The Blog - Where Business Collides with Human Nature

Spot Pyramid Schemes Before You Sign Up

If you’ve ever been told that you could make easy money and it sounds too good to be true, it probably is. Pyramid schemes often sound like enticing business deals, but fraudsters may use this “business model” - to take advantage of you.

"The SEC’s guidance on pyramid schemes advises investors to “exercise caution...if what is being sold is speculative or appears inappropriately priced.” But experts say this can be difficult to judge.

Pyramid-scheme operators have “learned the techniques of saying we’re a legitimate company,” by purporting to want to make money mostly from sales, rather than new recruits, said Joseph Mariano, chief of the Direct Selling Association.

There is no hard-and-fast test of whether a scheme is legitimate, according to lawyers. Instead, the decision rests on what is often a complicated analysis of revenues and other factors. “It can be like nailing Jell-O to a tree proving they’re pyramids,” said Kevin Thompson, an attorney for multilevel-marketing companies." - WSJ,com

Before you invest your time and money, it’s important to ask good questions and research the company.

Here are some typical characteristics of a pyramid scheme:

  • Emphasis on recruiting
  • No genuine product or service is sold
  • Promises of high returns in a short period of time
  • Easy money or “passive income” (money you earn without doing anything)
  • No demonstrated revenue from retail sales
Topics: Recommended Books Legal Pyramid Scheme

Creative Commons - Pseudonymity & Anonymity for Internet Marketing

Websites, social media and the Internet feed psuedonymity and anonymity while claiming "copyright" to their content.  It is simple enough to give yourself a fake name.  Even under a fake name you can own the copyright to content.  Your Twitter name can be a meme, mantra or brand.  Your eBay name can reflect the product you sell.  No one needs to know your real identity.  Even a website which has photos, videos and content can be fake, fake, fake.  The more technical term is that the website owner could have "psuedonymity and/or anonymity".

To understand the language we will review a few definitions.  Once these definitions are better understood, you can determine if your marketing strategy will be about standing behind a curtain and acting like the wizard in the Wizard of OZ or standing tall with pride and transparency to build a reputation which gains trust and forms relationships.

Topics: Internet Marketing Legal Copyright Get Published

Confidentiality Agreements - Keep it Top Secret with an NDA

A hand-shake agreement where both parties agree to keep things between them is replaced with a confidentiality agreement.  Such a document could be vital to protect your company (or person).   When egos. drugs & alcohol, dissappointments and greed are involved... human nature takes over.  "What the mind knows, the mouth wants to disclose."  Another more serious risk is related to unethical opportunists who work inside a company.

Topics: Business Forms Human Resources Legal

Balance Business and Law Without Breaking the Bank at Equinox

Change is certain in business but is often difficult to manage. Considering all aspects of the law while managing critical business issues will require an experienced authority who can help smooth the impact of change by providing guidance in how to structure the new and protect against the bad. 

Topics: Legal Business Services

Steps to Take Before Filing a Commercial Lawsuit

Litigators are trained on the law and the litigation process, not on how to run and grow a business.  Furthermore, many litigators fail to fully appreciate and properly advise their clients on how hugely distracting the lawsuit will be, and the huge risk this imposes on the business.

Making matters more complicated is the economic reality that litigation firms profit from clients that file and prosecute lawsuits. Indeed, unless the litigation firm has clients that pay them to file and prosecute lawsuits, the litigation firm dies.

Topics: Legal Business Services

Free Tools to Help Small Business Comply with Laws and Regulations

40,000 new laws went into effect this year.  It is impossible for a small business to perfectly comply with laws and regulations.  There are too many variable, the laws change without an email notification.  If you are not well read and staying in tune to the requirements, it is easy to get behind the game.

Topics: Government Free Legal

Starting a Freelance Business – How to Take Care of Legal, Tax and Contractual Paperwork

If you are new to freelancing or thinking of becoming a freelancer, you’ll no doubt have lots of questions, especially about the legal and regulatory paperwork you need to obtain and manage throughout the business year.

Freelancing, particularly if you are unincorporated, is one of the least paperwork-intensive forms of business ownership. Nevertheless, you are still a business and you need to be sure you have the right licenses or permits, make estimated tax payments on time, report your earnings each year, and deal with client paperwork such as contracts, non-disclosure agreements, and more.

