By Attorney Kelly Jesson
There are numerous to-do items and deadlines business owners must keep up with to successfully run a business. However, many business owners forget that they must file an Annual Report with the North Carolina Secretary of State to keep their business in active and good standing with the state.
The Annual Report is used to keep the business records up to date with the Secretary of State. On the Annual Report, you will provide basic information about your business, such as the name and address of the registered agent, the principal address of the business, and the names and signatures of company officials. Most businesses formalized with the Secretary of State’s Office need to file an Annual Report, such as Business Corporations, Limited Liability Companies (LLC), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). Non-Profits, Limited Partnerships, Professional Corporations (PCs), and Professional Limited Liability Companies (PLLC’s) do not have to file an Annual Report. There is also a filing fee due with the Annual Report. For LLC’s and partnerships, the fee is $200, and for corporations, the fee is $25.
The due date for your business’s annual report depends upon the type of business, but generally April 15th is the deadline for most businesses. For corporations and partnerships (LLP and LLLP), the annual report is due to the Secretary of State’s Office the 15th day of the fourth month following the entity’s fiscal year’s end. For example, if your fiscal year ends on December 31, your annual report for that year is due on April 15th.
Jesson & Rains offers a yearly plan for businesses that includes serving as our client’s registered agent and filing their annual report, among other things. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
We also offer an upgraded yearly plan that includes unlimited telephone access to attorneys throughout the year.
The consequence for not filing an Annual Report and/or paying the fee is that the Secretary of State can administratively dissolve your business. This means that you will lose the liability protection you enjoy by being a formal business, and a creditor can come after your personal assets. If you have questions about filing your Annual Report or want to learn more about the annual plan services offered by our firm, you can click HERE, or feel free to reach out to Jesson & Rains directly!
By Associate Attorney Danielle Nodar
Branding your business helps set it apart from your competitors and keeps it present in the minds of consumers. To protect that brand, a business can obtain a trademark that essentially puts the world on notice that you are the owner of the specific mark. 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 of these marks include brand names, slogans, tag lines, logos, and design elements (think, Tiffany blue boxes).
To get a federal registered trademark, the mark must be used in commerce, so normally the owner of the mark is a business. An application can be filed 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. A benefit of a trademark is that they do not expire, so 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, so oftentimes non-lawyer business owners will attempt it themselves, but actually obtaining the registered trademark can be tricky. Applications can be denied for a variety of reasons, such as the mark being “merely descriptive” of the goods or services it applies to, or a mark being considered too similar to an existing trademark in a similar industry (a “likelihood of confusion” according to the USPTO). 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 their goods and services for marketing purposes (for example, “Northwest Construction”), so trademark registration may not possible. Exceptions to this rule are well-known businesses or those that have been in business for many years.
A business can have a common law trademark (indicated by the ™ symbol instead of the ® symbol) without registering it with the USPTO just by using the mark in commerce, but there are benefits to federally registering. Inclusion in the national database deters others from using similar marks in similar industries. Also, there is a legal presumption that registrant was the first to use it, meaning that in a dispute with another business, it would be presumed to be the winner. Damages would also be presumed. A drawback to a common law trademark is that it 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 did not share customers. If a competitor opens in your geographic area, and you sue them for common law trademark infringement, you would have to prove that they did damage to your mark and that you were the first to use the mark.
If you’re thinking of protecting an element of your brand with a trademark, give Jesson & Rains a call!
By Attorney Kelly Jesson
October is National Women’s Small Business Month. Jesson & Rains is proud to represent and work for numerous women-owned businesses.
Charlotte is an exciting place for women entrepreneurs. As we previously reported, in 2018, it was named the “#1 City in America for Female-Owned Business Growth.” Women-owned business growth continued across the country in 2019. Unfortunately, due to the pandemic, Barbara Weltman reports that the number of women-owned businesses fell by 25% from February to April 2020. However, there are plenty of indications that women entrepreneurship is back on the rise.
Participation in women’s networking groups and trade associations is key. Attorneys Kelly Jesson and Danielle Nodar are members of the following groups: National Association of Women Business Owners (NAWBO), Women Lawyers of Charlotte, National Association of Women in Construction (NAWIC), and Women in Networking. Please reach out to Kelly or Danielle if you’d like to drop in on a meeting one day!
By Associate Attorney Danielle Nodar
When a business is formed and registered with the North Carolina Secretary of State’s Office, the business must comply with certain filings in order to remain in good standing and able to do business in the state. Scammers are aware of these requirements and target North Carolina business owners through the mail. These mailings may look like official government documents, and they quote statutes, cite scary penalties, and prompt the business to pay a fee for a certain “required” form.
One misleading mailing comes from C.F.S., a Michigan company that sends a solicitation for preparation and filing of 2022 annual reports for a fee of $295. The solicitation indicates that the company is not affiliated with the NC Secretary of State and that the annual report may be filed directly by the business owner with the NC Secretary of State’s Office. However, if you are not careful, you may pay a company for a service that you can complete yourself. Businesses can file their annual report themselves and pay a fee of $200 directly to the NC Secretary of State.
Another scheme targeting new business owners is from a company called NC Certificate Service, which mails out a form requesting businesses to order an NC Secretary of State Certificate of Existence for $82. However, there is no state requirement that each registered business entity obtain an annual Certificate of Existence. A Certificate of Existence is only required if a business does business in another state and can be ordered by the business directly from the NC Secretary of State for $15.00 or less.
