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B Corp

What are Certified B Corporations and Why They Matter

What are Certified B Corporations and Why They Matter

Chris Mendenhall

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Some people think that capitalism is what’s wrong with our world. According to Wikipedia, “capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working-class majority; for prioritizing profit over social good, national resources and the environment; and for being an engine of inequality and economic instabilities.” While that’s not true for every business, for most companies, whether they are scraping by or striking it rich, the focus is on the business itself.

Nonprofits, on the other hand, are supposed to be the alternative structure for organizations that care more about the collective, public, or social benefits. The model was designed to be responsible, honorable, and transparent, but there is controversy about its efficiency and accountability.  Resources are not always managed as well as they could be, and efficacy suffers. Nobody goes into nonprofit work to become wealthy, but the trade-off is that they go home at the end of the day with the impression that they’re making a difference in the world.    

Does there have to be a trade-off? Can a business do good in the world and still make a decent profit? There are big, wildly profitable businesses whose mission is to provide life-saving drugs or medical equipment, for example, but what do we know of their inner workings? How do they treat their employees? What is their environmental footprint? For-profit companies’ lack of transparency means there is no way to know. This leads us to the question: what if a for-profit company could be held to high standards of accountability, transparency, and verified social and environmental performance? 

This is where Certified B Corporations enter the picture. B Corps are organizations all across the globe that have committed to balancing purpose and profit. They are required to care about more than their bottom line. They form a powerful community of like-minded people and companies driven to use their business as a force for good. There is no shame in making a profit if there are no values sacrificed to get there.    

The process of becoming B Corp certified is rigorous, as it should be. Organizations must verify that their companies meet high standards in the areas of governance, workers, community, environment, and customers. There is a very extensive evaluation that dives deeply into how companies measure up in each of these areas. There is paperwork to submit to substantiate your statements. There are follow-up questions from a team of individuals whose job is to make sure companies are not fudging their numbers or claims. There is a live interview with a certification team to further confirm that your company makes the grade. Then, once certified, there is a recertification process every three years in which companies must prove that they are not only living up to what they claimed but are encouraged to do better than they were before, and the evaluation questions change and evolve as the standards are further scrutinized in light of new global concerns.    

What is even more beautiful about certified B Corps is the community they create. There is a global “B Hive” of articles, resources, opportunities, and ways to connect with other values-driven organizations. There are independent “B Local” groups all over the country comprised of certified B Corporations that meet to discuss issues, network, educate, support, engage, and inspire. There might be community service events, webinars on global issues like climate concerns, and opportunities for learning about other companies, vendors, and professionals that care about their global communities as much as you do.

Personally, it gives me great pride to work for a law firm that chose to jump through the B Corp certification hoops and to live up to those lofty standards. As Milgrom & Daskam’s Legal Administrator, I look to the B Corp member directory first when choosing a vendor for everything from a financial advisory firm to handle our employee retirement accounts (Thanks, BSW Wealth Partners!) to a bakery to provide cupcakes for a firm birthday event. We know what they went through to get on that directory, and we know they share our values in providing their goods and services. There is something satisfying in knowing that we’re doing good work within a community of good people. Let’s do what’s right for our world!

ABOUT THE AUTHOR

LEGAL ADMINSTRATOR

Chris’s life has meandered far from her degrees in sociology and elementary education from the University of Colorado but has now come full circle with the many years she put in as an administrator in the legal field.  After being a stay-at-home mom for 10 years and many subsequent years volunteering and working within the Boulder Valley School District, Chris operated a successful freelance office services business for a variety of clients, including Milgrom & Daskam.  Chris is happy to have now joined Milgrom & Daskam officially as the firm’s Legal Administrator.

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Entrepreneur & Startup

Understanding the LLC Structure: Key Considerations for Operating Agreements

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John Daskam

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Limited liability companies (“LLCs”) offer individuals a lot of flexibility when starting a new business while also providing the benefit of limited liability related to personal assets or assets that exist outside of the company structure. The LLC has become a favorite for forming new ventures due to its unique structure and single-level tax implications. However, when forming a new LLC, there are some key considerations to keep in mind related to its main governing document, the Operating Agreement (“OA”).

The OA for an LLC contains all of the rights and obligations of the individuals who are part of the LLC (“Members”). This blog post will focus on three main considerations for Members of an LLC when drafting the OA: 1) Management Rights, 2) Member Transfers, and 3) Deadlock.

1. Management Rights

As an initial matter, the Members will need to decide whether the LLC will be “member managed” or “manager managed.” In Colorado, this election will be included in the Articles of Organization which are filed with the Secretary of State. Typically, a “manager managed” LLC is advisable, as it provides for maximum flexibility for decision-making rights related to company matters. LLCs have two main associated rights: management rights and economic rights. Bifurcating the management rights from the membership base allows certain individuals to maintain control of the company’s major decision-making while allowing others to participate in ongoing company distributions (or required capital calls). Members who are Managers (though a Manager does not necessarily need to be a Member of the LLC) will want to think through what decisions can be made by an individual Manager and those that would require a majority or unanimous vote of all Managers (e.g., committing the LLC to a new loan or long-term contract).

