 Welcome to Adventures in Small Business, a collaborative effort by the U.S. Small Business Administration Hawaii District Office, the Hawaii Small Business Development Center, the MIG Center for Business and Leadership, and the Veterans Business Outreach Center of the Pacific to showcase the stories of local entrepreneurs and small businesses. I'm Victoria from VBoc of the Pacific Veterans Business Outreach Center, and today here's Catherine Tashner from Business Law Corp. Hi. How's it going? Can you please introduce yourself and tell us a little bit more about your background? Sure. So my name is Kat Tashner. I am an attorney with McCorrest and Miller-Muckay McKinnon. I specialize in transactional work, so real estate and corporate work. I'm also the co-founder and vice president of the Business Law Corp. The Business Law Corp we refer to as the BLC. It's a 501C3 organization, and we provide pro bono legal services, so free legal services to small businesses and entrepreneurs who would not otherwise be able to access legal representation. So the Business Law Corp is the only pro bono provider here in Hawaii that provides services to small businesses. So hopefully it's a good resource for viewers of the show. Wow, this is really a great resource. Thank you for doing that for small businesses. Can you tell us a little bit more about yourself? Where are you from? What school did you go to? The Hawaii question, right? Hawaii question. What school did you go to? So I'm from Hawaii. I went to Iolani for high school. I started college on the East Coast, but finished in Scripps College in Southern California. Once I graduated, I moved home, and I attended the William S. Richardson School of Law at UH Manoa, and I graduated in 2011. So I've been practicing for about seven years now. Oh, wow. Yeah, so I joined. I clerked for a year after law school. I worked at the Intermediate Court of Appeals. And then after that, I joined the firm that I'm with now, MacCorriston. Why did you decide to be a business lawyer? You know, I think even from when I was like five years old, I knew I wanted to be a lawyer. Both my parents are lawyers, so I'm sure that has something to do with it. Business law was really attractive to me, because when you work with these businesses, you really get to know them, and you get to know their goals. And you get to feel like you're a part of it. Being able to work with somebody to accomplish their lifelong dreams is really rewarding for me. So I really enjoy working with businesses, and same with real estate. You know, when you work with someone, you get to see the building that comes up, or it's a very feel-good area of law, I think. Well, that's very nice. So why business law court? Why did you decide to participate? So the business law court was really an idea that one of my professors in law school had, Greg Kim. He teaches the small business and entrepreneurship clinic at the law school, and I took his class. And the whole class was focused on helping small businesses. And I really enjoyed working with the small businesses. And so when I finished the class, I was like, well, why don't we do this full time? I was coming out of law school during the height of the Great Recession. And a lot of people were looking to start small businesses as a means of self-employment and to start jobs. And so I approached my professor and I said, hey, well, why don't we get on board? Why can't we be a part of that? We have skills as lawyers to help people start the small businesses. Let's do it. And so in 2011, we founded the business law court. At the time, there was no avenue for corporate attorneys to do pro bono work. Typically, pro bono work is family law, landlord, tenant, criminal. And so for the corporate attorneys, they'd have to learn a new area of law to be able to give back. And so when we started the BLC, we kind of tapped into that resource of corporate attorneys who wanted to do pro bono work in their field. And we were able to match them with small businesses and entrepreneurs who had really great ideas, but maybe they didn't have the capital to hire a legal counsel. So that was an idea that we launched in 2011, and we've been going strong ever since. That's wonderful. So let's talk about some legal questions that small business owners have. Sounds good. So what are the biggest legal challenges for small business owners from your experience? I think one of the most difficult things for a small business, when you're getting started, you have so many different things that you need to do. And often, legal is not one of the ones that's at the top of the list, but I think accurately identifying and then managing your legal and financial requirements, that's a really important thing. When you're starting a business, a lot of people don't want to pay attention to how do I properly create it, how do I get started. But it's really an important part of getting up and running, getting legal representation from the get go, getting the right contracts in place, structuring your entity correctly. That can have a huge impact on your ability to grow and your ability to scale, bring on investors, and so getting the legal team involved early on, I think is really, really important and something that people don't often do. And that's something that through the business law court, we're trying to be a resource for small businesses at the get go. Choosing the right structure, for example, and getting off on the right path, really important. Once you're down the path, it is sometimes hard to change vehicles and it takes some legal gymnastics at that point, so ensuring proper creation is really something that we try to do at the BLC and something that most small businesses should keep in mind. One of the most common question that we receive is how to choose the best legal entity. What would you advise? Your legal entity is really dependent upon what your personal business goals are. If you want to do a small mom and pop restaurant, maybe the entity choice that you choose is going to be different than if you have goals of being a publicly traded entity, they're going to be different. So identifying your goals, that's going to be the biggest indicator of what entity structure would be appropriate. Some of the