 All right, can everybody hear me? OK, and you can hear me. That's good. Well, welcome. I am really glad to see everybody here. It's 4 o'clock on Friday. The weather is actually kind of nice outside, and I'm really kind of surprised everybody wants to talk about law. Or maybe you don't want to be here. You just know that you should be here. I love this stuff, so I'm happy to be here. My name is Chris Brown. I'll start things off. Actually, first, she handed out some evaluations. I think you're supposed to fill those out, I guess, at the end of the presentation. So hopefully, I do a good job. If not, you can tell me. I'll start out briefly by talking about who I am. My name is Chris Brown. I'm an attorney. So I started out doing music business. I actually went to undergrad in Asheville, went up to New York City, worked at a recording studio, had a lot of fun, but ultimately decided at that time that I wanted to go to law school. Never in my life had I ever thought about going to law school, but it just kind of hit me one night at 2 o'clock in the morning, and I told my fiance, hey, I'm going to go to law school. And so here I am. I went to UMKC Law right down the street, went to work for a firm downtown, got bored after a few years, and so I quit. I left, and I actually made a company that now makes websites for law firms, so I actually know quite a bit about what all of you do. We have a multi-site WordPress install, and we build solo and small firm websites. I'm probably not as good as you, actually I'm not as good as you, but at least I understand the concepts of what you're doing. At the same time, though, I knew that I did not want to give up practicing law, and so I created my own law firm, Venture Legal, and today I represent tech startups, freelancers, and small businesses. My focus is solely on transactional work. I don't do any litigation. I don't do any estate planning. If you need me to pay off your porn star mistress, I won't do that either. I am very narrowly focused on transactional work for mostly creative people. Before I get too deep here, I do have a bunch of e-books on my website, venturelegalcasee.com forward slash e-books. You might want to check those out. There's one in particular, specifically on freelancing, how to be a successful freelancer, and that one you can find at that link as well. A lot of the stuff that I'm going to talk about today will be in that e-book right there. In fact, the flow of that e-book kind of tracks what we're talking about today. A few quick general disclaimers. I am a lawyer, so I have to say these things. Don't do anything stupid, right? This is general advice. Nothing in here is specific for you. Your situation is probably going to be unique and different. However, for the most part, what you're doing will fall in line with what I talk about today. Note, look around. This isn't private. This isn't confidential. So if you say anything to me in this meeting or in this presentation, everybody around you is going to hear it. And then the last thing is I'm not your lawyer. I don't think any of my clients are here. If there are, you're not my client for the next hour. So now that's the boring stuff out of the way. Before I jump too far into what we're going to talk about, I wanted to ask a few questions. How many of you are currently freelancing on your own? Most of you, good. How many of you work for another company and agency or whatever? Do you guys moonlight on, or how many of you moonlight outside of that agency? So most of them. Do you guys have LLCs? How many of you have an LLC? Not yet. So only a couple. So most of you just operate under your own name, right? I'm an escort. An escort, okay. But otherwise, most of you operate just under your own name. You might have a DBA or fictitious name, but you're a sole proprietor. Okay, that's helpful for me. So here's what we're going to talk through. I'm going to spend about five minutes on each section and then at the end, we can do some Q&A. In my experience, I've talked here at WordCamp twice and both times there's a million questions. So what I did was I took my presentation and trimmed out everything that is kind of irrelevant to focus on just the core important stuff and that way I gave plenty of time for Q&A. Feel free to ask questions at any point. Before I move on to each section, I will stop and ask if you have any questions so we can at least try to stay on topic. But ask questions whenever at the end we'll have plenty of time for Q&A. And if you want to ask me a private question when we're done, feel free to come up and chat. I'll stay around for a little while. Okay, so let's start. We're going to talk first about starting and running in LLC. There's basically three ways that you can set up your company. First, which is what most of you are, it sounds like is a sole proprietorship. That's by far the easiest way to operate. You just use your own name. You can get a D.B.A. or fictitious name if you want to. It's really dirt simple. The tax filings are simple. We'll come back to taxes in a little bit. It's just simple, right? There's some downsides though. You're personally liable for everything that happens. So you might want to consider forming an LLC and I'll come back to why in a few minutes. The next step up is if you operate with more than one person, actually does anybody in here have business partners like owners, co-owners? Okay, that makes this really easy. If you did, partnerships are a lot like sole proprietorships. The difference being there's more than one person. The other difference being, you see that white box? That represents the fact that it's actually a business entity, so it can own property. It can sue people. It can be sued. It's a business entity regardless if you file something with the Secretary of State or not. The biggest downside to being a partnership is you're liable for everything that happens through the company and you're liable for everything that your business partner does too, right? So in this example, if that nice looking dude went out and bought five new MacBook Pros and that nice looking lady said, what the hell are you doing? I don't want to own five MacBook Pros. We can't afford that. She's liable, not only through the company but personally, so if they defaulted on that loan to buy those MacBooks, she'd be personally liable and Apple could go after her, her own personal wages, her car, her house or whatever. You really don't want to do that. So just avoid creating partnerships. The next level up would be LLCs and corporations which are way more common. I won't talk too much about corporations today because they're mostly irrelevant for you guys. I doubt any of you would form a corporation. If you form an S-Corp, you might have, did you form a corporation? Do you mind if I ask? I did. Okay, but then you elected an S-Corp? Yes. Yeah, that's fine. The reason most people don't want to be a corporation is a tax reason and I'll come back to that in a few minutes. So most people today pick LLC, however, if you do do a corporation today and there are some benefits there, the big thing you want to do is make an S-Corp tax election for saving money, ultimately. Anyway, the point is when you form that company all the way over there, what you're doing at that point is creating a company that is separate and independent from you as an owner, right? So in that example, I moved the two people up out of the company. So the company might be liable for something. So the cafe sells really hot coffee, it swills in somebody and somebody sues the cafe. They could take all the cafe's money, they could shut down the cafe, but those two owners up there, they're personally protected, right? So you can't go after their personal assets. You cannot garnish their wages if they have a different job. Now, they'll still be liable if they did something wrong if they were negligent, if they spilled the coffee on somebody, but they're not gonna be liable just simply because the cafe did something wrong. Generally speaking, I really like LLCs, I think it's the best way to go. So we'll talk a little bit about that. Oh, actually first we'll talk about do you need it? That's a common question I hear freelancers asking. The number one reason which is at the top there is liability purposes, like I mentioned before. So if you