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Funding My Business by selling shares on the Internet

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Dear Business Guy,

I want to open a Restaurant and need around $150,000.  I have talked to my bank, but that did not go well.  They will only fund me with a home equity loan.  I was thinking about making my business a corporation and selling off 49% of the company with shares on the internet–EBAY.  How do I get started?

Well, that sounds like a good plan.  But because of federal regulations, once you start selling shares in your company over the internet you are regulated by the Securities and Exchange Commission (SEC).  This is very costly and time consuming.  So most small businesses choose not to go this rout.  You will have to hire attorneys and accounting experts to get approval with the SEC.  Also, your company is so small it will not be able list (be bought and sold on) an exchange.   Exchanges such as the New York Stock Exchange have their own requirements.  The ability to buy and sell in a short period of time, called liquidity, is important to potential investors.   There are also restrictions on how you can solicit investors.

What you may have heard about is the CrowdFunding program promoted by former Senator Scott Brown and was passed in the JOBS Act..  This would make it possible for you to raise money by selling off stakes in your business.  But as of the writing of this article, the SEC has not set down the regulations for this option.  For a discussion of this topic and a list of potential “crowdfunding portals” see this page on OCBusinessStartup.com 

Another option is borrowing money from sites like  lendingclub.com and prosper.com.  These sites let you borrow money for your money from a group of lenders.  They vet their borrowers for credit history.

Although this topic is outside our scope of knowledge, you have a few opportunities that you can look into.  If you have a few investors who believe in your business, you can for a partnership.  You can structure it so that you are the Master Partner so that you do not loose control of your business.  The key is to write up a partnership agreement rather than doing things on a handshake.  That way everyone knows what they are expected to contribute and what happens if the business goes South.  Along these same lines, you should consider forming an LLC or Type S corporation.  And you may want to consider incorporating in Nevada.  For a brief discussion of how to organize your business, see this page http://startup.ocbusinessstartup.com/wp/organizing-your-business/   You may also want to check out the books highlighted on that page at your local library.

© OCSmallBusiness.com

 

 


Home Made Cookies and Baked Goods as a Business

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Dear Business Guy,  

We make some of the best Home Made cookies around along with brownies and other baked goods.  We think people will really like them because we actually make them at home!   We would like to sell them at farmer’s markets on the weekend.  Since we are not renting a store, we don’t have to get any permits, Correct?  Are there any restrictions?

A.  Editor’s Note.  This information has changed.  A small business friendly bill actually made it through Sacramento that allows you to make food at home and even sell it from you home–before even bake-sales were illegal in California.  But there are limitations.  The law is effective January 2, 2013.  See this article for more information about the homemade food law.  

Thanks for asking us about you home based business.  There are some regulations which might get in the way of your plans.  First, the Orange County Health Department does not allow food to be sold if it’s made in a residential kitchen.  You need to do your baking in a kitchen certified by the health department.  The Farmers Market Manager’s will need to confirm that you have made your cookies in a certified kitchen.   You can rent a commercial kitchen to do your cooking in, and you can also contract to have your “homemade” baked goods made for you with your label.  For more info, see this article on the restrictions to selling homemade food.   And check out the website for the Orange County Health Department for more information.

If you are preparing the food yourself in a kitchen approved by the health department, you will have to get a Food Workers Card by taking a class on safely handeling and preparing food.  The Farmers Market Manager will generally also require that you have a State of California Resale Permit along with a City Business License for the city you are selling in.  These are not hard to get  if you are renting space in a Swap Meet or Farmers Market.  Click her to find our more information about getting these permits.  Another challenge you will face is getting into a Farmers Market.  Many of them have limited opportunities for prepared foods, and it’s hard to get into the more popular markets.  The rents are not necessarly much higher for popular Farmers Markets.  Click her for a list of Orange County Farmers Markets.

We hope this answered your business questions.  Feel free to e-mail us more questions.  As always we will not publish your name; and as the saying goes there are not stupid questions.
(c) OCSmallBusiness.com


Put NFL MLB NCAA Team Logos on T-Shirts

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Dear Business Guy,  I want to put logos of NFL teams on T-Shirts and other products using silk screening.  Can I do this?  They say that they have a copyright on the broadcast games, but do they have a patient on all of the team names or just the official Jerseys?

Thanks for asking.  Assuming that you have read our TOS and understand that this does not constitute legal advice, the answer is yes and no.  Yes you can put whatever you want on a t-shirt or jersey, but if you use someone’s trademark with out their permission this is illegal.  And you could get prosecuted by the DA and have to pay damages to the team’s owners.  Yes, you see a lot of shirts being sold for like 10 bucks around, those are generally made illegally without getting permission from the logo owners.  And they can get away with it because the guys selling the shirts only make a couple of bucks and are generally too poor to pay any judgement.  The guys who designed the shirts are long gone before they go on sale.