things you need to think about are, and the primary consideration is limited liability. Will your personal assets be protected in the event that there is a loss? That's probably primary. Other considerations you need to keep in mind are, am I going to be attractive to getting outside capital? Will I be able to get investors? Tax consequences or tax attributes, really important, administrative requirements. Those are all factors to consider when creating your business, but I think the overarching thing you need to think about is what are my goals. So for small businesses, that can be an overwhelming number of things to think about. And so one of the things I wanted to talk about today was the business locker. We have weekly consultations that are available to small businesses, and this is exactly the kind of question that you can come and ask us about. We have an attorney who goes to either the Patsy Mink Center or to the Minot Innovation Center for two hours a week, and you can make a 30-minute appointment and ask them, what's the appropriate business structure for me? You tell them your goals, and they can kind of work with you to identify what would be most appropriate. Great. So could you go over the most common legal entities, like LLC, corporation? You named them. Yeah, there's a whole universe of entity structures that you can choose for a small business. Typically, the corporation or the LLC is going to be the most popular for a small business. Corporations have been around the longest, so there's a lot of case law and statutory guidance on how they're run. LLCs are, by contrast, the newest entity type, but are really popular because they're really, really flexible. Corporations are typically more appropriate, especially if you want to go public and attract outside capital. The corporation might be a better entity, whereas if you're planning on being a little bit smaller, an LLC might be more appropriate. But again, it's very fact-intensive, and we would recommend reaching out to an attorney to discuss. But yeah, LLCs and corporations are probably the most popular. What is the Delaware Corporation? So Delaware has kind of become the go-to entity formation state. Whenever you form an entity, you form it under the laws of a particular state. Here in Hawaii, we see a lot of Hawaii formations. For companies that have some high growth, or they see themselves scaling quickly, attracting outside capital, Delaware is probably the most popular state to incorporate in. Investors are really familiar with Delaware laws, and so it makes them comfortable to invest. So let's say I want to start a business. How do I register my business? So yeah, wherever you register your business, you choose to register in a particular state. So here in Hawaii, we see a lot of Hawaii or Delaware if they have high growth. Whatever state you're in, that's probably the state that you'll want to form under. So in each state, you'll file, if you're in LLC, your articles of formation, a corporation to be the articles of incorporation. But you file what are called articles with the state, and that officially creates your entity. After that, you have an opportunity to adopt your internal governing laws, and that's either your bylaws for a corporation or your operating agreement for an LLC. And that internal document governs how the company is managed, what happens when you want to bring in another partner, distributions, solution or termination. So can business law corp help with business registration? Absolutely, yeah, that's one of the things that we love helping small businesses start their companies. And so if you have an idea and you're ready to go, come talk to us, we can help you fill out your forms. And especially if there are multi-members, that can be a very difficult conversation sometimes. I think about getting into a business with a partner, almost like getting into a marriage. You want to know what you're getting yourself into, and your operating agreement and all your agreements at the get-go, it's kind of like your pre-nep. You're happy about starting this business and everything is working out well, but you want to anticipate what's going to happen if, let's say you and your partner have a disagreement about bringing on a new partner or leasing a space. It's very common to have disputes. Addressing those dispute resolutions, we're addressing how to resolve disputes, I think is important at the get-go. But yeah, that's something that I think, that's probably what we see most at the business law corp, most of the applicants who apply to us for pro bono legal services need help with entity formation. We have a pool of attorneys who'd be willing to assist. Perfect. So you're mentioning by-loss and operating agreement. Can you tell us a little bit more, what is it, and what are the most common mistakes that businesses do? I think most businesses don't, no one wants to have that unhappy conversation of, well, what's going to happen if we don't get along? But it's really important to address that when you're thinking rationally. And so dispute resolution provisions, I think, are really, really important to think about when you're drafting your operating agreement. It's also important to think about what kind of structure you're going to have, how profits and losses are going to be allocated, how things are going to be managed, or if it's a two-member entity, do you both have an equal say? Does one trump the other? Thinking about management, I think, is really important, just because that's going to govern how things go day to day. What if I'm single-member LLC? Do I need operating agreement? You don't need an operating agreement. Here in Hawaii, if you don't have one, you'll default to whatever the statute says. But one of the beauties with the LLC is that it's really flexible. So if you want to adopt your own provisions that might not be what the statute says, you have an opportunity to do so by adopting an operating agreement. Okay, so we went over registration of a business. How do I register my trademark? So trademark, that's a subsection of intellectual property. But trademarks are a really, really important tool in any briefcase of a small business. The trademark often is kind of your brand. And so being able to