Frequently Asked Questions

When and How to Work with an Attorney

  • When should businesses use a lawyer?

Many companies may not be aware of their need to comply with various laws, regulations, and other legal requirements as well as other legal pitfalls. While many small companies are familiar with hiring a lawyer for purposes of establishing a business, negotiating a contract or defending a lawsuit, many do not think of using the services of a lawyer for general counseling for the purposes of complying with laws, strategic planning, and preventing legal problems. Small companies are generally more accustomed to dealing with legal problems in a reactive, rather than a proactive, way. As with most other aspects of operating a business, we believe that a proactive approach to potential legal problems is far more cost-effective.
 
Numerous legal issues confront virtually every company. For example, every day, companies encounter potential regulatory, contractual, securities, intellectual property, employment, and environmental liability issues. Indeed, legal issues are presented whenever a business undertakes any transaction or organizational activity.
 
  • How should businesses use a lawyer?

Legal advice can be expensive. However, if managed properly, ready access to legal advice is cost-effective. In that connection, one significant legal liability -- which could have been avoided with legal advice -- can erase years of "savings" from not using a lawyer. In short, to repeat an old English proverb, it is penny-wise and pound-foolish for a company not to consult a lawyer on a regular basis for periodic legal checkups and about potential legal problems. Lawyers can also help companies learn how to use the lawyer's time efficiently and how to keep a lid on legal costs.
 
  • Can early use of a lawyer save money?

Yes. Calling a lawyer for before consummating any transaction that is not in the ordinary course of the company's business is a cost-effective way to reduce legal fees on a long-term basis. In some cases, a 15-30 minute discussion with the lawyer for the company may be sufficient. The legal bill for such a conversation will be far less than the legal bill for trying to get out of a transaction that never should have been entered into or the legal bill for resolving a dispute or litigating a legal issue that would not have existed if timely preventive action had been taken.
 
For example, companies sometimes misclassify employees as independent contractors. If the IRS disagrees with your classification, your company may be required to pay substantial penalties, including back FICA taxes, interest on wages and past taxes, as well as the employees' own taxes. In addition, you may be responsible for many benefits for the incorrectly classified employees. Legal advice before you decide whether someone is an independent contractor or an employee can help your company avoid expenses like these penalties, taxes, and benefits.
 
  • Should major transactions be reviewed by an attorney?

Yes. Even simple tasks like drafting the summary of the discussion on a matter in the minutes of a corporation authorizing the transaction should be done by a lawyer. What is said -- or not said -- in corporate minutes can have an important bearing on the tax consequences of the transaction or the outcome of litigation that might later arise out of the transaction. In addition, a business executive cannot possibly know all of the potential legal problems which can arise from ordinary, day to day business operations. Legal counsel can be invaluable in both identifying and resolving such problems.
 
A good lawyer is part of the solution, not part of the problem. Particularly these days, lawyers are trained to appreciate business problems and to supply cost-effective answers to those problems.
 
  • Should companies conduct legal audits of the potential legal liabilities and problems they are likely to encounter?

Yes. Such an audit can be performed by any experienced business lawyer. A legal audit would seek to catalogue all of the significant legal problems your company might encounter in a specified period of time and also to evaluate whether access to legal counsel on a regular basis would help your company prevent or minimize legal problems and save money. Then you should analyze the costs of legal counsel.
 
  • Do small, emerging companies need legal counsel?

The natural evolution of a business suggests that even small companies need effective legal counsel particularly as they grow. In a start up business, the founder must create or purchase the product or service, sell, create and supervise the advertising, manage and collect the accounts receivable, do the books, etc. As the business grows, the entrepreneur hires specialists with particular expertise in each of those areas, e.g., sales representatives, advertising agency, credit manager, controller, etc. Some of those services may be provided by outsiders on a fee for service basis. Legal services should be viewed the same way. 
 
 

Intellectual Property

  • What is the difference between a trademark, a copyright, and a patent?

A trademark is a legally protected word(s) and/or logo that identifies a product or service. It is different from a name that identifies a business. The trademark must identify a product or service actually being sold or provided.
 
A copyright is legally protected authorship. It protects the particular manner in which the author expresses himself/herself. Copyright can protect written material, music, computer programming, artistic expression, etc. Copyright does not protect the idea being expressed. It only protects the form in which ideas are expressed.
 
A patent legally protects an idea that is innovative and that has been reduced to practice.
 
  • What is involved in getting a trademark?

First, a search is performed to make sure that we are not wasting time and money on an application that will most likely be rejected or objected to upon publication.
 
Second, an application is filed. It is important that the use of the mark relate to specific services or goods and that those services and goods are carefully distinguished from any potentially conflicting use of a similar mark by another person or business.
 
Third, the trademark examiner frequently will have comments and may request amendments or changes. These comments and requests must be responded to.
 
Fourth, the trademark is published so that the public can comment on or oppose the application.
 
Last, the trademark is issued.
 
The process usually takes about 1 year.
 
  • Can I trademark my business name?

