Starting a Comic Book – What Does it Cost?

Atom vs. Ant-Man (334/365) by JD Hancock from Flickr (Creative Commons License)

Atom vs. Ant-Man (334/365) by JD Hancock from Flickr (Creative Commons License)

I had the privilege of doing two panels at Phoenix Comicon this year: Fan Art/Fiction and Fair Use and Comic Book Creator Rights. The latter was a panel with writer/artist Josh Blaylock. He has experience licensing others’ work and creating his own.

Someone in the audience asked us how much a person should set aside to cover legal fees when starting a comic book.

Create Quality First
If your goal is to create a comic book and possibly a business from it, start by working on your craft. You won’t have any legal issues if no one cares what you’re making.

Start with a Consultation
When you’re ready to take your work from a hobby to a professional endeavor, schedule a consultation with a lawyer. Choose someone with experience in entrepreneurship and intellectual property – business formation, copyright, contracts, and trademarks. You need someone who can help you understand when you need a lawyer. Expect to pay $200-350/hour for a lawyer’s time, more depending on where you live and the person’s experience level.

It doesn’t cost much to get started with a new venture, but you do want to be thoughtful about what you can afford and act accordingly. A good lawyer will respect your budget and tell you what you can do on your own, and when it’s imperative to hire a lawyer. For instance, in many states, it’s easy to file your own business entity. Check with your state’s corporation commission for instructions and the forms. In Arizona, you can file an LLC and complete the requisite publication for less than $100.

Nuts and Bolts information by Josh Blaylock

Nuts and Bolts information by Josh Blaylock

Protect your Intellectual Property
The most valuable asset in your work is your intellectual property. Before you fall in love with a name for your comic book, run a search on the USPTO trademark database to verify that someone else hasn’t claimed the same or a similar name. Even if you can’t afford the $225-325 filing fee to register your trademark at first, you can put a superscript “TM” next to your work’s name, logo, and anything else you claim as a trademark. The USPTO has videos about how to submit a trademark application if you want to try to file your own, but I usually recommend that clients have a lawyer shepherd their application through the process. If you want to do this, expect to pay an additional $1,000 for their time.

In regards to copyright, I tell my clients, it’s not if your work gets stolen, but when so plan accordingly. For a new comic book creator, my recommendation is to register each edition with the U.S. Copyright Office. Their website is not the most user-friendly experience, but you can hire a lawyer for an hour to walk you through your first registration and then you can submit your subsequent copyright applications by yourself. The filing fee for a single work is $35-55.

Manage Relationships with Contracts
Every relationship related to your business should be documented with a written signed contract. This applies to co-owners of your business, writers, artists, colorists, licensors, licensees, vendors, and if your comic book turns into a job offer, your employment contract. Contracts are relationship-management documents. They keep everyone on the same page in regards to expectations, compensation, ownership, and they provide a course of action if there is ever a dispute. A contract is an investment and worth the cost to hire a competent lawyer to write or review your document to ensure it is effective for your needs.

Additionally, every entrepreneur should watch the video Fuck You, Pay Me, featuring Mike Monteiro and Gabe Levine. They have excellent advice for all entrepreneurs, especially those who work in creative services.

If you want more information about the nuts and bolts of starting a comic book, check out Josh Blaylock’s book How to Self-Publish Comics: Not Just Create Them. If you want more information about the legalities of starting a business or working in the creative arts, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that’s shared only with my mailing list, by subscribing to the firm’s newsletter.

Know the Fine Print – Dispute Resolution

Fine Print by CJ Sorg from Flickr (Creative Commons License)

Fine Print by CJ Sorg from Flickr (Creative Commons License)

Every contract needs a dispute resolution clause – every contract. It’s something you should look for in every contract you read. If you’re given a contract to sign that doesn’t have one, I strongly recommend adding one in. That’s what I would do.

The dispute resolution clause in a contract is the how-we’re-going-do-deal-with-problems provision. It lays out how and where problems will be resolved when they occur.

How Problems will be Resolved
There are three main ways people general resolve problems in a contract:

  • Mediation: Hire a mediator to help you resolve the problem – more likely to results in “splitting the baby” and not a winner and loser.
  • Arbitration: Hire an arbitrator (or panel of arbitrators) to hear/review your arguments and make a decision. (This is what they used in Erin Brockovich.) Sometimes arbitration is faster and more cost effective than litigation, but not always.
  • Litigation: This is the traditional civil lawsuit. This is what I recommend for most contracts I write for clients.