2. Member Transfers

It is of the utmost importance that the Members understand how their interests in the LLC (“Membership Interests”) may or may not be transferred, assigned, hypothecated, or otherwise. Typically, there will be strong prohibitions on any transfer other than with some level of consent from the Members or Managers or for estate planning purposes. In almost all instances, the Membership Interests will not be registered securities, so it is important to avoid a triggering event that would require registration. Furthermore, the Members have entered into the LLC with a common goal, and finding themselves in the position of a unilateral transfer to an outside individual who may not have the same goal in mind can be highly problematic. Understanding that Membership Interests may never have a market value and are not readily saleable is a key foundational aspect of the LLC that Members must understand.

3. Deadlock

In closely-held LLCs (those with only a couple or few individual Members), it is vital that the Members are thoughtful about the scenario where there is disagreement over a major decision that will cause the business to struggle or fail (“Deadlock”). Typically, in a Deadlock scenario (which may further be defined in the OA), the Members will want to have a mechanism in the OA that allows for a path forward. One way that this scenario may be handled is a shotgun provision where the Members may elect to compel the buyout of the Membership Interests of the Member(s) who are withholding consent to a major decision. In this scenario, the withholding Member would have the option to sell or purchase the Membership Interests from the Members initiating the shotgun on the same economic terms. The buyout mechanism and triggering events would be built out specifically within the OA.

The considerations discussed in this blog are only a few of the many important aspects that must be addressed in the OA, and it is highly advisable to discuss with legal counsel when thinking about starting your new business.

ABOUT THE AUTHOR

PARTNER

John Daskam joined Milgrom & Daskam as a Partner in January 2019. He focuses his law practice on real estate and corporate law. His real estate practice includes acquisitions and dispositions, landlord-tenant matters, leasing, financing, development, and contract preparation and negotiation.

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As the recent and somewhat terrifying UN Report informed us, we are well past the point of stopping climate change. But we can slow it down. And we need to slow it down.

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Intellectual Property

What is the Trademark Modernization Act of 2020?

What is the Trademark Modernization Act of 2020?

Amanda Milgrom
Amanda Milgrom

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Trademark practitioners, it is time to get excited! Trademark applicants? Registrants? You can get excited, too! The United States Patent and Trademark Office (USPTO), the office that decides who can own the rights to a mark, word, or design logo, has proposed long-needed changes to the trademark rules of practice via the Trademarks Modernization Act (TMA).

If you practice trademark law, you are well aware that much of the process can be antiquated, slow, and inefficient. The proposed changes are intended to make the trademark process more efficient and to allow businesses new ways to remove unused marks from the register. The TMA amends the Lanham Act (which governs trademark law) in three key ways, all of which will be discussed in more detail below.

1. New Tools to Remove Inaccurate Claims of Use

The USPTO has proposed two new methods by which an entity can cancel an unused registration: expungement and reexamination. These tools would provide faster and less expensive alternatives to the current inter partes cancellation proceeding before the Trademark Trial and Appeal Board (TTAB).

Expungement – Third parties would be able to request the cancellation of some or all of the goods and services in a registration based on the fact that the registrant never used the mark in commerce in association with those particular goods and services. An expungement proceeding must be requested between three to ten years after the registration date.

Reexamination – Third parties would be able to request the cancellation of some or all of the goods and services in a registration based on the fact that trademark was not used in commerce with those goods and services on or before a particular date. A reexamination proceeding must be requested within the first five years after a registration.

Either of these tools offers a less expensive, less burdensome, and faster alternative to a cancellation proceeding.

2. Proposed Changes to Existing Procedures

New ground for TTAB cancellation proceeding – The proposed changes under the TMA would add a new ground for cancellation: the trademark has never been used in commerce.

Shorter three-month response period for office actions – Under the TMA, applicants and registrants will be required to respond to office actions within three months (instead of the current six-month period). Practitioners, you will likely be excited about this change, as it would promote efficiency in examination and would speed up the registration process significantly.

Third-party submissions during examination (letters of protest) – The TMA would provide statutory authorization for the USPTO letter of protest practice. This practice allows third parties to submit evidence to the USPTO, prior to a mark’s registration, regarding the registrability of the mark. The TMA would set a two-month deadline for the USPTO to act on these letters.

The TMA became law on December 27, 2020, and will take effect on December 27, 2021. It is currently open to the public for comment until July 19, 2021. You can submit comments at www.regulations.gov. Enter docket number PTO-T-2021-0008 on the homepage and click search. Please reach out to Milgrom & Daskam with further questions.

ABOUT THE AUTHOR

PARTNER & EXECUTIVE DIRECTOR

 

Amanda Milgrom represents individuals and businesses of all sizes in various litigation matters regarding employment, intellectual property, and business disputes. She practices employment law, representing employees in discrimination lawsuits and counseling employers on best practices, drafting employee handbooks, and putting together suites of employment contracts.

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