have anyone doing work for you as an employee or more likely as a subcontractor, then you should form an LLC. The reason being the liability. So if that subcontractor does something wrong, the limited liability that you get from the LLC can protect you. Your subcontractor will still be liable if they do something wrong. Your LLC will still be liable, but you individually will not be. So your personal assets are protected. If you wanna add owners to your company or sell it someday, it's usually a good idea to form an LLC. Sometimes it can help your clients if you have an LLC because what you don't want or what your client doesn't want is for the IRS to say that you're really their employee. Because if you're an employee, they have to do employment withholdings. And so by forming an LLC, it actually helps your client out. And the last reason I say is it just makes you look a little bit more like a business. So depending on who your client base is, if you're selling to mom and pop stores, maybe that doesn't matter. If you're selling to Hallmark, maybe they wanna work with an LLC and not a person. If you're selling to a huge company like Sterner, having an LLC might really help you. It's not a hard rule, but it just might help. Okay, so if you do decide to form an LLC, here's the basic five steps of how you wanna do it. First thing that you do, and by far the most important it is you file articles of organization with the Secretary of State. You can do this in any state in the country, but realistically you're probably gonna do it in the state that you live and work in. If you live and work in different states like you live in Kansas but work in Missouri, you could basically pick either one for the most part, at least for what you're doing it's gonna more or less be the same. Next thing that you wanna do is draft an operating agreement. If you're by yourself, a solo founder, this could be just a two or three page document that outlines a few simple rules for your company. If you have co-founders, then you need a much more elaborate operating agreement that talks about what happens if somebody dies or what happens if somebody gets hit by a bus, what happens if somebody wants to sell their ownership interest, all these various contingency scenarios. In that situation it's probably like 20 pages, but you don't need to go that far if it's just you by yourself. Then you need to get an EIN from the IRS. Even if you're a sole proprietor you can still get an EIN and it's probably a good idea so you can protect your social security number. The EIN is basically like a social security number in the sense that it serves as an identification number for your company. So whenever you're working with a third party, whenever you open a bank account, whenever you do any of those things they're gonna ask for your EIN. And if you're by yourself a sole proprietor you'd be way better off giving out your EIN than your social security number, for obvious reasons. Fourth step open a bank account you always wanna get a separate bank account for your business even if you're a sole proprietor you still wanna get a separate bank account just for income and expense tracking. You never wanna co-mingle your money between your personal assets, your personal money and your business assets for liability purposes. And then the last thing is file any reports if required. So if you have an LLC in Kansas you have to file a report every year or if you elect you can do it every other year it costs like 20 bucks or 40 bucks depending on how you file. If you live in or if you're in Missouri it's formed in Missouri you don't have to do that. So that's one small benefit of Missouri. Big thing there is if you forget to file your EIN or report and this is actually a really big deal they will administratively dissolve your LLC and then you have a certain window of time to reinstate your LLC which is a big pain and then if you wait till after that date you literally can't revive it you have to start a new LLC and that's just a whole bunch of headaches. So don't forget about EIN or reports if you're subject to them. Okay that's companies went through that pretty quickly any questions on LLCs? Yeah. Can you talk to me about the separation of liability from LLC? Yeah. I want to do a couple of situations though where the owners were actively operating the LLC and the lawsuit is filed against both the LLC and the named individuals. Yeah so if you're, if you could talk to a lawyer and you say I need to sue somebody that lawyer is going to name every single person they can think of in the lawsuit. That's rule number one, they just do that by default and then they let the defendant figure out who should get sued. Well the defendant slash the judge. If you did everything right you'd be able to go to the judge on day one and say judge this is a liability for my company not me I didn't do anything wrong please dismiss me from this lawsuit you'll usually get dismissed. Reasons you wouldn't get dismissed are if you're the one who did whatever that wrong thing was. You know if you're the one who's built the coffee you're still liable you can't say oh I have an LLC and it doesn't work. Other reasons if you commingle your money if you don't have an operating agreement if you haven't been filing your annual reports if you don't follow those corporate formalities then they can pierce the veil which is what they call it and come after you as an individual and you don't want to do that. That's why it's important to follow all those little silly steps. They seem really silly. It's like why do you need an operating agreement when you're by yourself but that's one of the reasons. It's not rock solid it's not like if you have the operating agreement or don't have it that that decides everything but it's just one of multiple factors so yeah. This might not be something you want to address right now but I was just kind of curious would you form an LLC like in one state but you decide you want to move to another thing I want my form in Kansas or one in Kansas or Missouri? Yeah you probably want to move the company you just register to do business in a different state and so if you have an LLC in one state but you do business in multiple states you have to register in all the states that you do business in. Being in Kansas City it's hard like if you have a, I live and work in Missouri but occasionally I go to Kansas for client meetings right so do I do business there or not? I have come to the conclusion that I don't I don't go there enough to justify filing there I am registered as a lawyer there but my LLC is not registered there if you had an office there if you have employees there if you go there on a weekly basis then you're starting to have more connections to that state and you have to register there. So I mean you just, okay so you just more or less I mean if you actually move or something then you just start to move LLC in Missouri and you just let the, I mean you just close there Oh you could do that I wouldn't do that I would probably if I were to move to Kansas I would just register as doing business in Kansas which means I have to pay an extra fee I think it's 150 bucks and then you pay it 20 bucks a year but my Missouri LLC would remain active and then I would just be doing business in Kansas. You could still keep the LLC it's it just kind of becomes like if you say you moved to Washington state and you're never coming back here you could but realistically what you'd be better off doing probably is forming a new LLC in Washington state and then merging your Missouri one into it so everything transfers with it or if you don't have any assets and you don't have any contracts out there you could just shut down the Missouri one and start fresh. You should talk to a lawyer about your specific situation because it would heavily influence what decision you might make. Yeah Now LLC doesn't necessarily mean a business license so a lot of cities have a different business license if you sell your products online do you only have to have a business license like for where you live or if you send it to other like maybe cities or whatever. That's a little bit blurry right now. I know for tax purposes you only have to charge sales tax if you sell products in the same state that you're shipping them from but that's