UberPITCH

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By Rob Townsley

I work in a firm that usually provides legal services for startups and entrepreneurs, but pitching my own business idea in the UberPITCH startup competition last month was something I couldn’t pass up. UberPITCH, was a hybrid of the shows Shark Tank and CashCab. Call an Uber, and instead of a driver, a venture capitalist (VC) is delivered to your doorstep, and I had seven minutes to pitch my startup. The grand prize was five thousand dollars cash! And it was the first time Uber was in Buffalo, through a partnership with 43North.

After practicing my pitch in the morning and running it by a few colleagues at Colligan Law, I was ready to request my Uber and try to win $5,000! I opened the app and discovered that all the UberPITCH vehicles were in use and I would have to wait a while for my ride to arrive. It was a testament to the popularity of the mini startup competition, and also made me look forward to the day when the Uber is operating and available in Buffalo, with minimal wait times.

Critical Path Life Sciences Accelerator Program

Written by Colligan Law on . Posted in Articles, News

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By David J. Colligan

The First Annual Critical Path Life Sciences Accelerator Program sponsored concluded Thursday, January 12, 2017.  As part of the final preparation of the eight startup companies who participated until the end of the program, a panel of investors was assembled to present their experiences as investors in various roles.  David Colligan of the Colligan Law Firm was selected to present his experiences as a lawyer for investors, both Angel and Venture Capital, as well as a lawyer for many startups.  Kevin Centofanti, president of Brooks Houghton Investment Bank, was selected based on his ability to assemble large pools of capital to finance rapidly growing startup companies.  Theresa Mazullo of Excell Partners was selected as Excell Partners runs several different venture capital funds that have many startup companies in their portfolios.  Lindsay Stencel of Launch NY was selected as she is a general partner of a venture fund in Columbus, Ohio and serves part-time as the seed fund manager for Launch NY here in Buffalo, New York.  Sharon Weinberg was on the panel representing Empire State Development’s new $10,000,000 fund to support entrepreneurs with actual funding.  Alex Zapesochny was on the panel because of his successful co-founding of Icardiac and other successful startups before that which had a successful run from startup to exit.

Court Ruling Ensures There’s No Turning Back on Scajaquada Traffic-Calming Measures

Written by Colligan Law on . Posted in Articles, News

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By Matthew K. Pelkey

On Wednesday, the New York State Department of Transportation will hold what is likely its final public meeting on design changes to the Scajaquada Expressway – a project that has no doubt garnered controversy and heated discussions between officials and community stakeholders. But those pushing for further traffic calming measures may have just gotten a little help from the New York State Court of Appeals.

Turturro v. City of New York (December 2016) is a case involving a 12-year-old boy who was seriously injured when he was struck by a speeding car while riding his bicycle on Gerritsen Avenue in Brooklyn. Gerritsen was a 30-mph, four-lane roadway bordered by parkland. New York City officials had received many complaints about speeding but recommended additional police enforcement instead of traffic calming – a decision that ultimately resulted in New York City being held liable for the child’s injuries.

What is important about this case is the shift from simply relying on police enforcement to curb traffic and speeding problems, to now placing an affirmative duty on municipalities to study and implement traffic calming. If a government agency is aware of a dangerous condition and fails to study or implement traffic-calming measures, it may now be liable for resulting damages and injuries. Whether our state’s highest court realizes it or not, it may have just ushered in a new era of transportation design and put an end to prioritizing automobiles over people.

This shift in duty has the potential to fundamentally alter the DOT’s current design plans for the Scajaquada. It also likely ensures that the speed limit remains at 30 mph.

Why Do Cap Tables Kill Startup Companies?

Written by Colligan Law on . Posted in Articles, News

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By  John A. Moscati, Jr. and David J. Colligan

As lawyers practicing in the startup space, our clients often come to us with less than perfect cap tables.  Some don’t even know what a cap table is.  A cap table is a spread sheet that shows the ownership of the company by class of owner, timing of investment and various rights held by owners of the capital stock of the company.  To an experienced investor, a cap table tells the story of the company.  Like all stories, it has a beginning, middle and end.  By reading a cap table and asking questions based on its content, an investor can see when the company started, who the founders were, when significant pivots occurred, how much capital has been raised, and when.  Unfortunately for many entrepreneurs, they have written the story of their companies by issuing equity and granting various rights to founders, friends, family, and early investors, without an appreciation of how potential future investors will “read” this story.

