Legal Question in Business Law in New York

Re: Business Trust?

PLEASE SEE MY ANSWERS TO YOUR QUESTIONS IN CONTEXT BELOW. PARDON THE CAPS; IT'S THE EASIEST WAY TO DIFFERENTIATE BETWEEN YOUR QUESTIONS AND MY RESPONSES. I DON'T INTEND TO SHOUT AT YOU.

I am setting up a C corp to commercialize an invention. I got the idea from several people who do not want to be involved. They have no intellectual property rights in the invention.

IF THEY CAME UP WITH THE IDEA FOR YOUR INVENTION, THEY ARE AT LEAST CO-INVENTORS, AND THEY NEED TO BE LISTED AS SUCH ON ANY PATENT APPLICATION (OTHERWISE YOU ARE COMMITTING A FRAUD ON THE PATENT OFFICE WHICH CARRIES HEFTY PENALTIES).

Nevertheless, I'd like to set up the corp to ''leave a spot'' for them in case they change their minds later (after it's successful). Is there any way to accomplish this?

SURE. A C-CORP (WHY A C-CORP AND NOT AN S-CORP?) WILL BE AUTHORIZED TO ISSUE STOCK. DON'T ISSUE ALL THE SHARES; KEEP WHATEVER PERCENTAGE OF STOCK YOU WANT THEM TO HAVE AS TREASURY (CORPORATION-0WNED) STOCK, AND ISSUE IT TO THEM WHEN (IF) THEY WANT IT.

I've heard that it may be possible to set up a business trust with them as beneficiaries but me as trustee. Then in the future if they change their minds, I could easily give them control of the trusts. Is this something you could set up?

YES, I CAN SET THESE THINGS UP, AS CAN MOST BUSINESS ATTORNEYS.

Would their signatures be required?

THE TRUST YOU CONSIDER WOULD LIST THEM AS BENEFICIARIES. DEPENDING ON THE TYPE OF TRUST, THEY MAY OR MAY NOT NEED TO SIGN.

Would their beneficiary interests be publicly available (they are concerned about their privacy)?

IF YOUR CORPORATION ENDS UP DOING SEC FILINGS, THEN YES, THEIR INTEREST, EVEN AS TRUST BENEFICIARIES, WILL BE PUBLIC KNOWLEDGE. THE TRUST ADDS A LAYER, THE BENEFICIARIES OF TRUSTS MAY OR MAY NOT BE PUBLIC KNOWLEDGE; AGAIN, IT DEPENDS ON THE TYPE OF TRUST.

There is no interest to avoid taxes, but what would the tax situation be if the only asset was shares of the corp that would not be sold?

THIS QUESTION IS BETTER ASKED OF A TAX ATTORNEY, WHICH I AM NOT.

Thank you for your advice. :Dan

YOU'RE WELCOME.

Nancy Delain, Esq.

Registered Patent Attorney

Intellectual Property & Business Law

THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE AND IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. FOR SPECIFIC ADVICE ABOUT YOUR PARTICULAR SITUATION, CONSULT YOUR ATTORNEY.

Re: Business Trust?

FREE LEGAL ADVICE - the route you're planning on taking is not the easiest or most cost effective one. When creating the corporation simply retain the shares and offer to sell them shares at some point in the future, if you want something contractual/ written then have an options contract created where they would have a guaranteed option to purchase up to a specific number of shares for a limited length of time... this would cost you virtually nothing to put together.

Furthermore, it sounds as if you need some assistance with your corporate structuring. An S corp would seem the best option for you if you intend on having a small number of shareholders.

feel free to contact my office for further assistance. 2127098303