all in flux and Congress is looking at that right now about making some federal laws about that I don't know the exact answer for you. Until the business license only covers the tax part. Oh no, I'm just saying I know the tax part. The business license in theory you have to get a business license in any city that you transact business in but if you're just selling goods online I would hesitate to sell your transacting business in that city just cause you're shipping there it'd be really impractical for you to register in every city. Right That's, I wouldn't do that. So you're covered if you have a business license where you live. Oh where you work. You're selling online do you still need to have the business license? You should. Honestly I didn't get my business license. Can you turn the video tape off for a second? I'm kidding. I didn't get my business license for the first like two years of my law firm I just never got around to it and the city wasn't very happy about it but like the penalties are small and I just didn't get around to it but I did get my practice and set up all the legal stuff that's really important. So I mean business license are important I'm not telling you how to do it I'm just saying that those are relatively low on the list of priorities. So yeah Is there anything different if you have clients say in Canada as well as your local clients? I don't know I'm not a Canadian lawyer I don't really know. I have done a little bit of international law if you do a lot of work in Canada I would probably talk to somebody that does know the answer to that if you just occasionally do work for them like website design work for clients in Canada and you may not need to worry about it quite yet if you hire a Canadian subcontractor yeah you need to figure out something for employees or whatever. So yeah we got last question on this but we can come back at the end to more of this. Yeah you can address this later if it makes more sense but I was going to say like your LLC for numerous reasons I actually don't want to necessarily have the LLC be based at my house and you know it is kind of a whole new reason and I didn't know if there was any other things I had to worry about that. I don't want to hurt people actually like getting an address that I don't know UPS or something like that. Yeah yeah. Things like that that actually have like a real looking address for their LLC but some of the houses. There's two things there one is your business address which is what you would have people mailing checks to or whatever and that's where you might get like a UPS store box or if you work out of like a co-working place like I work out of WeWork so I have an address there which is great. The other component of that which is the registered agent address that's where official lawsuits get mailed. Most of my clients use their home address just because they don't feel like paying somebody to do this for them but some of my clients want to maintain that privacy they don't want their address out there especially some of my female clients that are afraid of like harassers and stuff they pay a company every year the one that I use the most they charge I think it's 120 bucks a year and they will serve for you it's called Northwest Registered Agent and they will serve as a registered agent for you so all the official mail goes to them and if they get a lawsuit or any other official government mail they will open it, scan it and send it to you which is awesome. They also collect all your junk mail and throw it away because when you register as a registered agent you'll get a ton of junk mail like pens and giveaways and just stuff. Okay so we can come back to that in a little bit I want to make sure we get through everything else though. So next thing that we're going to talk about is taxation who wants to talk about taxation at 4.15 on a Friday? So first up is some practical accounting tips I've been running my own businesses now for four years so I've learned a lot about just kind of day to day stuff. First thing is select a good bank talk to your bank before you open your account to understand how they work find out if they have a good mobile app if that's important to you including depositing checks on the mobile app find out if they have limits of how much you can deposit through the app make sure that they have good sinking capabilities whatever with whatever cloud based accounting software assuming you use a cloud based one which is what I recommend there's two that I really like zero dot com it's X-E-R-O dot com and fresh books which is probably what most of you have heard of they allow you to keep track of your income and your expenses really easily so at the end of the year it's easier to do your tax return. Do this stuff on a weekly basis keep your books clean and reconciled on a weekly basis it's really important not to get behind on that you can to help you do that you can set up a good chart of accounts so for example the way I do it is my marketing expenditures I have separated out to marketing subscription and marketing non-subscription so I put MailChimp whatever else I have like Adobe stock I put all that stuff on marketing subscription and then all my non-subscription stuff like I had a barbecue last night at my office that's marketing so I put that marketing non-subscription point is I set up my chart of accounts to match the way that I do business don't let me you should listen to your accountant but at the end of the day a chart of accounts should match how you do business so that it makes it easier for you to reconcile your accounts and then make sure well assuming you accept online payments integrate with Stripe or PayPal or Square one of the online payment platforms so that you don't have to do all that yourself you don't want to be dealing with PCI compliance and the last thing is if you have employees use a good payroll provider I really like Gusto if you have an S corp for example you probably you need to do payroll for yourself and you can either have your account and do that for you or you can do it yourself using this software like Gusto so I pay Gusto I think it's $35 a month because I'm also an S corp so that I can manage my payroll through there and when I had employees in the past I paid them through there you can also use Gusto to pay your subcontractors but honestly it may not be worth the money unless you use your subcontractors on a recurring basis if it's just run off projects that may not be a worth that yeah on the right just clicking and if you set up as a quick as an S corp or something like that you have different retirement options also right retirement accounts Medicare and Medicaid well I see like you can do like a 401k or something like that you would have set up an S corp and actually start paying yourself I don't know that side of it there are a lot of tax benefits to being an S corp I'm not going to get into those today because it's kind of complicated if you make more than so it depends on your industry but if you make more than 50 to 75 ish grand right and most of that is profit if you have high margins you should look into doing an S corp you should talk to an accountant about it they can run your numbers to see if there's a tax savings there that's usually around where the cutoff is yeah you mentioned 0.com and what was the other one the FreshBooks FreshBooks yeah FreshBooks.com that's a little more fun 0 is a little more accounting based FreshBooks is a little more creative based they do the exact same thing though and their fees are more or less the same also if you go to my website ventureleagueokc.com in the upper right corner there's an orange button that says free resources and then on the right sidebar there's a thing that says resource guide a lot of these links that I'm talking about are actually in that resource guide on my website okay so business tax 101 there's basically two ways that the IRS will tax you one is pass through and one is double tax most businesses in America are going to be passed through entities these are sole proprietors ships LLCs and S corps the idea being so you see the white box in the cafe cafe makes a hundred thousand dollars uh... that money assuming it's all profit gets divided up between that man and woman up there fifty fifty the woman will represent uh... and