No. A business name is often referred to as a trade name. It does not receive trademark protection. If the business files its name with the Idaho Secretary of State it is protected from anyone else filing for the same name. However, any name that is distinguishable would be registered without objection. Trade names are protected by the common law prohibition against unfair competition, which, in this setting, would be the use of names that create confusion in the market place.
 
  • I have done a trademark search, why does another search need to be done?

Most searches on the internet search for specific words. The legal standard is whether one mark is confusingly similar to another mark. The search must be done in a database that returns not only identical marks but also marks that may be confusingly similar.
 
Also, in the United States common law trademarks are recognized. A search of a database of registered trademarks, may tell you if the Trademark examiner will object to the application, but it will not give you information on what to expect when the mark is published or used. If a trademark is registered and used, its use can be stopped by the user of a common law mark if that use pre-dated your use. A trademark search must include a search of common law marks.  
 
  • Should I obtain a state trademark?

Usually no. The state trademark only provides protection in the state of Idaho. Most businesses provide, or intend to provide, products or services in more than one state. Thus a federal registration is almost always desirable.
 
  • When should a trademark be applied for?

A registration of trademark will not be issued until the mark is used in connection with an actual sale of product or services. The mark can be registered at any time, but it will not stop others from using a confusingly similar mark in other geographical areas until it is registered.
 
The federal law allows for an “intent to use” application to be filed before actual use. It is important to do this before any significant marketing expenses are incurred. 
 
  • What is a trade secret?

A trade secret is information that is not known by the public and that provides a significant economic benefit to the owner of the information. Trade secrets are protected if the owner exercises reasonable diligence in protecting the confidentiality of his/her information. Examples of trade secrets include formula, manufacturing techniques, specialized software, customer lists, and financial information.
 
  • When is a non-compete agreement enforceable?

The law in Idaho is in a state of flux after the 2001 Pinnacle case.  The courts are most likely to apply a balancing of interest approach to enforcement of a non-compete agreement. The restriction must be limited to a particular geographical area, must be limited in duration, and must be limited to meet the actual harm that could be caused by a particular employee. Generally non-compete agreements do not apply to employees possessing only ordinary skills and doing ordinary tasks. Generally non-compete agreements will not be enforced if the employees skills are significant to a community and where the loss of those skills would have an impact on the community as a whole.
 
Non-compete agreements must be ancillary to employment agreements, buy-sell agreements, entity ownerships, and other selected agreements. If they are not ancillary to a select group of agreements, they are not enforceable.
 
  • What limitations are imposed on an employee when his/her employment terminates?

Employees have a duty of confidentiality. They cannot disclose information about the former employer’s finances, customers, proprietary methods of doing business or of manufacturing. This obligation continues so long as the former employer does not make such information public.
 

Health Care

  • Can I own an interest in another health care facility?

Physicians and anyone who is in a position to make a health care referral is subject to restriction on ownership in certain health care facilities. A referral is any recommendation to use another health care professional, health care facility, health care activity, or any prescription or treatment plan. The two most significant prohibitions are in the Antikickback law and in the Stark law. The two laws are quite different. The Antikickback law has safe harbors and the Stark law has exemptions. The safe harbors and the exemptions are similar but not identical. The Stark law places restrictions only on physicians, while the Antikickback law is more broadly applied.  Generally anyone in the health care field should consult his attorney before acquiring an ownership interest in a health care facility.
 
  • Can I be paid for services I render to another health care facility?

The ownership restrictions mentioned in the answer to question 1, also apply to compensation arrangements. Generally anyone in the health care field should consult his attorney before seeking or receiving any compensation other than a fixed salary as a full time employee.  
 
  • Can I lease equipment to a health care facility?

The ownership restrictions mentioned in the answer to question 1, also apply to lease arrangements. Generally anyone in the health care field should consult his his/her attorney before lease to or from a health care facility.
 
  • Can I provide a service or lease equipment to a hospital and bill for the professional or technical fee?

Hospitals bill a set fee for a specified set of services. If the services to be provided are included within the hospital’s global billing, then the hospital can contract for the service or equipment, but you could not bill anyone other than the hospital for that service.
 
  • Who must bill for the medical service?

A physician or other person furnishing a Part B service usually has the option to bill a Medicare patient in the normal fashion, thus requiring the patient to seek reimbursement from Medicare. Alternatively, the physician can take the claim on assignment. In the case of an assigned claim, the patient signs an assignment and the physician agrees to accept the Medicare payment as payment in full. The physician may bill the patient only for the amount of the Medicare deductible and coinsurance. Except for assigning claims to the entity that furnished the service, beneficiaries are generally prohibited from assigning their claims or using arrangements such as powers of attorney to direct Medicare payments to another person.
 
  • May I provide the same service for different fees to different entities?

There must be no discrimination against Medicare. You cannot give a discounted fee to non Medicare patients. Many PPO plans and insurance plans contain a most favored nation clause requiring they receive your most favorable pricing. Generally, a fee schedule should be uniformly applied.
 
