​A trademark is a “word, phrase, symbol and/or design” that identifies and distinguishes the goods or services of the owner of the mark from another party.  Examples include brand names, slogans, tag lines, logos, and design elements (think, Tiffany blue boxes).  In order to get a federal, registered trademark, the mark has to be used in commerce, so normally the owner of the mark is a business or business owner.  Someone can apply for a trademark before the mark is used in commerce if the owner intends to use it in commerce, but the United States Patent and Trademark Office (“USPTO”) will not register the trademark until the applicant shows that it is actually being used.  Trademarks don’t expire, as long as the mark continues to be used in commerce and the owner files periodic documentation with the USPTO.   
 
The trademark application process is fairly simple, but actually obtaining the trademark can be quite tricky.  Not only does the applicant have to worry about the application being denied because the mark is too similar to another in a similar industry (“likelihood of confusion” according to the USPTO), but the applicant has to worry that the USPTO will deny the application for other grounds such as the trademark being “merely descriptive.”  For example, the name “Northeast Interiors” merely describes the business (interior design in the Northeast).  The strongest trademarks are “fanciful and arbitrary,” meaning they are words that have no relation to the good or service sold (like Apple computers), and the second strongest trademarks are “suggestive” meaning they suggest the good or service without literally describing it (think, Facebook).  Unfortunately, most people name their businesses something that describes them for marketing purposes!  Is marketing more important or trademarking?  This depends on the nature of your business.
 
A business can also have a common law trademark, but there are benefits to federally registering: first, inclusion in the national database deters others from using similar marks in similar industries; second, there is a legal presumption that the registrant owns the mark and was the first to use it, meaning that in a dispute with another, they would be presumed to be the winner.
 
A common law trademark is established simply by a business starting to use the mark in commerce.  The mark should be identified with the ™ symbol.  Only a federally registered trademark can use the ®.  A common law trademark is limited in geographic area, so you could have a competitor business open up with the same name in an entirely different state, as long as you didn’t share customers.  If a competitor opens in your geographic area, you could sue them for trademark infringement if they did damage to your mark.  You would have to prove you were the first to use the mark (unlike having a presumption in federal court).
 
If you’re thinking of trademarking something in your business, give Jesson & Rains a call!

What is intellectual property?
 
“Intellectual” property refers to creative works used in business that have economic value.  The four most common types of intellectual property (“IP”) are trademarks, copyrights, patents, and trade secrets.  Trademarks protect words, names, symbols, and logos that are identified with a brand; copyrights protect artistic works like books, music, and photographs; patents protect inventions; and trade secrets are property that are valuable and have been kept secret and out of the public domain.
 
We’ll be starting a series explaining each of these types of property in detail over the next few weeks.  As the word “property” signifies, intellectual property is an asset. Thus, it is important for both business planning and estate planning.  In the business context, it is crucial to determine who owns the IP.  Is it the individual who brought it into the business (and will take it with them when they leave) or does the business itself own it?  If there is a possibility for litigation, it may be worthwhile to form a separate LLC to own IP so the other business assets stay separate and protected.  Next time you look at fast food packaging, you’ll probably see that the company’s trademarks are owned by a separate business.
 
For estate planning purposes, we want to know about IP just like any other asset – how much is it worth?  Who inherits it?  So make sure to share this information with your estate planning attorney.
 
The next blog article will go into trademarks.  Stay tuned!
​

The privilege license tax is a tax levied on the privilege of conducting a particular trade or business.  If you are a professional that is licensed by a board, you most likely should be paying state privilege license tax every year (for example, accounts, attorneys, general contractors, realtors).  There are some exceptions to this requirement, like professionals working for the government or non-practicing physicians, to name a couple.

However, there are some surprising professions on this list; most notably, photographers.

A list of applicable professions can be found here:
https://files.nc.gov/ncdor/documents/files/instructions_b202a_application_for_state_privilege_license_2-18_web_v3_final_3.pdf

And the license application can be found here:
https://files.nc.gov/ncdor/documents/files/webfill_version_b202a_application_for_state_privilege_license.pdf

The license is issued to the individual and not the business.  While the individual can go ahead and form his/her business, the license should be applied for before beginning business.  It is unlawful to engage in business without obtaining a required privilege license. The penalty for failure to obtain a license is the greater of five dollars ($5) or five percent (5%) of the amount prescribed for the license per month or fraction thereof from the time the amount is due until the amount is paid, up to a maximum not to exceed twenty-five percent (25%).

The privilege license tax is annual and is due by July 1 of each year. The penalty for failure to pay any tax when due is ten percent (10%) of the tax due.

Because the license is issued to the individual and not the business, if an individual is engaged in more than one business, he/she will have to obtain a privilege license for each business.  If you are a licensed psychologist who has a photography business on the side, you must obtain two privilege licenses and pay two taxes, for example.  The license must be displayed conspicuously at the location of the licensed business, trade, or profession.

If you have questions about the privilege tax, please give us a call!

​We encourage business owners to form formal business structures like Limited Liability Companies and Corporations in order to protect their personal assets from business debts and creditors. However, simply filing the Articles of Organization or Articles of Incorporation with the Secretary of State’s office is not enough. If you do not keep your business and personal finances and operations separate, a court could potentially find that, while there was an apparent separation of the two, in reality, the individual was using his or her business for their own personal affairs and order that the two are not really separate.  If this happens, a court could satisfy a business debt or judgment with your own personal assets. 
 