You’re not limited to only these three options. You can have anything in your dispute resolution clause as long as it’s legal. So if you want to resolve disputes by throwing darts or Rock-Paper-Scissors-Lizard-Spock, you can.

Where Problems will be Resolved
The dispute resolution clause should specify in which county and state disputes will be resolved. If you’re writing the contract, you want the opposing party to have to fight you on your turf if there’s a problem. This is why most contracts I write for clients require them to resolve all disputes in Maricopa County, Arizona and that all parties agree to that jurisdiction. Without such a provision, you may find yourself having to travel to fight disputes in the opposing party’s state, and possibly needed to employ a local lawyer for additional assistance.

Which Law Applies
The laws in each state are slightly different. This is why it’s imperative that your contract state which state’s law will govern the contract for all non-federal claims. Federal claims (like many intellectual property issues) are governed by federal law. You don’t want to have a dispute within the dispute about which law applies to the state-law claims.

There may be other provisions in the dispute resolution clause like a requirement to notify the other party in writing if you believe they’ve breached the agreement and a set time in which they have to cure/fix it before you can take further action against them. Another clause to look for is a provision that requires the loser in a dispute to pay for the winner’s attorney’s fees. I like to add this into contracts I write. It makes people think twice before going after the other.

Next time you buy a ticket for a show, professional sports, travel, or sign up for an account on a website – read the fine print. See what the dispute resolution clause requires. You’ll quickly see that whoever writes the contract, does so with their (or their client’s) best interests (not yours) in mind.

If you need help writing or reviewing a contract, speak to a business lawyer about your needs and options. If you have questions about contracts that you want to discuss with me, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.

Treat your Blog as a Business

Office Hours by Tanel Teemusk from Flickr (Creative Commons License)

Office Hours by Tanel Teemusk from Flickr (Creative Commons License)

If you are making money from your blog, or you want to make money from your blog, you have a business. Treat it like the business that it is. You are no longer a hobbyist; you’re an entrepreneur.

Form a Business Entity
Creating a business entity is a relatively straightforward process. In general, it takes paperwork and money. Check with your state’s corporation commission or the secretary of state office to determine how much it will cost – because they significantly vary from state to state. If you have questions about whether you should form a limited liability company (LLC) or a corporation or whether you should form your business in your home state or elsewhere, as your accountant. Most clients I work with in Arizona opt to form Arizona LLCs.

The purpose of having a business entity is to protect you (the person) from liability. With a proper business entity, if the company gets sued, only the business assets will be on the line. Your personal assets (home, car, stuff, dog, etc.) will not be at risk.

Separate Bank Account and Credit Cards
You begin to protect yourself from liability by forming a business entity. The way you perfect that protection is by having separate bank accounts and credit cards for the company. You need to have a clear delineation between where you the person ends and the business begins. This often referred to as maintaining the “corporate veil.”

When you receive money as income, make sure business income passes through the business accounts. Additionally, when you spend money, use your personal accounts to pay for personal expenses (mortgage, groceries, etc.) and use the business accounts to pay for business expenses (office supplies, webhosting, etc.). To steal a line from Ghostbusters, “Don’t cross the streams.”

See your Accountant
Unless you’re a CPA, no entrepreneur should do their own taxes. You can probably make more money if you take the time you would need to do your own taxes to work on your business while someone else does your taxes for you. Having an accountant has saved me a lot of time and headaches. A good accountant is worth their weight in gold.

I love my accountant. He makes doing my taxes so easy. He’s been there to answer all my questions about what can and can’t claim as business expenses and what other information I should track, like mileage.

If you’re new to operating your blog as a business, or if you’ve been doing everything on your own up to now, do yourself a favor and hire a lawyer for an hour. Have a consultation to educate yourself about the legalities of running your business. As an entrepreneurial blogger, you want to be familiar with business formation, contract basics, privacy, copyright, trademarks, and the FTC rules regarding promotions and product reviews. There is a lot to know, but it’s not so complicated that a lay person can’t grasp and apply the concepts.

If you want more information about the legal rules regarding your blog and social media, please check out The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. If you want to chat with me about social media law, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that’s shared only with my mailing list, by subscribing to the firm’s newsletter.