and report fifty thousand dollars of income on her personal tax return the guy would I should give these people names uh... the guy would also report fifty thousand dollars on his personal tax return the business itself the cafe will not have a tax liability under the first uh... system of taxation uh... the money literally passes through the company goes to the individuals they pay on their personal tax return of whatever personal tax rate they might have right so if if the woman is married to a guy that uh... puts them in a really high income tax bracket she might pay taxes on that hundred thousand dollars at a forty percent tax rate if that man is mail it married to a girl that uh... maybe maybe his wife doesn't work so their income is lower so uh... they might pay taxes at a ten or twenty percent tax bracket right so it kind of unfair actually but the point is it passes through the people the other way you could do it is called double tax the only real company that pays double tax for the most part is going to be corporations what happens there is if that cafe brings in a hundred thousand dollars a profit they're going to pay a tax income tax on that profit so say twenty five percent so then they're left over seventy five thousand dollars then they distribute that money out to the shareholders in this case man and woman and they both represent uh... half seventy five grand on their personal tax return uh... and they have to pay taxes on that again right so double taxation it sounds really stupid there's various reasons why you would be a corporation and why you would set it up that way but for the most part freelancers like you guys would not choose that if you choose to be a corporation you can ask for election and bump yourself back up to the pass through taxation that's what people did for years up until up until nineteen ninety eight that was what everybody did uh... from like nineteen fifty to nineteen ninety eight everybody did that and then in nineteen ninety eight the irs to this little weird thing allowed you to make that election through an LLC and then ever since nineteen ninety eight most companies have been creating LLCs as opposed to corporations uh... so how do you pay your taxes here's a big kicker big kicker so first save uh... fifteen to thirty percent of your profit if you want to know more accurate answer talk to your account they can help you kind of figure out what the right percentages take that money and put into a special savings account somewhere so you don't touch it so you don't forget about it uh... and then pay estimate of taxes quarterly again you should talk to an account figure out how much you should pay and where you need to pay it too but the point is you should pay every three months actually it's not every three months it's like it's like april and then july or something it's weird but you pay four times a year and then at the end of the year you will attach a schedule c to your annual tax return if for whatever reason you have an escort or if your partnership you'll get a k one instead of a schedule c but they're basically the same thing schedule c will say you have x number of dollars of taxable income that you need to pay at the end of the year if you do not pay enough an estimated payments you'll have to pay more money to the irs if you overpaid you'll get a refund from the irs if you don't pay your estimated taxes the irs will assess a penalty i think it's one percent of whatever you owed so it's not a significant amount of money but it still adds up and i'll be honest i didn't pay my quarterly estimated taxes one year just just never got around to it so i've paid the one percent yeah if i have an LLC passed through and i pay taxes for myself on the annual filing it asks if the company had made a profit and if you say yes then it wants a taxi so if i'm paying taxes for myself and it's a pass through should i always say no i'm not following you there but this might answer your question the LLC if your taxed as a sole proprietor which you probably are the LLC will never pay a tax liability it might pay sales taxes and other stuff but i won't pay an income tax liability yeah i suppose it's possible you could pay your tax liability through your LLC but that would be weird maybe an accountant could do that for you i don't know i'm not an accountant just a lawyer does that help uh... okay so that's paying taxes managing finances before we move on any questions on that stuff okay uh... now we're gonna get into some really really important things intellectual property one on uh... we are going to have any book on this one too so uh... same link venture case eventually okay c dot com for such a book so i have a whole thirty page ebook dealing with i p issues uh... there's four basic types of i p this is really really really important for all of you because you're creative freelancers uh... i mean you all pretty much make websites right that's the whole point of this conference yes so this is a really big deal for all of you uh... first one which is the most important i'll talk more about this one uh... is copyright law copyrights will protect creative works creative works is a pretty broad category includes uh... uh... websites and graphic design type work it also includes things like uh... business documents presentations like i could copyright this presentation even boring stuff i mean you can use copyrights to protect uh... like uh... marketing plans and uh... uh... business plans and business outlines and so on uh... those will last typically seven years past the life of the author so it's a pretty long period of time uh... those uh... that some of your time period is coming up for expiration for mickey mouse soon so it will probably be extended because it is always the company that extends that they have the money they lobby congress and get it done trademarks will protect your branding so to the extent you have a name or a logo you can use a trademark to protect it to the extent that you're helping your clients make their branding elements they might want some help with protecting it you can protect uh... names slogans logos to some extent you can protect colors and sense the key there is well the smart thing to do is get a registration of the united states patent trademark office but you don't actually have to do that as soon as you use a mark in commerce you have rights in that name uh... but you're always better off getting a registration uh... it's always goods and services specific so if i have well so my marketing company's called the legal marketing so aside from the fact that i probably can't own the phrase legal i could probably own the logo that we created but it's only going to apply to website design so somebody want to go up and open a restaurant called the legal marketing for some stupid reason they could do that and there's nothing i could really do to stop them from doing that conversely if i want to open up a web design company called mcdonald's probably can do that mcdonald's known as a famous mark and they're so big and so powerful that they would almost certainly be able to shut you down don't know why you would do that but uh... that's true if your last name was mcdonald and there's some there's some interesting law stuff out there about what happens if it's your name our town has a mcdonald's restaurant, a mcdonald's vacuum and sewing machine, and a mcdonald's computer repair shop really? are they small? the two shops are restaurants obviously not? well sure, sure, yeah if you're small enough they may not come after you but they have a lot of power to be able to shut down stuff, have you guys seen the movie coming to america with eddie murphy from the eighties? it's an awesome movie, it's a lawyer's dream movie uh... okay so the important thing i mentioned is get a registration of the USPTO you don't have to do this but it's a good idea uh... they cost two hundred twenty five dollars to file their application i usually recommend you use an attorney for this because if you screw it up it can take a long time to fix if you can fix it at all and they're so slow that you won't even learn to screw it up for three or four months uh... so that's two twenty five associated with that you'd probably do a trademark search the company i use they charge a hundred thirty eight dollars