By SHELAGH BRALEY
BOSTON–Grasping the legalities of starting a business may top the list of startup challenges, but a panel of lawyers at the head of the class made it easy.
SheStarts hosted Law 101 for Startups at Gesmer Updegrove Wednesday night, bringing in founders to educate and address issues of structure, immigration, patent and employment law. A mixed crowd of male and female attendees brought their practical questions and lawyers Lynne Riquelme, Meredith Stewart, Cynthia Gilbert and Nancy Cremins patiently answered in plain language well past the scheduled end of the event, clarifying many misunderstandings and interpretations of the law that often cause costly mistakes.
The discussion started with corporate structure and that sticky situation involving founder against founder.
When dealing with decision-making among team members and shareholders, “You always want to try to find a way to resolve a deadlock,” said Riquelme, a corporate governance specialist with Gesmer Updegrove. “But someone almost always has controlling interest. Decisions have to be made by a majority.” If a compromise isn’t possible, that scenario triggers the no. 1 searched legal term for startups: judicial dissolution. “We will bring in a third party to work toward judicial dissolution,” Riquelme said. “That’s definitely a moment to talk to your lawyer.”
But many of the attendees were more focused on the beginning, not the end of their ventures, and delivered scores of questions regarding the legality of bringing in team members from abroad, or how to keep them here once they arrive. Stewart, from Pappas, Lenzo and Stewart, LLP, had practical advice for navigating the system. “U.S. immigration is becoming an important aspect of our startups, hiring foreign workers and discovering how to stay in the U.S. as an entrepreneur,” Stewart said.
She provided a handout to the multinational group, outlining the many classifications of visas available, and described scenarios to help clarify which visas applied in certain circumstances. “Something that really helps is proof of funding, press releases, media coverage–it helps you prove there is an established plan. Also, you must be able to pay prevailing wage for that position, not less,” she said.
Of the 65,000 H-1B visas approved each year, she said, only those that are in hand by the first five days around April 1 are submitted for lottery. “If you get your paperwork in by then, you could essentially win that lottery.”
Passionate patent lawyer Gilbert, from Hyperion Law, took on the issue of “Who are you, and what did you invent? Is it free in beer, or free in speech?” she asked. Patent law, as complicated as it gets, almost always requires the services of a lawyer, she recommended. “If you’re looking to get a 20-year monopoly on something, you better be sure you figure out whether you have IP before you start talking about it,” she said. “If you’re writing a patent application, you need that coach, that devil’s advocate to challenge you: What will you wish you included in your application at year 17?”
Cremins, both the co-founder of SheStarts and a startup attorney with Gesmer Updegrove, focused on employment law and promised: “I’m going to blow everyone’s mind,” because of the many changes in Massachusetts labor law that work directly against lean startup practices. “Your unpaid interns must meet Department of Labor requirements. They can’t do any work that would be given to paid staff, their work can’t have any immediate benefit to the employer, they must be closely supervised and may even impede the company’s growth. Course credit is not a shield from liability,” she said.
Another item that stirred questions from the group was the distinction between “true” employees and those filing 1099s. “If anyone is doing work that would be part of your regular industry, the attorney general rules this is an actual employee, not a contract worker,” Cremins said. “They must be free to work with others. If they are there to paint your office, yes. But if they’re there to assist in the daily growth of your company, then, sorry, no, you will still need to otherwise pay them on a W-2.”
At least offer minimum wage–which recently was pushed up to $9 an hour–even for founders, she recommended. “According to the Massachusetts Wage Act, if you lose (a case brought against your company), you’ll be facing three times what should have been paid, plus legal.”