Legal Q & A for Creative Entrepreneurs - Brittany Ratelle - Live IG replay - October 9, 2018

Hello everybody, Brittany Ratelle here, attorney for creative entrepreneurs, back for another Instagram Legal Live. I think that's what I'm calling them, so get excited. I will give a few minutes to let everyone hop on. Sorry, I'm a few minutes late. Sorry, sorry about that. I had some kids who, of course— hello— just had to finish watching Ice Age, of course, so could not convince them otherwise that they could get into bed without seeing the long, drawn-out finish to that spectacular movie of having Baby being returned to his parents who don't talk at all. Yeah, from Ice Age. Anyway, I'll spare you the details if you haven't had the pleasure of watching that. But, so I'm Brittany Ratelle, attorney for creative entrepreneurs, and I hop on every Tuesday night here for a little legal live for a 20 to 30 minute chat. I answer some of your legal questions that you might have about running your creative business. So What I do typically, I'm an attorney licensed in Utah, so I have to give my little disclaimer that while I'm a licensed attorney, I'm not your attorney unless you want me to be, in which case let's chat. And then you would sign an engagement letter, and then we would be attorney and client, and then I would give you advice that's specific to your facts, to a situation, and then you'd pay me money. That's typically how it works. So that is not this. This is just me giving general, you know, bird's-eye view informational advice about kind of running an online business or creative business in today's modern digital landscape. So, and what that might look like for you and maybe what some of the business needs or legal needs that you might have or questions regarding running that kind of business today. So I got one question beforehand, so I will start off with that. And then if anyone else has any other questions, you're welcome to jump on and put them in the comment box down here, and I'd be happy to answer them. So the question I got was someone who said she'd watched another one of my lives And, um, excuse me, and she wanted to know, um, what the relationship was basically between DBAs and having an LLC and what that looked like, whether you could connect your DBAs to your LLC, um, you know, at what point, or do you have to go through your county, your state to do that. And basically, how do you wade through this alphabet soup that is registering or incorporating your business? Which I don't blame you because it's a lot of acronyms. Um, it's kind of like reminds me of my term when I worked for worked for the State Department for the summer in Africa, in Mozambique. Um, and honestly, like, you probably need a master's degree just to wade through all of the acronyms, you know, USAID, MDC, you know, uh, AG, AI. I mean, yeah, it was crazy. Everyone just talked in acronyms the whole time. And, you know, because it was all PECFAR, um, and Millennium Development Corporation and all these things. Anyway, it was just crazy, crazy amount of acronyms. So So when you set up, and by means set up we mean incorporate or register your business or set up your LLC, these are all— use these all interchangeably for that. When you do want to do that, when you're at the step where you want to do that for your business, you do that at the state level. Each state is responsible through usually its Secretary of State for having control and setting up the rules of what it means to have a limited liability company or an LLC in its state. So, and states can make up their own registration requirements of what that looks like and what you need to do, and that's all directed at the state level. They'll have you usually fill out an online form and you'll have to fill out some boring stuff that says, you know, you're not transporting fuel across interstate lines, you're not in, you know, sexually explicit business, you have to answer a bunch of weird questions, and then you pay your fee and you've set up as an LLC. And the benefit to having an LLC is that you are a limited liability company, so you are a company is choosing to limit your liability. I know, no duh, Brittany, that's in the title. Um, but the reason why this is important is that you are saying to the world and to the IRS, um, and to your state that you want your business assets to be treated separately from your personal assets. So when you set that up, you are creating a bubble around your personal assets. Um, so you are saying that, um, someone is not— if they have a problem with you, so someone has you know, sues you in a lawsuit and they win, they cannot collect from your personal assets. They can only get at your business assets because you've put your— a little LLC, you have limited liability of a company that says you as a person are not liable, you know. So you can get whatever is in, you know, your company whether you're a graphic designer or you do embroidery or you do stop-motion photography or you're an online coach or life coach, whatever it is that you do. People could get into what's in those business assets when you've set up an