In the September 2015 issue, I addressed some longstanding art and entertainment legal myths that have been raised by past clients, which I sought to correct. However, there is a lot of misinformation that still passes for truth. Below are additional myths, which apply to both business owners as well as artists:
Having an Incorporated Business Will Always Protect Me:
This is partially true. Incorporating through particular legal entities (usually through the popular Limited Liability Company or Corporation) generally protects the business owner by considering the business’s assets and debts as separate from the owner’s personal assets. It offers a distinct layer of protection for your own personal assets because if a lawsuit is filed due to an issue relating to the business, they generally cannot go after your personal assets.
The reason that having an incorporated business doesn’t fully protect you is because you can lose liability protection if you don’t maintain certain formalities.
To maintain protection there are several rules you must follow: do not ever mix business and personal assets; maintain and keep separate records; properly capitalize the business; pay all the required taxes; file any required annual report; and if it is a corporation, then the corporation usually must have a board of director(s) and have annual meetings with corporate minutes kept. In cases of fraud, and in certain instances of negligence, a court can find that the protection shouldn’t or doesn’t apply.
Incorporating your business is accomplished by filing the corresponding paperwork with the Secretary of State. The actual fees to incorporate vary state to state; depend on whether it is being filed online and which incorporation method is chosen. It is surprisingly affordable and can offer important protection when formalities are kept.
*It is advisable to talk with an attorney and accountant to discuss the advantages/disadvantages of different business structures and the required formalities for your particular business, as each is different.
I Want To Copyright the Name of My Company
Copyright applies to protecting a work of authorship. What this client really needs is to be covered by a trademark or service mark - although many refer to both as trademarks. A trademark is a word, phrase, symbol, and/or a design that distinguishes and identifies goods from one source, as opposed to another. A service mark is similar, but refers to owners who use that mark to identify the services (intangible activity) they offer to others. The United States Patent and Trademark Office (found online at www.uspto.gov) provides a searchable trademark database and allows for filing an application to register marks for federal protection. Additionally, there are also trademarks registered at state level, as well as trademarks that have not been registered at either the state or federal level, but have protection via common law.
by Devon Landis, Esq.
RI & MA Attorney for the Arts
Disclaimer: This is for informational purposes only and not exhaustive of all aspects of the law on this topic and it is not to be considered legal advice on any particular set of facts or circumstances, you should contact an attorney for advice on specific legal problems.