What can you do to avoid this?  First, the easiest thing to do is to keep your finances separate. Open a business bank account and only use that account for business income and expenses. Do not pay for personal items out of this account, even if you’re going to reimburse yourself.  Keep good records.  Do not take liberties with categorizing something as a business expense when it’s really a personal expense. Use a trustworthy business accountant. It is not worth the risk of stretching your deductions to pay less taxes (if it’s not really a business expense) because you’re opening yourself up to personal liability. Second, sign all of your contracts as member of your LLC. Don’t sign them as you personally.
 
Third, if you own a corporation, you have to comply with the North Carolina Business Corporation Act. You are required to have bylaws, even if you are the sole owner. You are required to vote and install a Board of Directors. If you want to own your corporation, the board (which may just be comprised of you) needs to issue you shares so that there’s a record that you own the business and that you’re not simply just a director or the president of the business.  Directors need to keep thorough records of annual meetings and need to vote on business decisions (even if it is just yourself voting). If you do not have robust corporate records, you risk having a creditor ask a court to “pierce the corporate veil” … meaning that a court may find you and your corporation one of the same, and you may be ordered to satisfy corporate debts and judgments with your personal assets, defeating one of the main purposes of owning a corporation. If you or someone you know on a business and you believe that the books and records need to be improved, please give us a call.

Many of our clients who own businesses do business under an “assumed name” (a/k/a DBA … “doing business as”).  This means that the name the business operates under is different to the name registered with the North Carolina Secretary of State’s office (e.g. Jesson & Rains, LLP doing business as simply Jesson & Rains). The law in North Carolina has been, up until recently, that you had to have a “certificate of assumed name” filed in the register of deeds office for each county in which you do business.
 
As of December 1, 2017, a change in the law has begun the creation of a centralized database that is being run by the Secretary of State’s office (as opposed to each of the 100 county register of deeds offices located in North Carolina). This, accompanied by a new streamlined application process, will make searches of the assumed name database and filing for a certificate of assumed business name easier than it was in the past. However, the Secretary of State’s office does not yet have the database completely up and running so, for now, when applying for a certificate of assumed business name a search for the desired name must be carried out in the county or counties in which you wish to do business.
 
A big change that it is important to take note of is that any certificates of assumed name that were filed before December 1, 2017 will expire on December 1, 2022. This means that anyone wishing to continue doing business under an assumed name that they were using in the past will need to file a new application for a certificate assumed business name with the North Carolina Secretary of State’s office before the December 1, 2022 deadline.
 
For assistance or for more information please don’t hesitate to reach out to Kelly or Ed who would be happy to assist.

First, congratulations!!  Below is a North Carolina-specific check list.

• Prior to interviewing, review with an attorney improper questions or topics (for example, you should not ask someone if they are married).
• Prior to hiring, conduct a background check.
  • Employers can be held responsible for the negligence or intentional acts of its employees if it should have known about the employee’s background. 
  • You will need to keep personal information like social security numbers under lock and key, in a secure network, or shredded when not used.
  • If the employee will be operating a vehicle or around children, you should consider having them submit to a drug test.
• Notify your insurer.
• Prior to the employee’s first day, get any Confidentiality or Non-Compete Agreements drafted.  Do you have any proprietary systems, recipes, customer lists, etc. you need to protect?  Are you concerned that you will spend time and money training someone only to have them open a shop a mile away as your competitor?
  • Those contracts will not be enforceable if the employee is asked to sign one after their first day of work, absent a promotion or pay increase.
• Register for an IRS EIN and with the N.C. Department of Revenue (if you haven’t already).  The business will have to pay FICA Tax (social security and medicare deduction) and submit additional tax paperwork every quarter.  As the employer, you’ll be responsible for withholding the employee’s income tax from their paycheck.
  • On the employee’s first day, have them complete a W-4 and NC-4.
• Register with the NC Division of Employment Security because the business will likely have to pay unemployment tax.  https://des.nc.gov/des.  
  • You will not have to pay workers compensation insurance until you reach three employees.
  • We recommend you hire a payroll company to handle employee paychecks.  Payroll companies will make sure that your business complies with the aforementioned requirements. They will also assist you with providing tax forms and the I-9.
• Notify the state and federal government of the new hire so that, if the employee owes any back child support, his/her wages can be garnished: https://newhire-reporting.com/NC-Newhire/default.aspx
• Complete an I-9 and save for three years.  The federal government requires employers to verify that every employee they hire is eligible to work in the United States. Form can be found at www.uscis.gov.
• Upon hiring your first employee, you now have to comply with state and federal poster requirements.  The Department of Labor has a website where you can select specific facts about your business and they will tell you the posters you need: https://webapps.dol.gov/elaws/posters.htm.    State posters are found here:  https://www.labor.nc.gov/workplace-rights/employer-responsibilities/all-state-and-federal-workplace-posters
• FLSA applies to nearly every employer.  Therefore, you will be required to comply with minimum wage ($7.25) and overtime laws (depending on the type of employment).
• While an employment contract is not required, it may be helpful to define the scope of employment and provide useful information like vacation policies, for example. 
• Discrimination and wage laws are very stringent and pro-employee -- you should consult an attorney with any questions.

 
If you’re ready to hire your first employee, give Jesson & Rains a call now to ensure you are in compliance with the myriad of laws you must consider.