LLC, but they can't get in your personal stuff. They can't get into what's in your home, your 401(k), the assets you might own with the spouse, you know, your personal savings, you know, all that stuff's protected. So, and what's nice about that is obviously you get to protect those things. Yes, someone could bankrupt your business if you lost a lawsuit, but you're not going to be able to attack you specifically. And the reason I want to go through this whole walkthrough is that is that if you set up a DBA, which is a Doing Business As, a DBA is basically just setting up a— letting your Secretary of State know that there is a bridge, is connecting basically a bridge from what the name that you're doing your business as, as to what, who you are personally. And this means that if you set up a business that is different from your name, so if you set up, you know, Oh gosh, let's see, you know, Pink Uniform Photography, and you're going to do DBA, doing business as, under that name. Well, if someone has a problem with Pink Uniform Photography, they need to know who's running that business. And ostensibly, yes, they know it is you. But if they don't, you're supposed to make that DBA available to the state so that someone can track you down, so that they know, okay, Pink Uniform Photography is doing— someone is is being business done as, or so Brittany Ratelle is doing business as Pink Uniform Photography. Does that make sense? Doing business as, that's where that name gets it from. It's literally you are doing business as under this assumed name. Um, but a DBA does not grant you any kind of liability protection, okay? I'm gonna say that again, it does not grant you any type of liability protection. It is not an LLC. There was no liability in that title. A DBA is simply a bridge file between you as a person and doing business as, okay? You are still considered a sole proprietor, which is the default Times New Roman. That's what happens if you haven't set up an LLC company, okay? And for some businesses, this is not a huge deal because you're not in a very risky business. And this has typically been what people have done in the past, has been like, well, I'm not operating, you know, a grocery store with slippery sidewalk where old people are visiting. Like, what do I have to worry about? Or, you know, I'm not, I'm not doing in-person events, you know, or I'm just selling some product, do I really have that much liability? And the reason why this is important is because I don't advise bundling together businesses under the same LLC that have different levels of risk. So if you, maybe you're a serial entrepreneur, and say you have a company that does in-person events, those are always going to be riskier because people can get hurt when you're in person, okay? That's where people slip and fall, that's where they accidentally have something they're allergic to and go into anaphylactic shock. That's where people faint and hit their head on cement, something when you were doing like, you know, some acrobatics at your crazy party, whatever. That happens at in-person stuff. That's riskier, okay? That's why you have to sign those waivers that sign your life away when you do anything in person. If you're online, that's obviously a lower risk business. However, you still carry the heavy risk— not heavy, but serious. If you have a problem, it can be very serious, which is intellectual property risk. Okay, that means that say you have something that's in your offerings that could be considered someone else's content. Maybe you've used a picture, a photo that you shouldn't have used. Okay, you didn't have the rights to use it, you found it online, you thought it was in the public domain, turns out it's a Getty Image. Yikes. Okay, now you're in big trouble. Um, maybe you had someone help you as a collaborator with your photography or your web design or something, um, and, but you didn't have anything in writing, you thought you had the rights to it, they thought they still had the rights to it, and now we have a mix-up. And now that's a problem because you go to trademark something or you sell that then to someone else and now we have an issue because that person is now claiming infringement. So there's always a risk of intellectual property infringement even if you're still an on, a purely online business. So for my clients, for most people who come across my desk, my Instagram, I do preach setting up an LLC. So, um, okay, okay, I will. Hope some rhetoric. Thank you. I will. I do. I save it on my Instagram, so go check this out tomorrow. Sorry I didn't get to your question. Super long-winded, you know, it's classic character flaw, legal flaw. Um, but I will answer your question. So, um, so the issue is, is that I wouldn't bundle together separate businesses that have different levels of risk. So I wouldn't put together like a live gladiator event style business with like like a teaching watercolor online business, okay? Because those have very different level of risk. So if you have an LLC set up, which is great, and you start a new business and it's roughly the same level of risk, then I think that's