Kesha v. Sony – Cautionary Contract Tale

Microphone by Photo Cindy from Flickr (Creative Commons License)

Microphone by Photo Cindy from Flickr (Creative Commons License)

Last week, a New York Court refused to nullify the contract between recording artist Kesha and Sony, despite Kesha’s allegations that she was drugged and raped in 2006 by her producer, Luke Gottwald (a.k.a. Dr. Luke). Gottwald has not been charged with this crime. Kesha admitted she’s afraid of Gottwald, but she said if she doesn’t work with him (even though Sony offered to give her another producer), she’s worried Sony won’t promote her music properly. If everything Kesha said is true, she is trapped in a situation where she has to risk her personal safety for professional success.

Why Sony Won
The reason Sony won this case appears to be basic contract law – the verbiage of the contract wouldn’t allow for the change. When it comes to creating a contract, it’s a relatively low bar to clear to have a legally binding contract. And if the parties want to change the provisions later, they may only be able to do so under limited circumstances, such as by mutual agreement. If the contract is valid and the other side is not open to making changes, you’re stuck with the verbiage and the commitments of the original agreement. I suspect that’s what happened in this situation; Kesha signed 6-album deal, and her allegations that her producer raped her isn’t sufficient to force Sony to change the terms or release her from the contract entirely.

Personally, I believe Kesha. It’s rare for a person to lie about being sexually assaulted. However, the law doesn’t have this luxury. The court can only make decisions based on what the parties can prove, so without a conviction or a confession, the court can’t determine if her allegations is sufficient to release her from this contract.

Ke$ha by Becky Sullivan from Flickr (Creative Commons License)

Ke$ha by Becky Sullivan from Flickr (Creative Commons License)

Turn Back the Clock
Given that hindsight is 20/20, what might Kesha have done differently when negotiating her contract with Sony? I am not sure it was wise for either party to commit themselves to a 6-album deal. Perhaps it would have been better for the artist to only commit to 2 albums and then renegotiate. Given Kesha’s young age when she signed with Sony, perhaps she, and other young artists, should have provisions geared towards their personal safety such as cameras that record all meetings and security or at least a personal representative all times that she’s working as well as provisions that address physical and emotional abuse. I also wonder if it wouldn’t have been prudent for both sides to have a provision that required regular drug testing to help prevent artists from getting into trouble and from being taken advantage of by people who should be protecting them.

What Could Kesha do Now?
Since a Kesha appears to be legally obligated to work with Sony and her alleged rapist, what should she do now to protect herself? Her safety should be the top priority. In regards to Gottwald, Kesha should never be alone with him. She should have security at her side at all times when he’s present. Gottwald should not be permitted to be within 10 feet of her, be able to contact her directly by phone or using any electronic means, or for any reason except as professionally necessary. I’m also not opposed to Kesha being legally armed (pepper spray, stun gun, etc.) if that makes her feel safer for the duration of her contract.

Contracts are a beautiful thing when they are written properly. However, we can see from this case how it can be a disaster when parties don’t plan for the worst-case scenarios. (I agree that it is an incredibly sad that artists have to consider the possibility that they will be physically harmed by their business partners, but this case shows that it is something that should be discussed at the negotiation table.) If you have a question about writing effective contracts, please contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn.

I’m also going to revive my newsletter later this year. If you want access to my exclusive content, please subscribe.

How to Move a Business from California to Arizona

Arizona - The Grand Canyon State Welcomes You by Peter Zillmann from Flickr (Creative Commons License)

Arizona – The Grand Canyon State Welcomes You by Peter Zillmann from Flickr (Creative Commons License)

California is so weird. (I grew up there. I can say that from experience.) It’s a weird state with weird laws.

I recently helped a client move their business from California to Arizona. Arizona law allows you to simply transfer your company from your old state to your new one with a Statement of Domestication, if the state you’re leaving permits this.

California doesn’t.

Instead of it being a simple process, moving a business from California to Arizona is much more complicated, expensive, and time consuming. The easiest way to do it was to form a new company in Arizona and merge it with the California company, where the Arizona company was the surviving entity.

Here’s how it’s done:

  • Create a new entity in Arizona through the Arizona Corporation Commission and pay the corresponding filing fee.
  • Create and sign a Merger Agreement.
  • Submit the Statement of Merger to the Arizona Corporation Commission and request a Certified Copy of the Merger Certificate. Pay the corresponding filing fees.
  • Once you receive the Certified Copy of the Merger Certificate, send it to the California Corporation Commission with their required filing fee.