and then my legal fees are usually about eight hundred bucks when i do it so the point is when you do a trademark application it's usually about twelve hundred thirteen hundred dollars but it's money well spent in my opinion because once you have the registration you have really good rights in your name plus that applies nationwide so if you want to sell websites across the entire country it makes a lot of sense to get a registration what's the difference between a patent and pending and a patent that's confirmed why do people not care if it's pending and it's a big deal if it's if you earned it or whatever you don't like patent yeah i'll jump ahead of patent since you asked uh... patent pending just means that you file your application and it's pending with me hence the name it's pending with the USPTO i don't know if i say people don't care about it if i saw patent pending i would care the difference being if it hasn't registered yet then it may not ever register so maybe somebody could still get around your patent once you get the patent patents are pretty powerful the downside is they take a long time to register they cost a lot of money to register uh... and they only last for like twenty years patents are really powerful if you're like apple and samsung and all these big companies for you guys it really doesn't matter that much point is patents protect inventions you guys really are not inventing much you might invent a uh... algorithm or something which you might be able to patent but that's questionable right now uh... most of what you all are creating is going to be copyright and trade secret to some extent you also might i'm sorry copyright trademark to some extent you might create something that is a trade secret uh... and your clients will almost certainly be giving you information of theirs that is a trade secret and they might want you to sign like a nondisclosure agreement to protect it generally speaking if they ask you to sign one you're gonna have to sign it you just want to make sure you review it to make sure you understand what it says uh... make sure it's not overly restrictive you might also have trade secrets uh... you know and how you design your websites are uh... what you do in the back end of your website that is unique to you and that you don't want to get out so you might have your client sign a nondisclosure agreement to protect you as well if you have confidential information so of all of these issues the one that i want to come back to is copyright and specifically who owns the copyright the default rule is that whoever creates something will be the owner of that copyright so if i make a website or no for example i made this power or this uh... google presentation so i own the copyright in this website right there's three ways that somebody else might own that copyright and this is really important for you guys to all understand so the first one's pretty easy you transfer in writing so if i get out a piece of paper and i write down chris brown transfers slide deck to you and you pay me ten bucks and we both sign it you own the copyright that's easy the next one is kind of easy also it's created by an employee so in this case i'm technically an employee of venture legal and anything that i create within my scope of employment will be owned by my law firm so venture legal actually owns this slide deck but only fits within my employment so if i go out and make a website for a client through my other company venture legal does not employ me to make websites they employ me to practice law so that website would not be owned by my law firm the last area is the one that's the most confusing and it's the one that probably matters the most all of you because you are all independent contractors uh... the only way that your client will own the works that you're creating is if you have a written contract with them that transfers ownership to them or if it's called a work made for hire in that contract interestingly works made for hire has a very specific definition of the copyright act and it requires a written document so it still comes back to the writing so this is really great for you because if you create something for your client you don't have a written contract you actually own that work which is cool because if they don't pay you you could sue them or threaten to sue them for copyright infringement to the extent that you have subcontractors doing work for you the opposite applies they will own the works that they're making unless you capture ownership in writing right so if you get a big contract for hallmark to make a bunch of marketing materials or to make a new website for hallmark and you hire ten subcontractors and you don't get anything in writing with them you won't be able to transfer ownership to hallmark because you don't own it and that's a recipe for disaster uh... so always use subcontractor agreements with your contractors you should also use contracts for your clients and that client would be smart to make you have a provision that says they own everything you make if you do that which is normal you should also put in there an exception that says that they don't pay you they don't own it right and that way if they fail to pay you for whatever reason you can hold back the website you can threaten to sue them for copyright infringement and so on it's a really good benefit to you uh... and i'll come back to a little bit of this when i talk about contracts and and employees uh... any questions on intellectual property before we move on i did have one question if you know like say you have a client that um... wants to be like their logo and brand nationwide but it infringes on somebody who is just registered in like say Kansas what do you like how does that work when you say registered you mean like their business name is registered yeah like i worked for a company they're only registered in Kansas but there's other companies with the same name yeah in other states and nationwide yeah so there's two components there one is your business registration getting back to the very first thing i talked about registering with the secretary of state all that that's doing is telling the secretary of state i'm doing business under this name it doesn't give you any trademark protection whatsoever so somebody else could come into missouri and open up a venture legals with an s on the end and the secretary of state would be fine with that they don't care because it's different they could say venture legal the number one comma l o c and the secretary of state would be fine with that so that gets into trademark right so you got the business registration on one side which is kind of irrelevant here trademark is what really matters so i use the phrase venture legal in kansas in missouri almost exclusively so if i didn't have a registration i would only be able to protect it in the states that i already do business in and some extent states i might expand to so maybe colorado or i work or something so your rights only extended the area that you're already using the name that's called a common law trademark however i got a federal registration on my trademark so now i have that mark actually that mark with a tagline registered the u.s. pto so i have nationwide rights so if anybody were to use that uh... or anything substantially similar to that uh... i'd be able to shut them down uh... so the issue that you run into there's is kind of a practical one if you find somebody who's using a mark and your client wants to do it really it's obviously it's a call for your client not for you and you don't have to give them when you shouldn't give them legal advice uh... you should just tell them to go talk to a lawyer but what they need to do is figure out it does that other company first they have a registration of the u.s. pto if they do and then you should probably not adopt that name or that is that other company expanding are likely to expand into your area and if they're not well maybe you can use it but if you want to expand into their area you're gonna have an issue so it may not be worth it and then just practical considerations of like do they already have good rankings on seo and stuff and what kind of issues are you gonna have generally speaking the more arbitrary of a name you can pick the better it's going to be