Archive for the ‘Limited Liability Companies’ Category

Bring Out Your Dead!

Thursday, October 9th, 2014

By Brian Taylor Goldstein, Esq.   

Dear Law and Disorder:

Many years ago I hired an attorney to create an LLC for me, but I wound up never using it. Recently, I was presented with another business opportunity, but I’d like to have an LLC to do this. Can I still use the original LLC even though it would be for an entirely different purpose? I’d hate to have to hire an attorney to create a new one as the last one was very expensive.

When you create a corporate entity, such as a Limited Liability Company (LLC), a C-corporation or S-corporation, its like creating a living creature. It has its own legal identity, pays its own taxes, and can sue and be sued entirely separate from its owners. However, like leaving a fish abandoned in a fishbowl, if you ignore it, don’t feed it, and don’t change the water, it will die.

Corporate entities such as LLCs are created and formed in the state where they are located. Once formed, most states require the payment of a yearly registration fee to keep the entity “alive.” If the fee is not paid, the entity will be listed as “inactive” (ie: put into a medically induced coma.) While you can often pay the past due fees and make it “active” again, if it stays “inactive” for too long it will be removed from life support and you will have to start all over again. Also, even if you could somehow resurrect a dead corporate entity, unless they were originally created to be generic, such entities can’t be used for different purposes than those for which they were originally created. For example, if you created an LLC to represent artists, you can just use the same entity to operate a record company or produce a play.

However, whether you are creating a new corporate entity or resurrecting an old one, the process does not require an attorney and should never be “very expensive.” I have heard of people paying attorneys $5000 – $10,000 for this process which is, quite frankly, insane. Creating an LLC, C-corporation, or S-corporation in most states only requires a simple form or two (most of which can almost always either be downloaded or completed on-line) and the payment of a registration/filing fee. Often, its advisable to consult with an attorney or an accountant (or both) about the various legal and tax implications of different corporate entities, as well as to flag any potential business or legal pitfalls. Also, if your entity will involve more than one owner or partner, then you will want an operating agreement or shareholder agreement, and possibly even some by-laws to make sure everyone knows who’s in charge, how decisions are made, how to bail out, etc. However, unless you are creating an entity which will be involved with complex securities and exchange transactions or plan to do a corporate takeover of Apple or AT&T, the forming of the entity itself is quite simple. If you can complete your name and address (which I do acknowledge is more challenging for some that others), you can create and register an LLC.

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For additional information and resources on this and otherGG_logo_for-facebook legal and business issues for the performing arts, visit ggartslaw.com

To ask your own question, write to lawanddisorder@musicalamerica.org.

All questions on any topic related to legal and business issues will be welcome. However, please post only general questions or hypotheticals. GG Arts Law reserves the right to alter, edit or, amend questions to focus on specific issues or to avoid names, circumstances, or any information that could be used to identify or embarrass a specific individual or organization. All questions will be posted anonymously and/or posthumously.

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THE OFFICIAL DISCLAIMER:

THIS IS NOT LEGAL ADVICE!

The purpose of this blog is to provide general advice and guidance, not legal advice. Please consult with an attorney familiar with your specific circumstances, facts, challenges, medications, psychiatric disorders, past-lives, karmic debt, and anything else that may impact your situation before drawing any conclusions, deciding upon a course of action, sending a nasty email, filing a lawsuit, or doing anything rash!

 

Independent Contractors or Employees: What’s In A Name?

Wednesday, April 3rd, 2013

By Brian Taylor Goldstein, Esq.

Dear Law and Disorder:

I hire musicians to perform, with me. Are they employees or independent contractors? I do not deduct taxes from what I pay them. Should I also make them sign a contract stating that they are independent contractors?

Contrary to what many believe, the distinction between who is an independent contractor as opposed to an employee is not as simple as merely making them responsible for their own taxes (and issuing them a 1099) or making them sign a contract or other document in which they affirm that they are an independent contractor. Like many legal relationships in the arts, “titles”, while not entirely irrelevant, do not in and of themselves carry any legal significance. Instead, determining whether a hired musician (or anyone you hire to provide services for you) is an employee or an independent contract requires an analysis of both state and federal regulations.

A person is an independent contractor only when free from control and direction in the performance of their services. As independent contractors are not covered by unemployment insurance laws, labor standards, or safety and health regulations, each state, as well as the federal government, have established various “factors” concerning the nature of the relationship between the parties which are used to determine whether or not a person is an employee or an independent contractor. These factors include how a person is paid, the amount of control you have over them, where their services are performed, how their services are performed, whether or not they are part-time or full-time, and even whether or not the person you are hiring is “incorporated” as a business or merely uses a “dba” and is a sole proprietor. All factors concerning the relationship between the two parties must be taken into consideration. No one single factor is controlling, nor do all factors need to be present to establish the nature of the relationship.

Not surprisingly, the “factors” can differ from state-to-state, with some states applying a more liberal analysis than others. Whereas, in some states, its almost impossible for anyone to hire an individual as an independent contractor unless the individual is incorporated as a C-corporation, S-corporation, or a limited liability company, other states afford more discretion to the employer to determine how to classify the people they hire. And the federal government has its own set of factors and guidelines. As a result, its not uncommon for the same person to be classified as an independent contractor for federal purposes (IRS, US Department of Labor, etc.) and an employee for purposes of state unemployment law and state taxes.