The total process took a little over a month – and we expedited the Arizona filings – and the client spent over $300 in filing fees between the two states. Had they been able to file a Statement of Domestication, the Arizona filing fee would have been only $100 ($135 if expedited it).

Dealing with the California Corporation Commission wasn’t the easiest adventure. If I ever have a question and need a crystal clear answer from the Arizona Corporation Commission, I can go down there and talk to the clerk. I don’t have that luxury with California. One day it was impossible to get anyone at the California Corporation Commission on the phone and I ended up using their online contact form to get a call back 2-3 days later. That was a frustration that I’m glad I got to handle instead of my client.

Moving a company from one state to another can be confusing and stressful – especially when you’re trying to sort out which process you have to use and which forms and filing fees you need to submit to each state. It’s not something I recommend doing by yourself. If you have a question about starting a company in or moving a company to Arizona, please contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn.

Lawyers Protect you during a Business Divorce

Pareja (Couple) by Daniel Lobo from Flickr (Creative Commons License)

Pareja (Couple) by Daniel Lobo from Flickr (Creative Commons License)

Over the last six months I’ve worked with a handful of companies that were experiencing major changes in regards to how the company is operating and who the owners are – usually resulting in one or more owners buying another one out. Sometimes the owners realize that they no longer have a shared vision and can work together amicably to resolve the situation so they can each move forward in their professional lives and sometimes it’s quite contentious. I often call the situations “business divorces.”

When these situations happen, it’s helpful to get a business lawyer involved early in the process. You may only need in our consultation to discuss the situation in your proposed plan of action. Your lawyer can act as a neutral third party who doesn’t have invested ego in the outcome of the situation. Invite your lawyer to review your company’s operating agreement or bylaws (hopefully you have these) and remind you of what courses of action you previously agreed upon in this type of conflict (assuming you made these decisions when you started the company) and how to change the status of your business with your state’s corporation commission.

Most business owners I know don’t want to think about the worst case scenario when their businesses are just getting off the ground and everyone is optimistic about the future; however, this is the best time to have this conversation and document it because this is when you are most likely to be thinking about what is fair and what is in the best interests of the company. If you wait until there is a conflict to try to have this conversation, you’re more likely to get into a battle of wills where people are more interested in what they want and/or hurting the other person.

Additionally, if you are going through a “business divorce” expect it to take longer than you’d like. There may be valuations that need to be performed on the company, documents that need to be reviewed by your lawyer or accountant, and a custom contract drafted between you and your future-former-co-owner. This may involve a significant amount of negotiation and revisions.

I actually enjoy drafting these documents to shift the ownership of the company, especially when both sides are represented by counsel. Each lawyer is an advocate for their client’s concerns without it having to be a combative situation. And we can shield our clients from the tribulations that would likely result if they tried to reach a resolution on their own. Ultimately we both want the same thing – a change in business ownership and clients who are satisfied with the outcome.

If you are in a situation where the arrangement with your fellow business owners is no longer effective, please contact me or a business lawyer in your community. If you want to connect with me on social media, you can find me on Twitter, Facebook, YouTube, or LinkedIn.

Invest in Yourself with a Monthly Self-Meeting

Stargazin by Zach Dischner from Flickr (Creative Commons License)

Stargazin by Zach Dischner from Flickr (Creative Commons License)

How much time do you devote each month to your own professional development? I’m serious. When was the last time you took a step back to look at your business as a whole and not just focusing on whatever task is in front of you? I want to share an activity that my business mentor ingrained in me very early in my career as a business owner – a monthly self-meeting. It’s been a pivotal part of my business success. Here’s how I do it:

Within a week of getting my company’s bank statements, I reconcile my accounts and run the following reports for the previous month: profit and loss, cash flow, and balance sheet. I also pull the list of all my income sources from the previous month. I’ll need these for my meeting.

For my self-meeting, I block out 2 hours and remove all distractions. This is my time to focus on me and my business. I start my meeting by writing down (by hand) the celebrations since my last self-meeting. These might be things like a successful end to a client’s case, reaching one of my financial goals, or being selected to speak at a conference. It’s always good to look back and see the progress I’ve made, especially since I’m the only person at Carter Law Firm. It’s easy to focus on what I could be doing to improve that I forget to give myself kudos when it’s earned.