probably fine for you to put both of them, both DBAs under the LLC. Now take in consideration, you don't have to set up a DBA unless you are doing business as something different than what your name is or unless you, usually when you fill out an LLC, when I do this for clients in Utah and I'm setting up their businesses, it asks me, are you doing business as? And I can check it right there and I can say yes. If someone is doing business, like if they're choosing a really boring name for their LLC, like Smith Holdings, and they're doing business as Pink Uniform Photography, then we'll do it right there together. So, I mean, so hopefully everyone understands that. We are setting up an LLC and the LLC is giving them that liability protection, but we are also using that bridge and registering that little bridge, that little DBA, saying that this LLC is doing business as this assumed name, okay? So I know it's kind of a long-winded explanation. If you have more questions about LLCs, I have a podcast episode all about LLCs. Dives way deep into them. I mean, not way deep, like half an hour deep. But I talk all about LLCs, setting them up, why you might want to have them, might not have them, cost-benefit analysis. So I think it's podcast episode 8, I think it is, don't quote me on that, but go look it up. Law and Wit, you can, um, it's on everywhere you listen to podcasts. It's on the Purple Podcast app on your iPhone, it's on Stitcher and Overcast and Spotify, it's on all those places, iHeartRadio. Um, so go listen to Law and Wit, um, an episode on, um, do I need an LLC? And spoiler alert, you probably do. Okay, it's probably just a good idea to set it up. I know that it's usually slightly more money for your tax and accounting and bookkeeping or whatever, but If you're doing business, if you want to be treated like a business, then get your LLC set up, okay? Get your LLC set up, get your tax ID number, your EIN, set up your separate bank account, have something separate to keep track of your expenses, like be legit about it, okay? And you're going to make your life so much easier when it's tax season time, when it's March and you're trying to get everything together or you're paying someone to get everything together and you know exactly what are business expenses and what are your business revenues. And how you're gonna handle that. So, okay, I'm gonna go back up to her question. Okay, so, what if we are in terrible personal debt and don't want it to affect our business? I have a lot of student loans. Then yeah, I say all the more reason to have an LLC set up. We want to, yes, keep it separate, okay? Because if you have a problem and someone comes after you for your business, the worst they're gonna be able to do is get to whatever's in your business. Assets. So say you have 10 grand in your PayPal account because you've collected from your clients and that's what you have. Worst case scenario, your business goes under because you lose money because someone sues you or something. They get that 10 grand in your PayPal, you know, they attach as a judgment. Not to drop— go too legal nerdy on you, but that's what can happen. They would not be able to get your personal assets. Now the big asterisk here is that if you take on a loan, then that loan company is going to make sure that you are guaranteeing it personally and not just your business. If if you don't have any assets to put behind it, any collateral, then they're not stupid. They're a bank. They know how to make money. Okay. Um, so that, that, you know, that definitely is a big asterisk to that. Don't think that like, ooh, I'll set up my LLC and I'll be able to, um, get out. Like if I take on a loan, then I can't pay. Like, no, that doesn't work. Um, okay. I thought I could use this in my file folder, but the system is now not working. Maybe if I don't move. There we go. Okay. Yeah, so that's how that works there. So yeah, I mean, I usually almost always, 99% of the time, I suggest setting up your LLC. Now I do this for clients in Utah because I'm licensed in Utah and soon to be Idaho, but I can't do it for out-of-staters just because lawyer ethics being old-fashioned and what they are at this time, I just, I consider that kind of outside my scope of practice. So I do recommend you find a local attorney in your state to help you if you're going to be a single member. Honestly, if you're just going to be a solo, like one-member LLC, you could probably do it on your own. If you are, however, signing up and you're going to do it with a partner or partners in your LLC, like a multi-member, I highly recommend you paying the money to have someone help you write your operating agreement. Okay, this is a really, really important document. It outlines how the back end of your business is is going to run, like what the company actually looks like, what the partnership looks like, the founders agreement. Okay, it's also sometimes what it's called. And this agreement is really important to say, how are people going to get into this business and how are they going to get out? What is the business divorce going to look like? Okay, it's your