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Choosing Corporation or LLC: The Legal Side of iOS App Development Part III

At this point, you’ve read through Apple’s developer contracts and you’ve decided on an amazing name for your iOS app. But what’s the next step, aside from actually designing and coding your app, of course?

While it is definitely possible to have a single individual, also known in the business world as a sole proprietor, post an app to Apple’s App Store, you’re going to be much better off if you form some kind of business entity before you submit your app. Why? Several reasons—most of which revolve around liability and growth.

But before we get too far ahead of ourselves, we need to ask what is a business entity? It’s kind of a strange phrase, but it’s simply a general term for corporations (both C-Corps and S-Corps), limited liability companies, and partnerships. Which one is right for you is going to be a judgment call you should make after you discuss your situation with other iOS entrepreneurs and a knowledgable business lawyer.

With the general nomenclature out of the way, let’s talk about some specifics. Most small developers like to form LLCs. People talk a lot about the benefits of an LLC (liability protection, electable S-Corp taxation status, lack of corporate formalities). However, there are a number of very significant drawbacks. For example, I’ve discussed this on our site before, but if you’re forming a single-member LLC, you’d better be sure you know what you’re doing—or you could find yourself liable for the debts of your company. And that’s not a position anyone wants to be in. Further, LLCs often have a problem scaling, which is something even the smallest app developer should be concerned with since app development can sometimes be an expensive undertaking and you may want to take on extra investors in exchange for a percentage interest in the company. That said, LLCs are great for a small number of shareholders (called “Members” in the LLC context), but trying to add more members and investors down the road can lead to some major problems. After all, corporations are much better suited to taking on investors than LLCs are.

And that brings us to the corporation. Compared to LLCs, corporations are slightly more costly to set up and require more effort to keep running (in terms of required meetings, corporate minutes, resolutions, etc.). However, if you’re looking for a way to scale your business at some point, setting up your entity as a corporation is the way to go. With the ability to issue a range of stock types to investors, you’ll be in a position to grow in ways you never thought possible.

But what if you’re looking for something in between? You’ve started out and you’re developing your first app, after all. What do you do? Well, we sometimes recommend setting up the LLC first and then converting it to a corporation later. That way you don’t have to worry about all of the corporate formalities at the beginning and you can focus on what you do best—developing your app. Then, after your app is finished and selling like hotcakes on the App Store, you can convert the LLC to a corporation. And to top it all off, you’ll have saved some money to boot.

Next time we’ll discuss the legal ramifications of using third party resources and code in your app—what it means for your development now and in the future.

Photo Courtesy: Thomas Leuthard

2 Steps to a Trademarkable App Name: The Legal Side of iOS App Development Part II

Choosing the right name for your iOS app is always a difficult task. After all, you’re looking for something that sounds great, is memorable, is not already in use, and has some relation to what your app actually does. Finding the right mix between all of those factors is a tough job, but we have a few tips to help point you in the right direction.

Before we get into them, though, be sure to check out our post on How To Pick The Perfect Name For Your Business. You may find a number of helpful hints that can easily be applied to naming your app.

There are really three goals you should have in mind when choosing your app’s name: (1) Choose something that somewhat describes what your app is or does, (2) Choose something you can trademark, and (3) Choose something that is catchy or marketable.

Since our posts try to stick with the legal side of things, we’ll be talking about trademarkability. I’ve discussed trademarks a bit on our site before, but as a refresher, there are a couple of things you need to know. The biggest, when it comes to choosing a name, is to make that name as distinctive as possible. Whether you’re able to register a trademark for the app’s name at some point in the future largely depends on how distinctive your mark is. If you’re naming your new messaging app Message App, that’s not particularly distinctive—it’s merely descriptive and therefore somewhat unlikely to be registered by the United States Patent and Trademark Office (USPTO). However, if you name your messaging app something like Fast Messages, you’re getting somewhere. You have a name that is a little more distinctive than before. However, if you really want to take it to the next level, then take a page from messaging app names like WhatsApp or KakaoTalk, both of which have very distinct names.

The next issue you need to be on the lookout for when coming up with a name for your iOS app is to make sure you’re not (inadvertently) taking a page from an existing trademark. In other words, if your mark is too similar to a currently registered mark, you’re going to have a tough time registering your app’s name with the USPTO. Before any trademark can be registered, it has to be cleared through the USPTO’s strict set of searches, and if any problems pop up, it will delay the process. Furthermore, even after your application has cleared the USPTO examining attorney’s first search, the mark goes on to be published in the Trademark Official Gazette, a weekly publication from the USPTO that documents the marks that are approved for registration each week. Once published, you have to wait to make sure nobody opposes your mark before the USPTO will finally register your trademark. Long process, right? It takes at least 6-7 months.

Ultimately, I always recommend approaching naming an app (or a business) as a two step process. Start by coming up with 3-5 names you think sound great. Then start searching around to make sure those names aren’t already in use. Of course, if you hire a trademark attorney to help you through the process, we’ll do all of the searching for you.

Keep an eye out for our next post on the legal side of iOS app development, where we talk about forming your business in a way that’s great for you—and will make your future investors happy too.

Photo Courtesy: Thomas Leuthard

Apple’s Guidelines: The Legal Side of iOS Development Part I

You may think designing, implementing, and marketing an iOS app is a fairly simple process, legally speaking. However, like any other business foray in modern society, there are a number of legal pitfalls to watch out for whether you’re working on the next great iPad game or a fancy new competitor to Foursquare for the iPhone. In this series of posts on understanding the legal requirements for iOS developers, we’re going to be taking a look at everything—from start to finish—you need to familiarize yourself with before and during development of your new iOS app. Topics will range from forming your business, to naming your app, to copyrights and trademarks, to understanding Apple’s terms and conditions, to drafting customized terms for your app. Yeah, this series could get long.

We begin at the planning stage. You’ve decided you want to build an iOS app. Laid out all of the basic features you want it to have. Maybe you’ve even tinkered with a few designs for the GUI. Now you just have to join the Apple Developer Program.

So you sign into Apple’s website, follow the links to the Developer Program. Create a username and password, and you’re presented with a couple of documents you probably just click through without reading like everyone else. These documents, in the order you’ll probably come across them, are the Registered Apple Developer Agreement and the (more importantly) iOS Developer Program License Agreement. These two documents, along with a few others, dictate the terms of the relationship you have with Apple. And you really need to read them before you even think about developing your first app. (Although, it should be said that you generally have to join the developer program before you get to read the iOS Developer Agreement.)

While going through each and every term of the two agreements would be far beyond the scope of this post, we’ll quickly point out . After all, the more you follow along with Apple’s terms, the less resistance you’ll encounter when you submit your app. Some of the key points to be aware of include terms of third party licenses you may also be required to be bound by, such as Facebook and Twitter integration. Others include notices you have to provide to your users if your app needs to take information from other applications, most notably from a user’s Contacts app.

Once you’ve read (and reread) the requirements set forth in Apple’s documentation, you’re all set to start laying the foundations for your business and developing your app—or are you. Stay tuned for Part II of this series, on how to choose the best name for your iOS app.

Photo courtesy: Thomas Leuthard