  • May I work with other health care providers in negotiating PPO contracts?

This would probably involve illegal concerted activity under the antitrust laws. You can cooperate with other health care providers who are in your same practice or association if the practice or association has either financial or clinical integration. 
 
  • Do I need a compliance plan and what is included in a compliance plan?

Yes. The federal government is seeking to have the health care industry regulate itself. An important element of this effort is the widespread adoption of meaningful compliance plans. Health care entities with meaningful compliance plans will be treated more favorably by compliance authorities than those without such plans. To be meaningful the plan must identify areas in the business where there are significant risks of noncompliance. The plan must identify steps taken in those areas to assure compliance. The steps should include adoption of appropriate policies and regular education about those policies.  The plan must provide for monitoring to assure compliance, the designation of a compliance officer, and must have meaningful consequences of noncompliance. Most importantly, the plan must be applied and there must be regular recurring evidence of monitoring and enforcement. A plan without meaningful implementation, may be worse than no plan at all.
 
 

Business Formation

  • I’m starting a business, how can a limited liability company (LLC) or corporation help me?

The most significant benefit that LLCs and corporations offer is that the owners/investors in the venture can achieve limited liability protection so that their personal assets not involved in the business can be protected from the liabilities of the business venture.  There are some exceptions to the limited liability protection provided by LLCs or corporations, but there is no question that a business owner has significantly reduced the exposure to his/her personal assets when the business venture is conducted through an LLC or corporation.
 
  • What is a limited liability company (LLC)?

A limited liability company is a relatively new business entity that in many respects is similar to a corporation.  Idaho law started to recognize LLCs in 1993.  All 50 states now have legislation recognizing LLCs.  The LLC gives the owners of the company limited liability protection similar to a corporation.  In most cases an LLC will be taxed under the favorable rules applicable to partnerships.  The management of an LLC can be vested in its owners (members) or in its managers.  The legal structure of an LLC is very flexible.
 
  • How is an LLC formed?

An Idaho LLC is formed by filing Articles of Organization with the Idaho Secretary of State.  A $100 filing fee is required by the Secretary of State to process the Articles of Organization.  In addition to filing the Articles of Organization, a written Operating Agreement should be prepared by your attorney to define and govern the rights and responsibilities that the owners of the LLC owe to each other.  In many respects, the Operating Agreement of an LLC is similar to the Bylaws of a corporation.
 
  • What is a corporation?

The corporation has long been the preferred entity for operating businesses.  A corporation will typically have shareholders, directors, and officers.  Shareholders have minimal involvement in the management of the corporation, usually just electing directors and voting on major corporate changes such as mergers or acquisitions.  Corporations offer their shareholders limited liability protection so that generally only the assets invested in the business are subject to the risks associated with the business.  Directors are elected by the shareholders and have the responsibility to manage the overall affairs of the business.  Typically directors hire a CEO and the CEO and other corporate officers are responsible for the management of the day-to-day operations of the business.
 
  • How is a corporation formed?

An Idaho corporation is formed by filing Articles of Incorporation with the Idaho Secretary of State.  A $100 filing fee is required by the Secretary of State to process the Articles of Incorporation.  In addition to filing the Articles of Incorporation, bylaws and organizational minutes should be prepared by your attorney to define and govern the rights and responsibilities of the shareholders, directors, and officers of the corporation.  Typically stock certificates are issued to shareholders in exchange for the assets they contribute to the corporation.
 
  • What are the differences between an S corporation and a C corporation?

From the point of view of establishing the corporation with the Secretary of State, there is no difference between an S corporation and a C corporation.  The S corporation and C corporation are different as a result of federal income tax law.  The federal income tax law allows certain corporations to file an election (Form 2553) to be treated as an S corporation.  Once the election is properly filed, the corporation will be taxed under a set of rules that in many respects are similar to the taxation rules applicable to most LLCs.  Certain requirements must be met in order for a corporation to properly elect to be taxed as an S corporation.  Because of these requirements, an S corporation generally is not as flexible as an LLC.  With the assistance of your attorney you can determine whether an election to be taxed as an S corporation makes sense in your circumstances.
 


Estate Planning

  • What are living wills?

Living wills are legal forms signed to give directions to health care providers relating to the level of care the person wants to receive if diagnosed as terminally ill by two physicians or in a permanent vegetative state. The level of care requested can range from full life support to withholding nutrition and hydration.  The key to the instruction given in a living will is that the author’s loved ones and health care providers are aware of the choice the author makes.  Living wills are usually executed at the same time a durable power of attorney for health care is signed.  The durable power of attorney for health care allows a third party, usually a spouse or other family member, to make medical decisions including decisions relating to disposition of a deceased’s remains.  The medical decisions should be made in accordance with the instruction given in the living will and, at Beard St. Clair, it is our preference to combine the documents so the signer’s intent and instructions are in the same place as the appointment of the health care agent.  The decisions required usually involve a very personal reflection, but attorney counseling assists one in making the decisions.