LPS Law Blog

CONSEGUENZE FISCALI NEL PORTARE I SERVERS IN CALIFORNIA

Recentemente un imprenditore italiano mi ha posto una domanda interessante, la cui risposta vorrei condividere in questo spazio:  la semplice migrazione dei servers in California da parte di un'azienda non altrimenti domiciliata in California attiva la sales and use tax?

Come regola in generale, lo stato della California puo' imporre la sales and use tax (IVA italiana) se il retailer ha una sufficiente presenza fisica nello stato ("nexus") da risultare "engaged in business". Se pero' l'unico aspetto di presenza fisica sono i servers, cio' non e' sufficiente a stabilire il contatto minimo per essere considerati "engaged in business". C'e' proprio una normativa specifica in merito, di cui ne riporto un riassunto qui sotto.

 

The use of a computer server on the Internet to create or maintain a World Wide Web page or site by an out-of-state retailer will not be considered a factor in determining whether the retailer has a substantial nexus with California. No Internet Service Provider, On-line Service Provider, internetwork communication service provider, or other Internet access service provider, or World Wide Web hosting services shall be deemed the agent or representative of any out-of-state retailer as a result of the service provider maintaining or taking orders via a web page or site on a computer server that is physically located in this state.

 

Matteo G. Daste, Esq. is the author of this post and may be contacted at mdaste@lpslaw.com Mr. Daste counsels a variety of technology startups and entrepreneurs in capital raising and operational matters.

 

LLCs AND TECHNOLOGY STARTUPS: FOUNDERS FAQs

Limited liability companies (LLCs) are generally advantageous to hold (A) real estate, (B) closely held businesses; and (C) portfolio of stock investments (holding companies for startup founders or VCs)  In the last instance, founders of technology startups often utilize an LLC as the holding vehicle for their interests in the newly formed corporation. Some frequently asked questions are:

1. Why an LLC? The main conventional reasons for this are: (A) pass through taxation; (B) limited public filing information; (C) operating agreement flexibility

2. What is pass through taxation? Pass through taxation means that the entity is generally disregarded as a taxpayer. Yet, note that the LLC is still subject as an entity to state tax requirements. This link to the California Franchise Tax Board explains you those requirements in summary.

3. What about limited public information? The LLC operating agreement (detailing company ownership, among other things)  remains private. The articles of the organization are the only public filing, and these do not state the capital ownership of the LLC. For more information, see the CA Secretary of State website.

4. What is the operating agreement? The operating agreement is the governing document of the LLC, which sets forth the rights and preferences of its members.  Members can customize the operating agreement to suit to the circumstances. For example, with two or more members, you will always see a right of first refusal/cross purchase right. This is necessary in order to prevent transfers of LLC interests to third parties. An exception to this are permitted transfers, such as transfer to trusts, family members or other types of transfer that do not alter beneficial ownership. See the sample LCL Operating Agreement that is attached.

5. Why not just use an LLC for my technology startup? Corporations are the entity of choice. Unfortunately, LLCs are not so flexible for structuring multiple rounds of capital raising, since the law by default does not provide for different classes of interests with special rights, as stock corporation have. See for example the California LLC law, codified in the California Corporations Code Section 17000 et seq Beverly Killea Act.

6. Is Delaware better than California as the state of LLC organization? With regard to choice of state of organization, one view is as follows: (A) CA makes sense for LLCs holding local real estate and closely held businesses, (B) DE makes sense for LLCs holding a portfolio of stock investment of a portfolio of real estate in multiple states (in this last case there is a special type of LLC called Delaware Series LLC that allows multiple series of interests to hold different properties in away that insulates them one from the other for purposes of liability and yet maintains a single holding company). There are of course exceptions that make it preferable to use CA LLCs even as stock portfolio holding companies and viceversa.