register it is important. Here in Hawaii, you can register your trade name or trademark with the Department of Commerce and Consumer Affairs, and that'll give you statewide protection. If you're operating just in the state of Hawaii, that might be enough. If you're looking to scale to the mainland, for example, you might consider doing a federal trademark registration, and that's through the USPTO, the United States Patent and Trademark Office. It's a little bit more of an in-depth application, but it would, if granted, would give you national protection for your trademark. And so if your goal is to scale your brand, that's an important filing you'll need to make. Thank you, Kat. So we are going on the little break, and we will be back soon. I'm Jay Fidel, ThinkTech. ThinkTech loves energy. I'm the host of Mina, Marco and Me, which is Mina Morita, former chair of the PUC, former legislator, and Energy Dynamics, a consulting organization in energy. Marco Mangostorf is the CEO of Provision Solar in Hilo. Every two weeks, we talk about energy, everything about energy. Come around and watch us. We're on at noon on Mondays, every two weeks on ThinkTech. Aloha. Aloha, I'm Richard Concepcion, the host of Hispanic Hawaii. You can watch my show every other Tuesday at 2 p.m. We will bring you entertainment, educational, and also we tell you what is happening right here within our community. ThinkTech Hawaii, Aloha. Hi, I'm Ethan Allen, host on ThinkTech Hawaii of Pacific Partnerships in Education. Every other Tuesday afternoon at 3 p.m., I hope you'll join us as we explore the value, the accomplishments, and the challenges of education here in the Pacific Islands. Back to Adventures in Small Business, this is Victoria from VBock of the Pacific, and Katherine Taschner from Business Law Corp. And today we're talking about small business legal questions. So, Katherine, how can I protect my intellectual property if I have an invention? Totally, so IP is one of the, it's a really big part of a lot of small businesses. IP is a really broad category. It includes patents, copyrights, trademarks, and trade secrets. And protecting each of those four is different. For patents, copyrights, and trademarks, the first step to protection is registration. Patent registration can be very difficult, so I would recommend seeking a patent attorney to assist with that. We kind of touched on trademark registration and copyright registration, not necessary by law. You get automatic protection when you use it. But for those three, registration is the first step to protection. For trade secrets, because it's a secret, you don't want to register it and tell everyone about it. So for that, the first step is maintaining the secret. After that first step, once you kind of take the register to protect it or keep it secret, to enforce that protection, I think most small businesses, it's really important to invest in a good confidentiality agreement or nondisclosure agreement. Those provisions are really important, when you have an employee and you bring them online, you share with them confidential information, which may be a trade secret or some kind of copyrighted material. You want to make sure that once they learn it, they don't go elsewhere. A nondisclosure agreement helps to protect your IP by restricting them from sharing it with other people. Those provisions should be included in an employment agreement. If you're looking to sell the business, maybe included in the purchase agreement, you don't want to share something with someone who's looking to buy it, and then they back out of the deal and then tell people. But it's important to keep those provisions in part of most of your contracts. So have you ever had a client that had an invention and wanted to protect it, but maybe didn't have enough funds? Yeah, that's often the issue. Yeah, especially for patents, I mean, I know you're talking tens of thousands of dollars sometimes to put together the patent application, but when you do register, you do get really strong protection on the back end. So it's really a consideration you need to make going forward. Is the cost worth the benefit? And that's the case with a lot of small business legal issues. We recommend getting really strong contracts in the get-go. Yes, it can be expensive, but it really can protect you as you continue to grow. So it's just something to think about. So you mentioned in contracts, agreements are very important. So let's say if I have a retail store or a restaurant business, so what is this list of contracts and agreements I should have? If there is a list? Obviously the list will depend on what kind of industry you're in. Leases, for example, if you want to lease a space to operate a restaurant, that's a really important document that you're going to have to negotiate with the landlord. Goods and services contracts, if you are ordering from vendors or if you are providing services, having a good goods or service contract is important because it identifies, it should identify whatever responsibilities you're willing to take on, what your expectations are from the other contracting party, what your rights and obligations are. The clearer your contract is at the get-go, the less opportunity there is to dispute it later. So having really clear contracts about what goods or services you're providing or receiving, really important. Employment contracts, you want to know what obligations you may have to people within your company. If you are looking to get investors or seek partners, that, I mean, stock purchase agreements and investor agreements really, really important. If you're looking to get financing, if you, any loan agreements or things like that, really, that's kind of the arsenal that I'm initially thinking of. But again, it's really dependent upon what kind of business you're going to operate and things like that. Okay, so if I'm a small business owner and I don't have enough capital, I'm looking for investors, what are the things that I should consider? When you bring on an investor, I mean, you want to vet them as if you're dating them. You want to do a little bit of digging into their background because they're going to be an integral part of your company. You should have a very frank conversation with