If a startup wants to create a cap table spreadsheet, we advise them to identify shareholder groups by class (i.e., founders, angel investors, friends and family, etc.); and to include number and class of shareholders or shares or units issued followed by percent of outstanding, and if applicable, percentage of ownership fully diluted.  Where applicable, footnotes should disclose any conversion right or other preferences and any options, warrants, option pools or other rights to acquire equity should be disclosed (and included in the “fully diluted” calculations).

New Overtime Rules – December 1, 2016

Written by Colligan Law on . Posted in Articles, News

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By Joseph F. Saeli, Jr.

We would like to remind our clients and friends that the new U.S. Department of Labor rules for determining whether employees are exempt employees take effect on December 1, 2016. If an employee is not exempt, they must be paid one and one half times their normal hourly rate for all hours worked above forty in a week.

The key parts of the new rules are:

  • Exempt employees must be paid an annual salary of at least $47,476. (The current requirement in New York State for exempt executives and administrative employees in $35,100).
  • The new minimum salary for Highly Compensated Employees is $134,004.
  • Employers may use non-discretionary bonuses and incentive payments to satisfy up to 10% of the salary level. (This was not previously permitted).
  • The salary levels will be automatically updated every three years.
  • There is no change in the job duties tests for the exempt categories.

In addition to meeting these salary tests, exempt employees must also meet the job duties tests for one of the three exempt categories, professional, executive or administrative. Also, they must be salaried. An hourly employee can never be exempt.

If you have employees who are currently exempt, but do not meet the new salary requirements, you are faced with a difficult decision. The options some employers are considering include the following:

  • Change the employee’s status to hourly, and pay overtime for all hours over forty in a week.
  • Change the employee’s status to non-exempt salaried, and pay overtime for all hours over forty in a week. (This is possible, but the hourly rate calculation for determining overtime pay can be complicated).
  • Increase the employee’s salary to meet the new requirements.

Please let us know if we can assist you in complying with these new rules.

This article is meant to convey general information, and not to provide any legal advice. Legal advice should be provided only by an attorney who is familiar with all the circumstances about which advice is requested.

 

New Department of Labor rule could mean more money in your paycheck

 

The Laws of LinkedIn in the Workplace

Written by Colligan Law on . Posted in Articles, News

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By Erin M. Gormley

In a culture where viewing someone’s social media profile can serve as the modern equivalent to an in-person networking opportunity, it is crucial to be hyperaware of our online personas. And with public perception at the forefront of everyday life and business, our sense of ownership over social media channels and accounts can often be distorted. How much control do we have over our web presence, specifically on LinkedIn?

LinkedIn is an invaluable tool for networking and exploring employment opportunities. But what happens when the ownership and responsibility of a LinkedIn account becomes unclear? Say for example, an employee builds contacts using their employer’s company email address, and then no longer works for the company.

Generally, the presumption is that the individual portrayed on a LinkedIn profile owns the account, and therefore has discretion – regarding profile content and who has access. However, that is not always the case. A look at the recent case law shows that the following factors have been labeled as important in determining what rights ex-employees, and their former employers, have to the LinkedIn accounts that they access and maintain:

Creation of the Account

It is important to be aware of what the status of the account was: (1) prior to the start of the employee’s employment, (2) during their employment, and (3) after the termination of their employment. Factors to be considered are whether or not the employee already had the LinkedIn account prior to beginning the term of their employment, whether or not the creation of the account was a condition of their employment, and who created and provided content for the account – the employee or employer. If the employee inherited an account from the previous holder of their position, or otherwise received access to an account that was created by the employer as a condition of the employee’s employment, it weighs toward a finding that the employer is the owner of the account.

Department of Labor Announces New Overtime Rules

Written by Colligan Law on . Posted in Articles, News

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By Joseph F. Saeli, Jr.

The U. S. Department of Labor recently announced new rules for determining whether employees are exempt employees. If an employee is not exempt, they must be paid one and one half times their normal hourly rate for all hours worked above forty in a week.

