole shareholder is not concerned about protecting their retained earnings (because the new shareholder is a spouse or adult child lets say), and is more interested in spreading out personal income extracted from the business, would the approach that I mentioned work, or are there tax considerations (such as some kind of benefit by way of purchasing shares at something less than their FMV?)

I have a small business that is incorporated. I'm told that no longer protects me from being sued personally. I know the taxman can come after me for unpaid corporate taxes and hst but what about a customer that trips and falls at my place of business or someone else for any other reason?

Also, when would someone register a LLC or LLP over Inc?

LLC is for US companies. An LLP is a partnership. Partnerships are often used when losses are expected at the start of a business (since the loss flows into the income calculations of each partner, and reduces their personal taxes). LLPs are generally only used for professionals such as accountants and lawyers to allow them to share income, but not become liable for the work of each individual partner.

I'll leave the liab stuff to the lawyers.

[xserverfd]

I have a small business that is incorporated. I'm told that no longer protects me from being sued personally. I know the taxman can come after me for unpaid corporate taxes and hst but what about a customer that trips and falls at my place of business or someone else for any other reason?

Also, when would someone register a LLC or LLP over Inc?

Interested as well. I know the corporate "veil" can be broken just I'm not sure on what grounds. Aside from the obvious errors in the corporations documents/filings + lack of clear distinction between personal/corporate activities what other kind of precedents are out there?

[northfur1]

Oh, I could use some advice.

I have a general partnership. We make masks and costumes, we're located here in Ontario. At the beginning of May we had a customer from a theatre in California place a large order worth around $2150. We received a deposit of $500 the first week of June. We shipped the order on June 6th. They received it June 7th along with an invoice we sent for the remaining due. They acknowledged receiving the costume items and have used them. The show is now over.

Along with that invoice sent on June 7th, we requested that they pay $850 in 30 days and the remaining $800 in 60 days.
30 days has passed and we've not received a payment. We have called and left voice messages this past week to remind of them of the upcoming due date. We have not received a response. We've sent a payment request via PayPal for the $850.

I'll likely give them a few more days, or even this week, but I'm not holding my breath that they'll come through. So should they not come through this week, what should be our next move or how long should we wait?

[yahi]

Are sites allowed to compare and review products without the permission of the copyright / product owner? For example if I wanted to blog a comparison of credit cards, am I allowed to post about credit cards without the card owners permission?

[flafson]

Oh, I could use some advice.

I have a general partnership. We make masks and costumes, we're located here in Ontario. At the beginning of May we had a customer from a theatre in California place a large order worth around $2150. We received a deposit of $500 the first week of June. We shipped the order on June 6th. They received it June 7th along with an invoice we sent for the remaining due. They acknowledged receiving the costume items and have used them. The show is now over.

Along with that invoice sent on June 7th, we requested that they pay $850 in 30 days and the remaining $800 in 60 days.
30 days has passed and we've not received a payment. We have called and left voice messages this past week to remind of them of the upcoming due date. We have not received a response. We've sent a payment request via PayPal for the $850.

I'll likely give them a few more days, or even this week, but I'm not holding my breath that they'll come through. So should they not come through this week, what should be our next move or how long should we wait?

In most invoices that tell you to pay within 30 days it also says about penalty of not paying on time, which means very high interest rate. I guess the common thing is to wait a few month and increase the payment due due to the penalty and if they still don't pay then you send it over to collection.

[flafson]

Are sites allowed to compare and review products without the permission of the copyright / product owner? For example if I wanted to blog a comparison of credit cards, am I allowed to post about credit cards without the card owners permission?

Why wouldn't you? It's all free speech and you are talking about YOUR personal experience.
They could threat with libel but then most bloggers would just fold and take it down or just hide the name of whoever threatens them.

[onehair]

I'll add a follow up question to OP (and hansol, if interested):

Assuming that a shareholder incorporated as a sole shareholder, but would like to add adult family to ownership (and as a result add the ability share of earnings) of the corporation, is there anything stopping them from simply issuing shares at $1 each (despite the fact that the market value of the business, and consequently shares, is much higher than $1 each)?

It seems like Hansol has done an adequate job to help you out.

Just a word of caution, when you are dealing with non-arms length parties, if you sell shares below FMV, you may still be dinged with the consequences you would face had you sold the shares at FMV. My guess is those liabilities would be tax related. Just food for thought.

Cheers

[onehair]

Interested as well. I know the corporate "veil" can be broken just I'm not sure on what grounds. Aside from the obvious errors in the corporations documents/filings + lack of clear distinction between personal/corporate activities what other kind of precedents are out there?

Piercing of the corporate veil can happen in many different situations. It is extremely fact and context specific.