them about what their expectations are as an investor. Some investors are very passive. They just want to give you money and they don't really want a lot to do with the day-to-day operations. Some investors want to be a part of it and that might be a good strategic partner for you but you need to know are they expecting to have voting rights? Are they expecting preferential treatment? Things like that, those are conversations that you need to have. Another thing you need to think about is how are they investing in my company? And are they going to do, is it going to be equity or debt? Are they making them stock? Or is it more like a loan and I'll give them a promissory note? Could it be a combination whether you give them a convertible note? It's just something you have to think about when you're bringing on a partner. What risks, what other risks small business owners are facing besides investors, agreements, what lawsuits they might possibly get into? Yeah, no, that's the big unknown for a lot of small businesses. What kind of risks should I protect against? Depending upon what kind of business you have, there will be different risks, I think getting adequate insurance and speaking with an insurance broker is a good way to minimize some of that. I think arming yourself with a strong team, getting good legal counsel, getting a good accountant, getting a good insurance person, that really will help you, those are your advisors who will help you to identify what risks might be out there and how to mitigate them. So it's great that we have business law corp and we can meet with lawyers and talk about those issues. So you talked a lot about how can attorney help a small business. So would you say every small business owner needs to hire an attorney? I think so. I mean, I think as a small business, there are so many things that you're thinking about and the legal side often gets ignored but it's really, really important. Lawyers can help with not only the initial startup but also as being advisors. A lot of the corporate attorneys downtown, I mean, we work regularly with businesses, we have relationships and I think relying on an attorney for that is important. Especially when you take big steps, like I'm ready to lease a restaurant or I'm ready to bring on a third party. Working with an attorney to talk about the legal impacts of that, I think is really, really important and that's a service that we try to provide through the business law core. I mentioned, we have weekly consultations, they're 30 minutes and they're pretty informal but it's a good way to kind of bounce ideas off of an attorney and get their candid advice. We also offer direct legal services. So if somebody needs a contract drafted, they want to have an investor come in, they can apply to the business law core and we can match them with an attorney that's in their specialty and that they're looking to do pro bono work. So having that kind of toolkit I think is, it's really important for a small business to know that just because you can't afford the $500 an hour attorneys downtown, you still have an opportunity to get legal representation and we at the business law core really see that as economic justice. Yeah, so attorney can be pricey but then it can save you money at the end of the day, right? That's the hard thing. Yeah, it's expensive but sometimes when you do things the wrong way, retrofitting can be really expensive and there can be tax consequences and it can be difficult. So our recommendation is always to get off on the right foot from the beginning. So if small business owner would like to learn more about legal questions, where should they go? Are there any useful resources that they can take a look at? In Hawaii I mean there's so many resources for small businesses, for the legal questions, the business law core, we have a lot of services that we offer, I know the Patsy Mink Center has a lot of business consultations, VBAC does. So it's a good time to be a small business in Hawaii. There's a lot of people who want to help and there's a lot of really great resources. One thing that I didn't mention earlier that the business law core has is we have those 30 minute appointments, we have direct legal services. We also have sample forms available online. So people who want to look at like, what is it, we talked about operating, it's like, what does that look like? What do bylaws look like? What do articles look like? We have forms that are available online. They're free to download and you can take a look and see is this more appropriate for me? Obviously we recommend having them tailored for your specific needs, but yeah, there are forms available online too. That's perfect. And VBAC are the Pacific organizing two day course, which is called Boots to Business. It's an introductory course for small business owners on business planning, accounting, marketing, as well as legal questions. And I know you participating in Boots to Business. How do you participate? Yeah, so yeah, Boots to Business, it's a program, I think through the DOD, the Department of Defense, that assists transitioning members from active military to civilian life. And we give a seminar for every Boots to Business one. I think we participated almost monthly, I think 10 per year. And we just do a really quick and dirty course of entity. That really is one of the biggest questions that a small business has. So we talk for an hour about what are the benefits of an LLC versus a corporation. Perfect. Are there any other events that small business owners should attend anytime soon? Yeah, so at least for the business law core on August 2nd, we're going to be flying to Moloka'i. Moloka'i is having their annual small business conference. And so we'll be giving legal seminars there at the, I think it's at the Kuhau Business Center. On August 21st, we're going to be working with VBOC and the, at the SBA to put on a seminar on the new Trump tax law and how that might impact small businesses. We have two tax attorneys who are speaking, and I believe a CPA will also be there to kind of field some of the issues. Sounds interesting. So thank you very much, Catherine, and stay tuned for Adventures in Small Business every Thursday, 11 o'clock. Thank you for joining us today.