The key parts of the new rules are:

  • Exempt employees must be paid an annual salary of at least $47,476. (The current requirement in New York State for exempt executive and administrative employees is $35,100).
  • The new minimum salary for Highly Compensated Employees is $134,004.
  • Employers may use non-discretionary bonuses and incentive payments to satisfy up to 10% of the salary level.  (This was not previously permitted).
  • The salary levels will be automatically updated every three years.
  • There is no change in the job duties tests for the exempt categories.
  • The new rules are effective December 1, 2016.

In addition to meeting these salary tests, exempt employees must also meet the job duties tests for one of the three exempt categories, professional, executive or administrative. Also, they must be salaried. An hourly employee can never be exempt.

If you have employees who are currently exempt, but do not meet the new salary requirements, you are are faced with a difficult decision. The options some employers are considering include the following:

  • Change the employee’s status to hourly, and pay overtime for all hours over forty in a week.
  • Change the employee’s status to non-exempt salaried, and pay overtime for all hours over forty in a week. (This is possible, but the hourly rate calculation for determining overtime pay can be complicated.)
  • Increase the employee’s salary to meet the new requirements.

Please let me know if I can assist you in complying with these new rules.

This article is meant to convey general information, and not to provide any legal advice.  Legal advice should be provided only by an attorney who is familiar with all the circumstances about which advice is requested.

New Year’s is the Time for Corporate Resolutions as Well!

Written by Colligan Law on . Posted in Articles, News

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By John A. Moscati, Jr.

Lose weight, exercise more, spend more time with my family . . . making and breaking New Year’s resolutions is all the rage this time of year.  When it comes down to it, most resolutions revolve around trying to establish good habits, or break bad habits.  Why not use the New Year as an opportunity to establish some good and break some bad business habits as well!

Here are five “New Year’s Resolutions” that we suggest you consider adopting for your business as you head into 2015:

 

  1. We Will Keep Our Minute Book Up to Date.  All corporations, and most LLCs should have regular meetings of their governing board.  Minutes of these meetings (or written consents, where meetings are not held) should be recorded in the business’ minute book.  At a minimum, one meeting a year is recommended for most businesses, with additional meetings (or action by written consents) when significant issues arise.  January is a perfect time to update your minute book to catch up on decisions that were made during the prior year that might qualify as being “outside the ordinary course of business.”  This can include things like bonuses, executive compensation, entering into new leases, equipment purchases, etc.  Having these items formally approved by your governing board shows that your business is “respecting the corporate formalities” which can be a key issue in protecting officers and directors from potential personal liability.

 

  1. We Will Schedule and Hold an Annual Meeting of Shareholders or Members.  Most corporations and LLCs are required to hold an annual meeting of their shareholders or members.  Many fail to do so.  This can result in shareholder dissatisfaction and a lack of confidence in management.  Ultimately, if shareholder meetings go unheld for too long, it can expose the business or individual managers to liability.  Holding an annual meeting does not need to be a confrontational exercise.  Generally, it is an opportunity for management to tell shareholders or members how the business performed in the prior year, keep them informed about plans for the coming year and have the shareholders vote to re-elect the Board of Directors or managers.  The election of the board is generally the only real business item on the agenda at the annual meeting.

 

  1. We Will Update Our Buy-Sell Valuation.  Many businesses have Buy-Sell Agreements among the owners which call for the value of the business to be agreed upon annually, or uses a formula to determine the value of the company.  As tax returns and financial statements are being completed, it is a good time to look at your Buy-Sell Agreement and verify that any agreed upon value or valuation formula in the Agreement still works for the business.

 

  1. We Will Put Commission and Bonus Agreements in Writing.  Many states, including New York, require that employers enter into a written agreement with any employee who is paid on commission.  Failing to have a written agreement can result in a presumption that the employees’ recollection of the commission structure is the correct one.  This can result in significant expense when a dispute arises.  Commission agreements do not need to be complicated, they just need to get done!

 

  1. We Will Update Our Employment File, Notices and Posters.  Both state and federal employment laws require the posting of certain notices in the workplace.  Similarly, there are rules requiring that written notice of compensation be provided to employees on an annual basis.  Finally, all employers are required to maintain up-to-date employment documentation for their employers.  The start of a new year is a good time to make sure you are in compliance with these rules.  Many payroll services will assist you in maintaining compliance if you ask.

 

Happy New Year and good luck keeping your 2015 New Year’s business resolutions!