but arbitrary is hard because arbitrary is it's just hard to connect your new business to a product if your name is arbitrary but that's the best for trademark purposes uh... okay let's talk about employment issues real quick so there's two ways that you can hire people or there's two ways that you might perform services for other people one is being an employee the other is being an independent contractor that's it you can call it whatever you want you call it vendor subcontractor supplier whatever you're going to be one of these two ultimately the irs has final say over how you classify your employees and how you will be classified if you're working for somebody else uh... and it comes down to these basic five categories and a few others uh... so first one is control so to the extent that they have control over how you do your services uh... if they say show from nine to five sit in this cubicle here's your computer and so on and they have a lot of control over how you work and when you work and where you work then you're more likely to be an employee uh... if you use somebody else's equipment you're more likely to be an employee right so um... me as a lawyer i have my own computer i have my own office i have my own pens and paper and all that stuff makes me more like an independent contractor uh... third is payment if you pay somebody like a regular salary or even if you get payment as an independent contractor but you get paid like a certain salary every week it looks like an employment relationship in the irs might call you an employee uh... whereas if you get paid like on a project basis you know fifty percent down fifty percent at the end or something you're more likely to be an independent contractor uh... benefits obviously if your clients giving you any kind of employment style benefits like health care or more likely like paid time off for something like that you're more likely to be deemed an employee last is term and termination so the more that you just kind of work you know five hours a week every week forever and either party can terminate any day the more likely you are to be an employee if your contract says something like you have to give thirty days notice before you can terminate and it's not so much a weekly thing but just kind of project based then you're more likely to be an independent contractor now why does this matter right so one is tax responsibilities and i'll come back to that the other is copyright which i talked about earlier if you have an employee working for you you'll own everything that they create within their scope of employment which is great if you have an independent contractor working for you you don't own it so that's obviously a big deal and then the flip that for when you're working for somebody else the other area and why it's hugely important is tax issues so if you have employees you have to do employer withholding you have to withhold part of their income for income taxes as well as their portion of employment taxes and then you also have to pay a part of their income uh... percentage of their income in taxes as well so it's more expensive for you and then you have to issue them a w two at the end of every year that's probably largely irrelevant for most of you because you're probably not an employee of somebody and you probably don't hire employees you're more likely to hire contractors and you are a contractor of your client so what matters more for you is the second part here uh... contractors are responsible for their own income tax liabilities so when your client hires you they don't have to do anything for tax uh... they have to possibly give you a ten and nine which i'll come back to you but otherwise they don't do anything you were responsible for paying all of your own taxes so if you could go back to that slide i was talking about where i said you need to save and pay and attach and so on that's what i'm talking about uh... w nine's and ten and nine's come in to play here if your client pays you more than six hundred dollars uh... in one year or for you if you pay a subcontractor more than six hundred dollars in one year if that happens then you have to give a w nine and you have to do a w nine and ten and nine exchange the purpose there is uh... so your client pays you a thousand dollars to make a landing page and they give you a thousand dollars cash right in theory you could take that put in your pocket never even tell the irs about it right the irs doesn't like that the irs wants to know that you got paid because they want to tax you on that income so what happens is the irs says okay business you paid that freelancer a thousand bucks uh... now you need to give us what's called a ten ninety nine and tell us that you made that payment that ten ninety nine will have your name on it and a thousand dollars the irs will then go look up your tax return and see did they report that thousand dollars or not right so in order for them to give you that ten nine you have to give them a w nine which is a one page form that you put your name and e i n an address on it's pretty simple uh... and then they use that information to create the ten ninety nine ten and nine's are kind of a pain in the ass if you hire a bunch of contractors uh... but for your side of it if all you're doing is work for other people and you don't have some contractors all you have to do is the w nine and if your client doesn't ask you for it it's not your fault if they don't file the ten and nine it's not your fault what is your fault is if you don't report the income so don't do that if somebody pays you put it on your tax return reported as income pay taxes on it uh... that's a really good way to end up in jail is if you don't report your income uh... okay is that helpful any questions on that yeah uh... you said under six hundred dollars so you know i'm just starting out hundred two hundred dollars but i still have to report them uh... you mean that they're paying you that money yeah but yeah yeah you have to report any money that comes into you for services it doesn't matter if it's a dollar hundred thousand dollars anything else okay so the second part about working with subcontractors is your agreement with them uh... you should always get a an agreement in writing with your subcontractors number one reason being an electrical property you wanna make sure that you capture ownership of whatever they're creating for you uh... from there uh... there's a bunch of reasons why you don't have it for payment liability and other issues but here's the big ones anytime that you're hiring somebody uh... consider the termination rights to see how you can fire them and also how they can quit and also consider that if you're hiring them to work for you on a project for a client and that client has some kind of a termination right you want to make sure that you can get out of paying them or at least terminate early if your client cancels on you so always think through those two and how they relate uh... always look at an actual property to make sure you know who owns the uh... ip that's being created always look at nondisclosure obligations for confidentiality in case there are issues of actual confidential information going back and forth and then also consider non-solicitation provisions uh... you might want a provision there that says that your subcontractor cannot go straight to your client without going through you while they're working for you and maybe for one or two years afterwards because that's that would be unfortunate for you but i do have a little surprise at the end i'll show you i shouldn't call it a surprise it's really not that cool for you but uh... a little soft plug that i'll show you at the end for a company that i created to help with this issue yeah and that can be an issue uh... now what i typically do for clients is we sit down for like freelancer clients i usually charge five to six hundred dollars i do a lot of work on fixed fees i don't like charging hourly so i'll say you know it's usually five to six hundred dollars and we sit down for an hour and we talk through how do you do your services and then i go back and i create it that you can then reuse all clients that's how i typically do it but i've created a new company to help freelancers with contracts and i'll talk about that here in a few