While all the various factors must be considered, in almost all cases the most significant factor is whether the party contracting for the services exercises, or has the right to exercise, supervision, direction or control over someone they hire. In the case of musicians and other performers: do you hire them to show up and perform their own music in whatever manner they want? Or do you direct them? Do you require them to attend rehearsals? Can they wear whatever they want or do you require specific costumes or clothing? In general, musicians or other performers who are paid to perform and are told/directed what to perform, how to perform it, where to perform, and what to wear are almost always considered “employees”, if not by the federal government, then by most state governments.

The only way to answer your specific question is to apply the applicable state and federal factors and guidelines to your specific circumstances. However, the New York State Department of Labor actually has specific guidelines and factors for determining whether performers are employees or independent contractors. You can find them at http://www.labor.ny.gov/formsdocs/ui/ia318.17.pdf Whether or not you are in New York, this is a good place to start.

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For additional information and resources on this and other legal and business issues for the performing arts, visit ggartslaw.com

To ask your own question, write to lawanddisorder@musicalamerica.org.

All questions on any topic related to legal and business issues will be welcome. However, please post only general questions or hypotheticals. GG Arts Law reserves the right to alter, edit or, amend questions to focus on specific issues or to avoid names, circumstances, or any information that could be used to identify or embarrass a specific individual or organization. All questions will be posted anonymously.

__________________________________________________________________

THE OFFICIAL DISCLAIMER:

THIS IS NOT LEGAL ADVICE!

The purpose of this blog is to provide general advice and guidance, not legal advice. Please consult with an attorney familiar with your specific circumstances, facts, challenges, medications, psychiatric disorders, past-lives, karmic debt, and anything else that may impact your situation before drawing any conclusions, deciding upon a course of action, sending a nasty email, filing a lawsuit, or doing anything rash!

How Do I Protect My Personal Assets From Claims of Copyright Infringement?

Wednesday, June 13th, 2012

By Brian Taylor Goldstein

Dear FTM Arts Law:

Could owning copyrights individually (as opposed to being owned by a corporate entity) ever be a personal liability?  I understand that if copyrights are held in the name of a S-corp, C-corp, or possibly LLC, the corporate veil would shield my personal assets.

There is no liability in “owning” a copyright—unless you’ve written something really horrible and would rather not be credited. However, there can be considerable personal liability in stealing (or what attorneys call “infringing”) someone else’s copyright.

Let’s assume, for the sake of argument, that you are a composer and another composer claims that portions of your famous zither concerto contains unlicensed portions of the other composer’s music. If you own the copyright in your zither concerto personally, then you can be personally liable. But what if you had transferred or assigned the copyright to your publishing company and your publishing company is a Limited Liability Company (LLC)? Then both you and your company can be sued! In other words, a corporate veil does not protect you or your personal assets from liability for copyright infringement!

In most cases, you are correct that when your form a valid corporate entity (C-corp, S-corp, or LLC), then a “corporate veil” descends between the entity and the owners (even if there is only one owner) and the owners are not personally responsible or liable for the debts of the corporate entity. If, for example, your corporate entity enters into a contract to pay for services, and your corporate entity breaches the contract and refuses to pay, then only the corporate entity is liable, not you personally. However, this “corporate veil” only protects you from liability for debts, bad business deals, or contract breaches. It does not protect you from liability from what are called “torts.”

A “tort” is any thing other than a breach of contract which causes damages to another person and includes such things as fraud, negligence, assault, battery, defamation, and….copyright infringement. So, if the president of a corporate entity commits fraud, then both the corporate entity can be liable as well as the person who “personally” committed the fraud. Or, if a truck driver runs a red light and causes an accident, then both the truck driver can be sued, as well as the company he or she works for. It is the same with copyright infringement.

If you are accused of using unlicensed material in your zither concerto, it doesn’t matter who holds or owns the copyright. If it is ultimately determined that you used someone else’s copyrighted materials when creating the work in the first place, then you are personally liable. And it gets worse. Through a legal theory called “vicarious liability”, the musicians who perform you work could be liable, the agent or manager who promoted it could be liable, even the venue where it is performed could be liable.

In the end, the smartest way to protect your personal assets from potential claims of copyright infringement is either by using only original works or by ensuring that you have all of the proper licenses and permissions in the first place. Also, in order to protect yourself from frivolous lawsuits and false claims of infringement, register your copyrights with the US Copyright and Trademark Office.

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For additional information and resources on this and other legal and business issues for the performing arts, visit ftmartslaw-pc.com.

To ask your own question, write to lawanddisorder@musicalamerica.org.

All questions on any topic related to legal and business issues will be welcome. However, please post only general questions or hypotheticals. FTM Arts Law reserves the right to alter, edit or, amend questions to focus on specific issues or to avoid names, circumstances, or any information that could be used to identify or embarrass a specific individual or organization. All questions will be posted anonymously.

__________________________________________________________________

THE OFFICIAL DISCLAIMER:

THIS IS NOT LEGAL ADVICE!

The purpose of this blog is to provide general advice and guidance, not legal advice. Please consult with an attorney familiar with your specific circumstances, facts, challenges, medications, psychiatric disorders, past-lives, karmic debt, and anything else that may impact your situation before drawing any conclusions, deciding upon a course of action, sending a nasty email, filing a lawsuit, or doing anything rash!