prenup for your business. Okay, going into business with someone is like getting business married and you better plan on there being an exit at some point. Someone's going to want out, they're going to want to move on and It could be amicable or it could not be, and the best thing you can do is to prepare yourself for what that looks like. How are you going to value the company? Are you going to have the first right of refusal to buy them out? What does that look like? Does everyone have signing ability for the company, you know, to sign and buying the company and to say, hey, I ordered some new equipment, and to what amount? If you're worried about people ordering or paying for stuff that you don't have the money for, then you want to put a limit on that and say, hey, you can only buy up to this amount and then we need everyone's approval. You can only hire or get us into this line of product work up to this amount. As your business gets more and more successful, you can change that, you can amend that, but you don't want someone to have an open season to be able to run with whatever you have in your business bank account or whatever is in your credit limit on your business card because they could go off the rails. So I do recommend paying someone to help you with that operating agreement. Okay. And I'm sorry if you live in California, the fees are crazy high. They're like $900 to set up your LLC. But if you live anywhere else, they're usually a lot more reasonable. They're usually around $100 to set it up for your first year. And then after that, they're usually a lower amount to renew every year. And you just put a little asterisk in your calendar, a little yearly reminder every year to renew it. They should send you something in the mail, but if they don't and you change addresses or whatever, then you'll remember to renew it. So, so yeah, that's how that works. So, and so that's the basics of LLC, which are great. Okay. Someone says, I have a separate bank account and a tax preparer, but I'm not incorporated yet. All I reported on a Schedule C, nor do I have any terms on my website. I'm 3 years into my business. So then, yeah, I would say it's a great time to take care of some of those things. I would incorporate as an LLC. That's great that you have a separate bank account and tax, you know, a separate bank account, and then you must have probably your tax ID number. So, but again, like I said, you're not getting the benefit of giving that limited liability protection unless you have an LLC, which is great. It just makes things a lot cleaner. And just in case anyone should have a problem with your business, if you own any intellectual property, you can own it under your LLC and not you personally, which makes it really nice if there if there's any ever problem or lawsuit or infringement that happens relating to the intellectual property. I also— you need to have terms on your website. So every website needs two things: needs a privacy policy and terms. They just do. So I know there's a million things that people can do on their websites in case scenarios, and I've seen a lot. I won't say I've seen it all, but I've seen a lot. But it's 2018 and everyone needs those two things on your website. So So if you don't have them or if you're not sure if you have them or where they came from, if they maybe fell off the back of a legal doom truck or your web developer just put some on or like you took the ones that like Shopify suggested on their default template and you just put them up, that's okay. That's better than nothing but you can do better than that, okay? Your privacy policy outlines what information you collect and what you do with it, okay? And you want to make sure that you're not making promises you don't keep. You say, "I would never sell your email address. I would never spam you." Really? What happens if you sold your business? You'd probably sell those email addresses. What if you had a joint collaboration with somebody that you guys were sharing cross-marketing email lists? You'd probably share those email addresses. So don't make promises you can't keep. So I sell both of these, by the way, in my contract shop, creativecontracts.co. And they're called the website bundle for $250. You buy these, you customize them. I have yellow highlights, I have Screenflow instructions that walks you through how to use them, download them. Within 1 hour, you'll be on, up and running, okay? Add them to your website. Here, I'll walk you through how to do it. The other policy that you need are your terms, your website terms. They're also called terms of use, terms of service, terms and condition. We're all over the map on what to call them, but they're website terms. It's basically the mini contract that outlines when people come onto your website, what is that going to look like? And it should have in there information about exchanges, return policy, copyright information, can people use your stuff, can they not, if you have any kind of social or community elements on your website, what can people upload, what can they not, if they put things that are inappropriate or they're