minutes uh... yeah i've worked for uh... one of the paint party places i only got paid to teach classes but they also supply paint and canvas for me to come up with ideas which i painted on my own time to teach the classes so i owned the copyrights because basically they didn't have a contract or i didn't sign a contract but who owns that painting if i create a painting that's got my copyright on the painting oh good question yeah so the actual object itself is separate from the copyright right so um... a good example of that is when you when you used to buy CDs i used to buy CDs when i was a kid uh... i would own that CD i could do whatever i wanted with that CD i could sell it to you i could transfer it i could shatter i could do whatever i want with it it's an object uh... but i don't own the underlying copyright so i can't copy it so when Napster came along and everybody started importing all those songs from those CDs that was illegal because you can't copy the CD you can't create a word of works from it you can't play the CD out in public and have a free concert right because that violates the copyright but the CD itself that one copy i owned i could do whatever i wanted with so back to your point they could do whatever they want with that painting but they don't own the underlying uh... copyright to the painting so they can't make copies and so on even though it took my time and effort to put the painting on the canvas without pay oh without pay well it depends on whatever you're they need to make the painting they need to teach the class well then in theory you might own the actual painting itself that gets into the specifics of that contract if you had a contract um... there was no contract yeah so they ended up with a bunch of my paintings you would have a good case that you own those and would get them back but there's a lot of really fact specific things you'd have to go through so i didn't get paid for any of my time to create that idea for the copyright or to put the painting on the canvas before this class that i was going to teach yeah you would need to talk to a lawyer or me about that because uh... the specifics are hugely important there in terms of who actually owns that physical painting so the paintings are probably gone by now but if i came up into that situation again i'd like to know yeah makes sense uh... okay last thing i'm going to talk through is contracts i also have an e-book on this uh... same link as before uh... so why should you use contracts uh... the number one reason that i like to say is that it creates better deals and better relationships between you and your clients a lot of people hate using contracts i get it but it really doesn't help you uh... it also helps you to minimize risks and it also helps you to improve dispute resolution if you get into a dispute with your client uh... seventy percent of freelancers have been stiffed so disputes happen quite a bit you will inevitably you will get stiff uh... but what is a contract and this is something that kind of surprises people there's only three parts to it one an offer to do something uh... two acceptance of that offer and then three what lawyers call consideration which is just something of value so if i say will you paint my house that's the offer uh... if you say sure i'll do that or say i say will you pay it for ten thousand dollars and you say sure i'll paint your house for ten thousand dollars uh... that was offered that was acceptance and in the consideration is me giving you ten grand is my consideration you showing up in painting the house is your consideration boom you have a contract it doesn't have to be in writing uh... so uh... oral contracts for the most part are enforceable there are some exceptions on that though well actually before you can get into that i should say uh... don't rely on oral contracts because they're uncertain who knows what the terms are both parties probably have their own interpretation of what the terms are to the extent you do rely on an oral contract always in a follow-up email after you talk to the person and say hey just to confirm our deal i'm gonna paint your house and you're gonna pay me ten grand that we have some record of it and and ask for them to respond uh... some contracts however do have to be in writing so like marriage licenses or not marriage licenses married uh... recall any sign a contract with your spouse uh... prenup prenup prenups have to be in writing real estate deeds have to be in writing certain things have to be in writing service contracts don't have to be uh... and then also sometimes you do need special language to use like uh... in a real estate deed the language matters a lot in a service contract like you're what you're doing the language doesn't matter as much in terms of enforceability uh... what you might want to do with your clients and your subcontractors is use the msa and so w format what that means is you'll sign an msa that might be you say five or six pages long and it covers all the basic uh... and complicated legal issues but it doesn't actually say what either party's going to do in terms of payment or services and then you might sign multiple statements of work you call it a scope of work that's going to talk about what are you doing building a website and how much and when do they have to pay you and the beauty here is that your statement of work to be one page and you might attach a proposal or an outline or something but the statements of work then could be signed a lot quicker because you don't have to go back and look at all those legal terms again the important thing to do here is make sure your statement of work references back to the master service agreement how to review a contract i'll go through this pretty quickly inevitably your clients will give you a contract enough to take a look at it so the thing that you want to do is always understand what you want and need out of the contract typically it's payment uh... also understand what they want and need out of the contract so they might have some very specific things that they need uh... you always need to read it all of it seriously all of it read it uh... it's important because there's just always things in there that you might skim over but they're really a big deal and once you've signed it you can get stuck into something that you don't want to be stuck into if you don't understand something about what is in there ask the other party like if they have something like an insurance requirement that you're like why do you want me to have commercial auto liability insurance ask them why and they'll either have a good reason or maybe they don't have a good reason and they say oh yeah we can take that out a lot of times it's just miscommunication is why things are in and then also negotiate when appropriate always be willing to negotiate now if you have a contract with uh... sirner for example you're probably not going to negotiate much it's just the way it is but if you have a a contract to build a website for a coffee shop down the street you probably have a lot of room to negotiate uh... i have a contract review checklist in that e-book i'm not going to go through it i just want to let you know that it's there uh... it's really helpful that you can kind of just kind of go through line by line to see what all is in uh... the contract that somebody gives you the last thing on contracts i think it's the last thing is how to sign a contract so if you're working on your own you sign it as an individual you just print your name pretty easy if you are operating under an LLC or corporation you absolutely want to follow that format on the right print your company name sign your name print your name print your title by doing that that makes that contract a contract between the other party in your company and not the other party and you as an individual if you accidentally sign it as an individual and you have an LLC you might be subjecting yourself to personal liability for everything under that contract it's really actually pretty easy but it's also really easy to mess up uh... i think that's it okay so here's my surprise uh... i created a company recently it's called contract canvas the idea is to make it really easy for freelancers to create their own contracts online we're creating what we call a human