Starting a Distillery in New York

Written by Colligan Law on . Posted in Articles, News

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Distillery

By Matthew K. Pelkey

Over the coming months we will explore the various legal issues facing distilleries, brewers and wineries in New York State. This first part of the series will explore what goes into a startup distillery in New York.

Recent changes in New York State regulations have made starting a distillery a viable consideration for those in—or desiring to be in— the craft beverage industry. Indeed, since loosening these regulations, New York has seen unprecedented growth of producers of craft spirits.

This inevitably leads to a thought amongst so many of us: how do I go about starting a distillery?

Well let’s get one thing unequivocally clear from the beginning: starting a distillery in New York is not as simple as starting a brewery or a winery. And rightfully so—distillation after all produces high grade ethanol, which for those of us who did not pay attention in chemistry class, is highly flammable. Distillation is a craft, and a craft that while enjoyable, needs to be given some fairly serious consideration and respect.

Unlike breweries and wineries, home-distilling (or moonshining as it is more commonly known) happens to be a felony in New York. In fact, owning, operating, possessing, or controlling a still for production of ethanol without a proper license is also a felony regardless of whether a still is even used. Oh yeah, and if that weren’t enough, even selling a still to someone lacking a proper license is a felony in New York.

There simply is no such thing as a legal “home-distiller” of ethanol for use as spirits in New York. The distilling industry is a highly regulated one at both the state and federal level. To successfully open a legal distillery, one will have to navigate a myriad of regulations from the New York State Liquor Authority (“SLA”), the Alcohol and Tobacco Tax and Trade Bureau (TTB), New York State Department of Taxation and Finance, and the New York State Department of State.

Zoning:  Depending on where your distillery is located, you will likely also need to obtain zoning approval to legally operate. In the City of Buffalo, you will need to be zoned for manufacturing which requires, amongst other things, a valid lease or cooperation from the existing landlord or owner of the intended property. Properly structuring and negotiating a lease can mean the difference of tens of thousands while permitting is being completed.

TTB Approval: The “basic” federal distilled spirits permit is the first permit on your way to becoming a distillery. It will require submission and review of the principals’ tax history, criminal records, architectural drawings of the building, a lease, a bond/surety to cover estimated excise tax liability, the equipment intended for use and a thorough review of the company’s corporate structure and ownership.

SLA Approval: The New York State Liquor Authority will likewise conduct an extensive review of the proposed distillery including but not limited to a background check, financial review of the owners and principals, review of the finances for the distillery, and finger printing. Depending on what class of license you are apply for will determine your production requirements and capacity. A NYS class D farm distillery license (which carries with it certain marketing and cost advantages) will require finished products comprised of “predominately” (at least 75%) NYS agricultural products, and will cap production at 75,000 gallons a year. New York will also require further permitting for sales tax and distribution.

TTB COLA: If you’ve successfully made it through the above steps, congratulations! You should now be legally able to produce spirits in New York. Unfortunately you are not yet able to legally sell spirits. In order to sell the spirits that you can now produce, you will need to go through formula approval and/or label approval (COLA) through the TTB. Depending on the spirit you are producing COLA may require compliance with a specific definition set out in the TTB regulations or creation of a fictitious name for your spirit, submission of your recipe, and/or submission of a sample for lab analysis. After formula approval, or if your particular product is exempt, you will need to submit your proposed label to the TTB for approval. Once you have cleared these final two hurdles you will be at a point where you can legally sell your spirits in New York State.

Of course, you may still have local laws and ordinances to comply with. Going forward you will also have no shortage of operational compliance at both the federal and state level covering everything from regularly scheduled calibration of equipment, OSHA and employee safety, production, marketing, distribution, compliance with environmental regulations, both federal and state excise tax—and everything in between. The reporting and compliance requirements for your distillery will occupy a considerable amount of time each month.   In case that weren’t enough to worry about, failure to comply with operational regulations can result in fines of $1,000 or up to one year in prison for each offense.

While the above may seem an onerous amount of regulations to navigate, it is not in any way intended to be an exhaustive list, nor is it intended to substitute legal advice regarding the particular circumstances surrounding a distillery. This article is intended for information and discussion purposes only. If you are considering starting a distillery (or are in the process) it is highly recommended that you seek professional assistance from attorneys and accountants.