Finally, another mailing scheme comes from Annual Minutes Filing Services, LLC, also based out of North Carolina, offering to prepare annual minutes to business entities in North Carolina for a fee of $159. The mailing indicates that the company is not affiliated with any government agency in North Carolina but fails to mention that meeting minutes for a company are internal documents that are not required to be filed with the Secretary of State.
There are ways you can protect yourself when receiving a document requesting additional filings or fees for your business. First, always read the fine print. These mailers often come from private companies that have no affiliation with the North Carolina Secretary of State or other government agency, and many are from out of state. Also, some mailings may indicate that you are not obligated to obtain the services to meet North Carolina’s requirements for your business. Do not blindly mail in a check when you receive mail like this. Read it carefully. Contact your attorney or the Secretary of State’s office if you are concerned about a required form your business receives in the mail.
By Attorney Edward Jesson
A Sheriff’s deputy has just showed up at your door and handed you a summons. Or you received a summons via FedEx or Certified Mail. Do you need to hire a lawyer to move forward with things? This is highly dependent on a lot of things, but often most importantly, whether the Defendant that has been sued is an individual or a business entity.
In North Carolina, an individual has the right to represent his or herself. So, if you have been sued in your individual capacity you have the right to represent yourself in court. This is known as proceeding pro se. Sometimes we even recommend our clients proceed pro se. For example, if an individual has been sued in small claims court for a small amount of money, often times the legal fees that might be incurred in defending that small claims action would exceed the damages that were being claimed. Moreover, small claims court is fairly well designed for those who wish to proceed pro se with a lot of the formalities that are present in District and Superior Court being relaxed.
However, if the summons is for District or Superior Court, while an individual is still permitted to represent themselves in those proceedings, generally we would advise against that. In District and Superior Court the North Carolina Rules of Civil Procedure, the North Carolina Rules of Evidence, and applicable Local Rules, and various other rules and regulations apply. The majority of the time we find that individuals proceeding pro se end up getting tripped up by these rules—often with serious long lasting financial consequences.
However, things are much different if the Defendant being sued is a business entity such as a corporation or a limited liability company. In North Carolina a business entity cannot represent itself nor can a member or owner of the business represent the business in court unless that individual is an attorney licensed to practice law in North Carolina (or has been admitted to practice in North Carolina on another basis).
If a business owner (that is not permitted to practice law in North Carolina) files a response on behalf of the business that they own, they are engaging in the unlicensed practice of law which is a Class 1 Misdemeanor in North Carolina. Any documents filed by an unlicensed attorney could be stricken by the Court which could result in a judgment being entered against the Defendant, even though the Defendant may have thought that they properly responded. Repeated violations of the law could result in financial sanctions being awarded by the Court or injunctions being sought by the local district attorney.
Generally speaking, if you receive a summons, regardless of what it is, it is in your best interest to at least consult with an attorney to see what your options are. Depending on the situation, it may be advisable to move forward and represent yourself. However, in a lot of circumstances the litigation can be a mine field for those who are not used to appearing in court on a regular basis.
If you receive a summons, or have any other questions about the litigation process, the attorneys at Jesson & Rains are ready to help.
By Attorney Edward Jesson
In the employer/employee relationship, non-compete agreements get a lot of attention, but non-solicitation agreements should not be ignored. Non-solicitation agreements are agreements either to not to solicit a business’s customers or its employees. Employees could be asked to sign these agreements as well as other businesses. If the latter, courts will generally allow businesses to contract with one another how they see fit. However, courts closely scrutinize non-solicitation agreements that a business asks an employee to sign.
The purpose of a non-solicitation agreement is to ensure that a former employee cannot steal the employer’s customers or poach the employer’s current employees to go and work for a competitor. In order for a non-solicitation agreement to be enforceable, it must be: (1) in writing; (2) part of an employment contract; (3) based on valuable consideration; (4) reasonable as to time and territory; and, (5) designed to protect a legitimate business interest. These factors are very similar to what courts look at when evaluating non-compete agreements, but, generally in North Carolina, non-solicitation agreements are easier to enforce.
The “in writing” and “part of an employment contract” prongs are easy to satisfy. Furthermore, courts in North Carolina have routinely held that non-solicitation agreements protect a legitimate business interest. The “valuable consideration” and “reasonable as to time and territory” prongs are where people often get tripped up. Valuable consideration is generally the job itself (meaning the non-solicitation provision is included in the employment contract at the very beginning as a condition of taking the job) or it can be in the form of a raise after the fact.
Courts look at the time and geographic scope limitations in conjunction with each other. For example, a longer period may be permissible if the geographic coverage is small. Two years is generally held to be enforceable, though longer periods have been held enforceable under unique circumstances. As to geographic scope, courts will usually look to: (1) the area of restriction; (2) the area assigned to the employee; (3) the area where the employee actually worked; (4) the area in which the employer operated; (5) the nature of the business involved; and (6) the nature of the employee’s work duties and knowledge of the employer’s business operation. Additionally, courts in this state will only prohibit the former employee from soliciting customers with whom the employee had contact with or had intimate knowledge of during their former employment.
If a former employee violates the agreement, the business can seek an injunction (a court order prohibiting the employee from further breaches); compensatory damages (such as lost profits); and, in egregious situations, treble damages (three times the compensatory damages). Businesses may also write liquidated damages clauses into the contract that sets the amount of damages up front. However, these are also carefully scrutinized by the court so it is important to make sure that any liquidated damages provisions are properly drafted.
If you need assistance in drafting, reviewing, or enforcing a non-solicitation agreement that you believe an employee has breached, the attorneys at Jesson & Rains are available to assist.
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