contract that has icons in plain english on it where you and your client can create this contract online in about five or ten minutes sign the contract online and then underneath that contract are the formal legal terms so it's fully backed up by a typical contract that a lawyer or a judge would see so we haven't released this yet but we are going to do free beta access specifically for people in Kansas City uh... so if you want to sign up you can just go to contractcanvas.com click on beta access and type in your email it's not free it's going to be a lot cheaper than hiring a lawyer okay that's everything real quick i want to make a note i'm talking at the wordpress casey meetup on may eighth harps I haven't been there since law school so this will be fun we're going to talk about legal issues a lot of the same stuff is here but it's going to be more of a q and a roundtable discussion and not so much of a presentation uh... here's my contact info so you can shoot me an email tweet at me or go to my website got a bunch of info there so that's exactly fifty minutes i'm happy to take questions as a group or uh... one-on-one whatever you prefer any questions for the group yeah i don't know about why you mean a lot of people pick Delaware for various reasons uh... if you want to maintain your privacy you can do that in almost every state if you pick LLC and have a lawyer do it for you so for example if you hired me to create a Missouri or Kansas LLC i could do it and i don't have to put your name anywhere on there it'd be my name and then the only thing you have to have is a registered agent so you'd have to pay a company to serve for you but then your name won't be on there anywhere so LLCs don't have directors or officers and so you don't have to report that if you form a corporation in Kansas and I think it's the same as very you have to list your directors and your officers so there becomes an issue and in Kansas for corporations in Kansas you have to list any shareholder above five percent and I think about it there's a there's a minor chance you have to do that for LLCs but I don't think so I don't file Delaware for sure you can hide everything in Delaware which is okay so here's a really funny side story Trump's lawyer the whole like porn store payment thing right he formed an LLC in Delaware to get I assume to get privacy he put his name on there and I'm like dude if you're trying to do this and not get your name out there it's like law school 101 like come on anyway how do you prove ownership of that company how does that work certified documents just signing documents that lawyers can prepare for you anyway I don't mean to harp on Trump so much but this stuff that's been going on has been hilarious from a legal ethics standpoint lawyer not Trump yeah yeah or both I don't know anyway it's just as a lawyer watching this stuff happen like ignoring all the political and ethical and societal issues ignoring all that watching all the legal ethics stuff that's been happening recently has just been amazing because this doesn't happen very often so I kind of missed the slide that said if you need an LLC I didn't get a picture of that one so what's that line where you go from just doing some crafts and selling them what they call a hobby what's that line or is there a certain income that you cross over I guess or it's more about the liability probably whenever you decide that you need an LLC so this one you're talking about either that one or the one before it probably this one um the biggest thing is if you have people doing services for you because if you have another person doing anything for you as an employee or as a subcontractor then you're subjecting yourself to liability for anything that they do by forming an LLC you can you can shield yourself from personal liability that's really the biggest one the rest of them are not as important but they're still important to some degree if you want to grow your company and add owners that you can't add owners of yourself you can only do that in a company it helps your clients because your clients will be able to call you an LLC and not a human and therefore it helps them with the reclassification audit if they were to get audited and the last one just helps you look like a more of a business yeah it's not like the threshold that you mentioned like between the you know between the S corp and the LLC like oh yeah um so the benefit of forming an S corp is you can avoid paying fifteen percent of taxes on a certain chunk of your income uh... but it only applies once you make more than a reasonable salary now the reasonable salary changes for different professions in different cities and states and so on uh... typically at the cutoff is usually around seventy five grand kind of as an average but it really depends uh... you have to talk to an accountant to see if the numbers make sense for you so so you would say like uh... if a person is starting you know service or you know trying to build websites and stuff and you know you got to that uh... threshold seventy five grand or however much it is is it easy to switch from LLC to an S corp or relatively easy you can uh... make an S corp election so an S corp is actually not a business it's just a tax class is all you can make that election uh... the first two or three months that your company is alive you can make it during that window or you can make it the first two or three months every year so you have to do it in that window it's relatively easy to go into an S corp however if you become an S corp you have to pay yourself a salary with with holdings you have to file an S corp tax return every year and then there's also some complicated ownership issues if you have an S corp uh... if you're like a high growth startup uh... you don't want to be an S corp there's a bunch of issues with ownership uh... if you're a small business a local small business yeah S corps can be really awesome only if but only if you make us enough money to justify it because if you don't make enough money to justify it you're just gonna pay a bunch of extra fees to the to your accountant you're gonna have to do the payroll stuff which is just kind of a pain and you'll actually end up making less money there is a blog post uh... if you if you google venture legal kc dot com force or uh... space uh... S corp i have a three-part blog post on the third part has a chart that actually outlines how the three different tax options work and it kind of helps you but at the end of the day you have to talk to an accountant to see if you would save money the last thing i'll say is once you become an S corp getting out of it is really hard from a tax perspective so you don't want to make this decision lightly uh... for me in my law firm because i started it kind of as a side business i didn't even make the election for the first three years because i wasn't sure if i was going to practice law forever so yeah and i can't get any specifics but i know that you have different retirement options in terms of being an S corp the person being an LLC and that's a little different yeah what i think what i think you're getting at is if you form a corporation you can do certain 401k savings plans through a corporation that you can't do through an LLC but if you do a corporation you don't want to be double taxed so you'd most likely make an S corp election as the corporation uh... and then you can do it interesting once you start paying yourself an actual income you know, earn income then you can output your retirement savings i think that's where it is at probably so so do you get this information from a lawyer or is there another place you can do research for what they're talking about i would go to an accountant i would go to an accountant first because they can run your numbers is it an S corp within a corporation? are you going to be triple taxed at that point? no, so so again, an S corp is just a tax class it's not a business, right? the only business entities that exist for purposes of this talk are LLCs and corporations there's a lot more but that's really all you would ever really pick once you've picked that then you can make the S corp election uh... to choose to be taxed differently we have to wrap up security once the 7th building at 5 oh no oh i'm sorry, i didn't realize that, okay