While you may consider it no big deal, the law looks at it like steeling because the logos and use of the logos are private property.  Using them without permission is kind-of like steeling someone’s bike.  For more information on trademarks and copyrights, see this page, and for more information about the T-shirt business check out this page.  For instance you could have a general things like “I ♥ Football” “Take me out to the Baseball game” or make up your own team names.  That sounds great, but not too many people want to buy a T-shirt that with such general slogans on it.  They want to show they are fans of the Dodgers, Angeles, or Raiders.  But you cannot use team names or logos without permission of their owners.

National Football League Licensing

That said, it is possible to use NFL trademarks, it just may be impractical if you want to do a small amount of products.  The NFL also grants permission to use individual team names/logos.  Check out the NFL’s licensing website nfl.biz .  It seems like they want to deal with larger manufacturers and distributors.  You need to guarantee at least a $100,000/year royalty to the NFL, and have at least a 6M/12M liability policy to protect the NFL against lawsuits arising from your products.  You will also have to prove to them that you have the financial resources to meet these requirements.

They also review your products to insure that it does not have a negative impact on the NFL’s image.  i.e. no cheep products or pornographic products.  Although they do not state this on their website/application, they probably will not let you produce a product that is already being produces as the resulting price competition would reduce the value of an NFL license.  If you have a unique product that is not NFL branded, you might want to run it by their new products department before you fill out the application.  New Products Division, NFL Properties LLC, 345 Park Avenue, New York, New York 10154   newproducts@NFL.com

Major League Baseball Licensing

For licensing, the MLB has provided this contact on their website  lisa.teitelbaum@mlb.com From what we understand, it’s very similar to the NFL system.  Some people on the internet have said that the the minimum royalty is $40,000.  We could not find out any other information on line.  We did note that in the MLB, players have licensing rights to their likeness, team number, and name.  You can inquire about using a player’s trademarks from the player’s association here: http://mlb.mlb.com/pa/info/licensing.jsp  This is where you would get permission to use a player’s picture on your product.

NCAA Licensing

Another group of logos that are in demand are the logos to universities.  Virtually all universities belong to the National Collegiate  Athletic Association which helps schools cash in on their athletic programs.  Each school retains the right to use and marked their own names and logos, but most schools they license their use through the the Collegiate Licensing Company .   They license most of the big schools, bowl games… including Arizona State, University of Arizona, UCLA, and SDSU.  We did note that the other big school, USC was missing from their client list.

USC runs its own Trademark office trademarks.usc.edu

As with MLB and NFL licensing, you need to demonstrate that you have a high quality product, that you have insurance to protect the institution against liability claims, you have to pay a licensing fee in advance, and you have the financial where with all to pay future royalty fees.  But this is done on a school by school basis.

Yes, the counterfeit police will get you

The leagues actually hire investigators to go out to malls, swapmeets and even internet sites hunting down evil merchants selling fake merchandise.  The way they look at it is that selling fake goods takes away jobs from Americans–even though a lot of the real stuff comes from China anyway.  But the deal is the NFL and other leagues have friends in high places, and selling fake stuff is taking money out of their pockets.  If it’s imported or goes across state lines, it’s a federal crime.

This video was produced by HomeLand Security, and in this video they explain that they are very serious.  ICE (Immigration and Customs Enforcement) has HSI Police (And HSI stands for Homeland Security Investigations) that go after sellers and seize inventory.  They are helped the the leagues PI’s, and as you can see they have become experts in determining what is real and what’s not.  In addition to taking your inventory you could get arrested (in this Video  from New Jersey discusses a guy who got fake NFL jerseys from China and sold them through the mail.) with a crime and civil lawsuits could be filed against you by the owner of the trademark you are copying.

So the bottom line is that it’s not a good idea to make or or sell fake stuff.

Reader Question  I attend a University in Los Angeles that’s supposed to be a public university.  Can my school sue me for using their name?  I am paying a lot of money in tuition; and it’s owned by the public.

Although we are not attorneys, we believe they could sue you for using their trademark.  And our guess is that they might if you sell anything with their trademark (link).  Even Though they are owned by the public and are a non-profit doesn’t mean that they will permit you to make money from what they consider their property– the UCLA trademark.  If you are using their trademark for to discuss policy we would think you could use it.  For instance, if you made a sign that said UCLA is Unfair, UCLA costs too much …  It’s not a cut and dry thing.

They are with the CLC licensing program, see above.  You can submit an application through the CLC. (see above)


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