In short, as a matter of first principle, if an individual is led to believe because of the circumstances is lead to believe that he or she is dealing with the person rather than the corporation, it raises an argument for piercing the corporate veil. Of course, it is tough to do, but at the same time, there are many many different examples of it happening (for example, a breach of trust in a construction lien).

Cheers

[onehair]

Hmm this is a great thread to get some general ideas about things!

I have a current issue that recently came to my attention. My company is incorporated (in case that makes a difference or not).

My company deal in sporting costumes that use customized designs etc... There are always companies in this industry that copy designs whether knowingly or unknowingly as customers bring the designs to the companies to make or other companies just steal the ideas and make slight adjustments to them, to the call them their own design.

I found a company who not only have they copied some of our designs and changed them a bit, they've literally taken pictures off of my website, photoshopped out the heads/legs of the models we used and stuck a mannequin head on it then posted on their website as their own product. The company is based out of Spain it seems so I'm not sure if we can really do anything about it. I was primarily wondering if there is any grounds at all for copyright infringement or something of that sort.

On the basic facts that you have told me, it seems like you could have a case. But the company is in Spain, so you may face a lot of potential issues with enforcing your judgment against the spanish company. You could try having a lawyer send out a cease and desist letter as a first step...

send me a PM if you want to further consider your options in greater detail.

[onehair]

Oh, I could use some advice.

I have a general partnership. We make masks and costumes, we're located here in Ontario. At the beginning of May we had a customer from a theatre in California place a large order worth around $2150. We received a deposit of $500 the first week of June. We shipped the order on June 6th. They received it June 7th along with an invoice we sent for the remaining due. They acknowledged receiving the costume items and have used them. The show is now over.

Along with that invoice sent on June 7th, we requested that they pay $850 in 30 days and the remaining $800 in 60 days.
30 days has passed and we've not received a payment. We have called and left voice messages this past week to remind of them of the upcoming due date. We have not received a response. We've sent a payment request via PayPal for the $850.

I'll likely give them a few more days, or even this week, but I'm not holding my breath that they'll come through. So should they not come through this week, what should be our next move or how long should we wait?

With respect to how long you should wait, the Limitations Act, 2001 states that you have 2 years to sue the defendant from the time you first had "knowledge" of your claim.

You may want to have a lawyer write a letter demanding payment (a demand letter). Once you send the demand letter, you can commence a claim. You will want to consider whether to start it in the US or Canada. The circumstances of the case will decide this.

You said that they owe you 2100. You would have to go into Small Claims Court. Given that the defendant is in Cali, it may cost you a decent chunk in order to recover any (in the thousands). If your lawsuit is in Canada, you can recover some of your costs, but they are capped to something around 15%. Just some food for thought.

[onehair]

Why wouldn't you? It's all free speech and you are talking about YOUR personal experience.
They could threat with libel but then most bloggers would just fold and take it down or just hide the name of whoever threatens them.

He is somewhat right. If you are flat out lying and what you are saying isn't true and your intention is to harm the company, then you may end up liable for libel. It all depends on the facts.

Generally speaking, I don't see anything wrong with writing a review of a product you tried.

[Squageli]

I have a few questions. The business is incorporated.


1) My company operates a retail store. Is my company liable if a customer's dog bites another customer while in my store?


2) My company leases a store. If I break the lease and dissolve the company can the landlord come after me personally?


3) My lease states that rent includes taxes and maintenance. Does maintenance include snow removal? If it does and the landlord fails to clear the snow & someone slips and is injured as a result who is liable?



Thanks

[fernandodave]

HI onehair, if a couple is going thru a divorce, and one of the parties has 2 incorporated companies (both have 1 partner each) registered and operating. Does that party have to include this in their assets and liabilities portions for court? Does the other party have/can have any claim against the assets etc of the companies?

thanks

[onehair]

HI onehair, if a couple is going thru a divorce, and one of the parties has 2 incorporated companies (both have 1 partner each) registered and operating. Does that party have to include this in their assets and liabilities portions for court? Does the other party have/can have any claim against the assets etc of the companies?

thanks

In short, yes and yes. Normally a shareholder agreement in place between the shareholders will have provisions which will trigger a certain event prior to any net family property calculation during a divorce of one of the shareholders. For example, the shareholder's agreement could require that a shareholder sell their shares to the other shareholders in the event of divorce proceedings being commenced against them.

In a divorce, property is divided in half. A divorcee's shares are that person's property. Therefore, their value would be included in the calculation (whether it is the shares themselves or just the monetary value of them, I'm not 100% certain. It probably depends on whether the couple can make an arrangement between themselves. I'm sure a divorcee can argue for the actual shares rather than the current market value of them - if, for example, the shares are about to skyrocket in value, the shares maybe worth more than current market value).

If you do not have a shareholder's agreement in place, the other shareholders may find themselves in a situation where a court orders the shares be transferred to an angry spouse lol.