Topics: Taxes Government Business Planning Legal

The Difference Between a Trade Name and a Trademark

During the evolution of your business, there can be confusion about the trade name and the the process of business name registration.  What is the difference between a trademark and tradename?  Is there legal branding protection with a trade name?  Can a trade name be the same as your trademark?

Topics: Start a Business Government Legal

Buying a Business – Key Legal Steps and Considerations


Buying a business is often perceived as a less risky option than starting your own business from scratch; however, without proper research, due diligence, and consideration for the key legal steps and potential liabilities involved – it can be a risky path to venture down.

For example, has the previous owner been in compliance with tax law? Is the business adequately insured? What are the terms of the seller’s commercial lease?

These are just a few of the questions that you need to ask as you pursue the purchase of a business. Follow the points below to learn more about the due diligence and legal aspects involved in buying an existing business.

The Due Diligence Phase - Research the Seller’s Business

The first phase of buying a business involves doing your research and identifying the right business (get more tips on this process in SBA’s tips for Doing Research before You Buy a Business). The second phase involves doing your due diligence, where you really poke your nose into the details of the business!

Areas to consider include:

  • Business Finances –A seller’s business finances should be thoroughly researched to ensure the business is truly viable and isn’t carrying too much debt. Work with an accountant to review audited financial statements, tax returns going back five years, cash flow and income statements. Find out if there are any outstanding debts, liens, or tardy accounts receivables. Take a close look at sales tax records too; some states will hold the new buyer responsible if the previous owner was delinquent on paying their sales tax.
  • Legal Issues –Learn as much as you can about the business's obligations and compliance with legal issues, including details about existing contracts, insurance policies, intellectual property rights, licenses, permits, employee agreements, and commercial leases. (Check, for example, if leases can be transferred to you).
  • Employees – Don’t put this off until after the sale, employees can often make or break your business. Instead request to see HR-related documentation, employee records, non-compete agreements, and so on and be sure your lawyer sees them too.
  • Business Structure – Each business structure has different legal and tax obligations. For example, corporations are highly regulated and must maintain proper records – check that your seller is in compliance.

Note that most sellers will require interested buyers to sign a confidentiality agreement to ensure that you won't use the information about the seller's business for any purpose other than making the decision to buy.

Determine What you are Buying

Businesses are sold either in their entirety (the entity and any stock in that business) or as assets of the business.  Asset-based purchases tend to be favorable to small business owners because the obligations and debt of the target business would be left with the seller. This should be backed up by a written agreement stating the terms of the asset acquisition (remember you don’t need to buy all the assets, only what you need.) You should also check whether licenses, business names and other intellectual property are transferable.

Consider Forming a New Legal Entity

Talk to your lawyer about this one, but it may be advisable to create a new entity that will acquire the assets of your target business.  As a general precaution, forming a corporation or an LLC to buy a business will minimize your personal risk for the business's past obligations.

Write Up a Letter of Intent

Once you’ve determined what you are buying and any employees, liabilities, etc. that you are taking on, you should draw up a letter of intent. This is a non-binding agreement outlining what is to be done when the buyer and the seller have generally agreed upon the terms of the transaction. 

Negotiate Purchase Terms

SBA has compiled detailed information on buying a business and negotiating the purchase. For example, to help you determine the value of the business or assets that you are buying read: Determining the Value of a Business. Next you’ll need to work with a lawyer to draft and sign the sales agreement, you should also push to get it into escrow as soon as possible to protect you from other buyers.

Bringing on Board Employees

Don’t assume that the employees will automatically be transferred to you. This decision can be made during the negotiation phase. However, if you are obligated by the sales agreement to keep employees on but intend to review headcount and employee costs and contributions after the sale, check with your state law regarding worker protection rules and the amount of calendar notice you need to provide. Read up on Employment Law as it pertains to layoffs and severance payments. If you don’t have one already and take on employees you will need to obtain an Employer Identification Number from the IRS.

Additional Resources

Topics: Start a Business Legal Buying a Business

Does Bankruptcy Clear IRS Tax Debt?

As 2010 comes to a close, it is time to tackle taxes and planning for your business.  If you are an entrepreneur who believes that debt is overwhelming and bankruptcy is the next step, here is an article from Wystan North:

Topics: Taxes Business Planning Legal Business Services