infringing on other people's, how are you going to handle that. It just outlines all of those expectations for that side of the relationship. And it's to protect you if there is a problem, then you can take action on someone under those terms, okay? And you can say, "Hey, I told you when you were on your website you were not allowed to do this," or, "You took this information," and someone could say, "Well, I didn't know." No, you did, because here are my terms right here on my website. So, I know these are something that you guys never read. I'm fully aware that no one ever reads these besides me, but they're really important. So, if you don't have them yet or if they need to be freshened up, if you haven't done anything after GDPR, especially if you have any business that comes from Europe, then I really suggest that you take a look at them, and I do happen to sell some in my shop, okay? So creativecontracts.co, and you can download them and be on your merry way. Okay, alright, anyone else for tonight? There's just a few more minutes, and then we'll be shutting off. So thanks guys for hopping on. And I do wanna tell you, if you have any other questions about resources and are looking for working on this side of your business, or you're ready to get your business legit, or you've been meaning to for a while and just haven't been sure where to start, great place to start is to listen to my podcast. So my podcast is Long Wit: Creative Counsel for Entrepreneurs, and I walk through several different episodes that kind of outline where you need to do to start on your business. And so you can find that on anywhere you listen to podcasts. I also have a free legal checklist that's available on my website if you sign up to be on my newsletter, and that's BrittanyRatelle.com/newsletter. And I have just a free legal checklist that'll kind of give you an idea of what things do I need to be looking at, like do I need a contract, what about this website stuff that Brittany's talking about, what about LLCs, what about working with other people. I give you kind of a nice overview of that so you can start working through that checklist and at least know what kind of questions should you be asking. Whether that's me or whether that's an attorney in your, you know, close to you or some other advisor, you at least have a handle on a starting place so that that process doesn't seem so overwhelmed and so big and large, expensive and scary, that you don't make any progress and it just keeps being something that you know you should take care of, but you haven't. So, and I know that that frequently legal falls into that category. I know that there's a lot more sexy and exciting things that you can be doing to develop your business. Websites and new business cards and photography and all of that. But if you want to take your business seriously, then you deserve it to yourself to try to set the bar high and to really educate other people on how they should be treating your business seriously. And part of that comes with setting up those legal foundations that allow you to grow your business and scale. If you want to be adding team members, Let's make sure we're doing it in the right way so that you're still controlling what you need to control in your business. Do you want to license your product or your services? Let's make sure that we have copyright and trademarks in place so that you can protect what's important, your secret sauce, what's, you know, what's cool about your brand and distinct so that we are portioning off and selling those parts of your business but also developing that core brand that you spent so much time and money and effort into developing and creating an engaged audience with. So, so those are just some of the services that I help with. I do contract review, drafting, copyrights, trademarks, and I set up LLCs for people inside of Utah. So if you have any questions about that and working with me, I do free 20-minute legal chats. So you can pop on my calendar, you pick a phone time, and we chat on the phone about your business, about what— where you've gone and where you want to go. And then we, um, then I can give you some details and pricing for anything that maybe I can help with as you start to grow and get your business legit. So, so you can sign up for that at BrittanyRatelle.com/services, and all these links are in my profile on Instagram, so in my little Linktree. So, well, thanks so much for jumping on tonight, and I'll see you next Tuesday. Um, make sure to— if you want to watch the replay, the replay will be on my Instagram for the next 24 hours. If you want to share with a friend, or if there's someone else, um, that you think could use you think this would be useful for, go ahead. And make sure you enter my giveaway. I had Tubby Todd was on my most recent podcast, Andrea, and she is giving away a $50 credit to her shop. Tubby Todd has amazing natural bath products. We love them in our house. My kids do. And she's giving away one of her books of You've Got This, Mama. So if you haven't entered that away, you can do that also on my profile. Thanks so much. Have a good night.