I also look at my networking activities from the past month, what networking events I have coming up, what business ideas I’m toying with, what concerns I have, what opportunities might be on the horizon, and whatever else comes to mind. This is my time to look at my business and process how things are going and where I want to see them in the future. By the end of my self-meeting, I have a list of things I want to accomplish by my next self-meeting. At the subsequent meeting, I will review this list and acknowledge my successes and also look at where I came up short and what contributed to that happening. I also make a list of reflections and write out things that I’ve learned in the last month and what issues are currently important to me.

Then I shift my attention to the company’s financials. I look at where my work is coming from – which tells me what marketing techniques are being effective, what type of legal projects are bringing me the most revenue, and I review my expenses. I maintain two spreadsheets: one tracks how much money I’m making from each type of legal work I do and the other tracks my spending. These spreadsheets help me see month-to-month how money is coming and going from the company and by the end of the year it gives me a clear picture of the state of my business affairs.

Sometimes it’s hard to make my self-meeting a priority, particularly when I’m busy. However, it is enormously helpful in terms of my business development as well as understanding who I am and my priorities as a business owner.

Do you do a periodic self-meeting? What’s your process like?

Does Your Business Need Cyber Liability Insurance?

Guilty Viewing Pleasures: Hackers by Ingrid Richter from Flickr (Creative Commons License)

Guilty Viewing Pleasures: Hackers by Ingrid Richter from Flickr (Creative Commons License)

Anthem Health Insurance was victim the latest cyber attack to hit the news. Approximately 80 million customers’ health records were compromised by this security breach. When you hear about these hacking stories, do they make you wonder about your company’s security system? Do you assume that you probably have nothing to worry about because hackers are only interested in big companies like Target?

I attended a workshop last month about cyber liability insurance where the presenter said that a 2011 study revealed that 95% of all credit card breaches were against small businesses. We only tend to hear about the security breaches involving bigger companies but any size company could be at risk. Data breaches can occur through hacking, theft by unauthorized access , employee errors, and stolen or lost paper or electronic files, laptops, smartphones, flash drives.

Any business that handles or stores private business, customer, or employee data should consider getting insurance to cover them if a data breach occurs. This data includes social security numbers, bank account information, credit card numbers, driver’s license numbers, and email address. Additionally, you should take a look at your company’s policies and procedures related to data security. Are you taking the following precautions?

  • Secure sensitive data
  • Restrict access to data
  • Dispose of data properly – i.e., wipe laptops before donating them, shred paper files
  • Use effective passwords
  • Use encryption and secure remote access
  • Make sure your employees understand how to protect data and why it’s important

There are many benefits of having cyber liability insurance. Your provider should offer risk management services to help prevent a data breach from occurring. If a breach occurs, they will can professional assistance for damage control and regulatory compliance as well as cover the response expenses for mailing notification letters, credit monitoring services, and public relations. Your cyber liability insurance policy can also cover your defense and liability expenses if you are sued because of the breach.

This is a serious issue that can affect any company that uses the internet for business or commerce. If you have a traditional business liability insurance policy, read the terms carefully; it may not cover cyber liability. If you need a cyber liability insurance policy, contact a cyber liability insurance specialist to discuss your needs and options.

If you have questions or want to chat more about these issues, feel free to connect with me on TwitterFacebookLinkedIn, or you can send me an email.

Starting a Business in Arizona

Little Waitrose - Birmingham Snow Hill - Colmore Row - Now open - sign by Elliott Brown from Flickr (Creative Commons License)

Little Waitrose – Birmingham Snow Hill – Colmore Row – Now open – sign by Elliott Brown from Flickr (Creative Commons License)

Starting a business is exciting and can be overwhelming at times with everything that has to get done. I wish more business owners put more energy into creating structure within their business when they contemplate and launch their endeavors. It will save a lot of pain and frustration in the long run. If your plans for 2015 include starting a business, make sure these steps are on your to-do list in the first month or two of starting your company.

Discuss with your accountant what type of entity you should form. Every company needs an accountant. In Arizona, you have the option to create a C corporation, an S corporation, a B corporation, or an LLC. I tell all my clients to meet with their accountant to make sure they select the right entity and understand the corresponding tax implications and other responsibilities.

Check with the Arizona Corporation Commission and the U.S. Patent and Trademark Office to ensure that the name you want for your business is available. Many companies make the mistake of assuming that just because the website domain they want is available that their desired company or product name hasn’t been registered as a trademark for another company. If you use a name that has already been registered by someone else in the same or similar industry, they can make you rebrand.