7. How do I capitalize an LLC? Finally, with regard to funding an LLC, it is capitalized thought he sale of LLC Interests. Important Note: - unless an LLC is member managed, the LLC Interests are deemed "securities" and thus are subject to securities laws.

Matteo G. Daste, Esq. is the author of this post and may be contacted at mdaste@lpslaw.com Mr.Daste counsels technology startups and entrepreneurs in capital raising, strategy and operational matters.

RIGHT HOLDERS BEAR THE PRINCIPAL RESPONSIBILITY TO POLICE THEIR TRADEMARKS

On July 14, 2008, in Tiffany Inc. v. eBay, Inc., 2008 WL 2755787 (S.D.N.Y.) a New York District Court ruled in favor of defendant eBay and against plaintiff jeweler Tiffany & Company.  This decision ended a four year lawsuit where Tiffany sued eBay alleging that eBay allowed hundreds of thousands of counterfeit silver jewelry to be sold on its website.  Tiffany argued that eBay knew a problem existed and that eBay had an obligation to investigate and control these illegal activities.  Tiffany wanted eBay to refuse to post any listing offering five or more Tiffany items and to immediately suspend sellers upon learning Tiffany's belief that the seller had engaged in potentially infringing activity. 

The court held that it is the trademark owner's burden to police its mark and companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their websites.  The court looked favorably on the fact that eBay made substantial investments in several anti-counterfeiting initiatives and took appropriate steps to remove listings and suspend service when it knew of counterfeit items listed.  While the court held that Tiffany failed to prove its claims against eBay, the court stated that it made no finding as to whether Tiffany might prevail against any individual eBay sellers.

CHANGES IN DOMAIN NAME TECHNOLOGY AND HOW THIS COULD IMPACT YOU

New technology is now in the hands of "domainers," those who acquire domain names without the bona fide intent to use them, generally for re-sale.  The legal turf is now growing between trademark holders against the domainers. Below is a brief overview of activities that may hurt your online intellectual property. 

 

1.          DOMAIN NAME "TASTING."  One can register a domain name and return the domain name within five days for a full refund.  Domainers acquire names and view the traffic that is generated over a five-day period.  This is called "domain name tasting."  Domain name tasting allows the domainer to conduct a free "market survey" into the ways in which Internet users are mis-typing a bona fide trademark that is used as a website address.

 

Domain names that generate traffic are then purchased and held, and non-trafficked domain names are returned.  Those that are purchased and held are re-routed to advertisers or others for a "pay for click" fee.

 

Domain name tasting has become rampant.  For example, in March 2005, nearly 43,000,000 dot-com and dot-net domain names were registered.  Only 2.5 million such names were deleted that same month.  In contrast, only one year later, in April of 2006, 35,000,000 names were registered and 32.7 million were deleted within the five-day grace period.

 

2.          DOMAIN NAME KITING.  A domainer will set up two companies, Company A and Company B.  Company A will taste domain names in bulk and then reject all of them.  Simultaneously, Company B will then sign up the same domain names immediately after Company A has rejected them, so that Company B now gets to taste the domain names for an additional five days.  Companies A and B engage in this repetitive tasting (domain name kiting) over and over.  To the legitimate domain-name holder, this will tie up related domain names that may be desired.

 

3.          FRONT-RUNNING.  Also known as "domain name spying," when a person inquires about the availability of a domain name, but does not sign up for the domain name that instant, the registrar will "register" the domain name itself, thereby preventing the person from registering it later.  Most typically, the registrar holds the domain name awaiting the user to come back to that registrar, thereby forcing the user to sign up with that particular registrar.  This is annoying but generally does not cause any harm other than preventing one from keeping all domain names consolidated with one registrar.

 

Legal remedies exist but the solutions require creativity given that in these instances trademark law often intersects shifting technology and novel forms of infringement. 

 

Neil Taxy, Esq. is the author of this post and may be contacted at ntaxy@lpslaw.com Mr.Taxy counsels a variety of business clients in trademark and online intellectual property protection strategies.