Submit the necessary paperwork and fee with the Arizona Corporation Commission. Consider filing your trade name with the Secretary of State’s Office as well. The forms to file your Articles of Incorporation or your Articles of Organization are on the Arizona Corporation Commission’s website. Make sure you get all the supplemental forms you need. The standard filing fee is $60 for a corporation and $50 for an LLC. The filing fee to register a trade name with the Secretary of State is $10. (Registering a trade name prevents other companies in Arizona from using the same name. It is not a substitute for filing a federal trademark.)

Create a separate bank account for your business and set up your accounting system. It’s imperative that you keep your company’s corporate veil intact. I strongly recommend using an accounting system like QuickBooks. It makes life so much easier when you’re reviewing your books and preparing for taxes.

If your LLC has more than one owner, create an operating agreement. If you have a corporation, write your bylaws. These documents will dictate how you will run your business, including how you will divide responsibilities and how you will address problems when they occur. They will help you decide in advance how you will address situations that are likely to occur.

Create the contract templates you will need for your business. If applicable, write the terms of service for your website. If you are going to be hire to provide a product or service by multiple customers, you will want to have contract templates for those interactions. This creates consistency and uniformity which will help you build your reputation as well as be more efficient. You can customize your templates to suit your needs. I encourage business owners to look at others’ templates for ideas of what they might want to include but be leery of using someone’s template unless it’s been reviewed by your lawyer.

Discuss what intellectual property your business will or might create and what strategies you will use to protect it. Every business has intellectual property: copyrights, trademarks, patents, and trade secrets. It’s often the company’s most valuable asset. It is important you understand what you have and the best ways to protect it.

Ideally, you would have a lawyer involved from the beginning of your business, if only to tell you what you should do and when you’re better off hiring a lawyer to work for you. Even if you’re on a shoestring budget, you can find a reasonably priced business lawyer or resources for startups to assist you. It’s also prudent to schedule an annual consultation with your lawyer to educate yourself about what legal issues might be on the horizon and to get advice about what more you should do to protect your business as you have the ability to afford it. It’s easier and cheaper to prevent problems than to clean up the mess when something bad happens.

If you want to chat with me about starting a business in Arizona, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

Now Available – B Corporations in Arizona

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

One of the awesome developments in the Arizona business community for 2015 is that businesses are allowed to form benefit corporations (B corporations) in this state. These are for-profit corporations that have other motives for being in business besides maximizing profits, and their shareholders are aware and accept that the company has dual motives. This motive must be to at least provide a “general public benefit,” meaning the business has a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation.” This option became available in Arizona at the beginning of the year.

Given that this is a new type of business entity in this state, I looked to the Arizona Corporation Commission (ACC) to get answers to my questions about B corporations.

What information does a company have to provide to the ACC in the Articles of Incorporation?
To create a B corporation, the incorporators must fill out the same Articles of Incorporation as other corporations in Arizona and pay a $60 filing fee ($95 for expedited processing). Every corporation is required to file an annual report with the ACC. B corporations must file an annual report and an annual benefit report where the company describes what general public benefit it provided. Each report has a separate filing fee.

Can an existing Arizona corporation be converted to a B Corporation? If so, how? Please include information about the associated fee(s).
Yes. An existing Arizona corporation can be converted to a B corporation by filing an Articles of Amendment with the ACC and paying a $25 filing fee ($60 for expedited processing). An Arizona LLC can also be converted into a B corporation under the Arizona Entity Restructuring Act.

Is a B corporation taxed like a C corporation? If so, can a company be a B corporation and file as an S corporation with the IRS?
Traditional corporations are C corporations, and they have double taxation where the corporation pays taxes on its income and the shareholders pay taxes. If the company qualifies, it may elect to be taxed as an S corporation where there is pass-through taxation so only the shareholders pay taxes on the income. Based on my research, a B corporation is taxed as a C corporation, but it has the option, if it qualifies, to be taxed as an S corporation.

I tell all clients to talk to their accountant before starting their business to determine which type of business entity is right for them and to make sure they understand the tax implications. And yes, every business needs an accountant.

Where can people go for more information about B corporations in Arizona?
The ACC created a legislative update that is filled with information and links about B corporations in Arizona. This is a great resource if you’re interested in starting a B corporation or converting your business to a B corporation. If you still have questions after reading this, contact the ACC or a business attorney in your community.

If you’re interested in B corporations but are unsure you want to create or convert your business to one at this time, you can look into being “B Corp. Certified” by B Lab.

If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.