Cost to Move a Business from California to Arizona

January 21, 2021 by Leave a Comment
“Arizona Welcomes You” by AlmightyWorm, public domain

UPDATE (1/10/2023): The process for moving a corporation from California to Arizona has recently changed! Read about the new, easier, more cost-effective way to move your company to Arizona here.

Frequently, I receive emails from people who need help moving their business from California to Arizona. They typically find me after reading my post about how challenging it is to move a company from California to Arizona, particularly a corporation. One of the most common questions they have is, “What will this cost?”

Cost to Move a Corporation from CA to AZ

Moving a corporation from California to Arizona is complicated because it requires forming a new business entity in Arizona and then merging with the California entity where the Arizona entity is the surviving business. This requires extra steps and extra fees. Here is the process if the surviving entity is an Arizona corporation, with all filing expedited.

  • File the Articles of Incorporation with the Arizona Corporation Commission (ACC): $95
  • File the ACC Statement of Merger: $135
  • Once the Statement of Merger is approved, request and obtain a certified copy of Statement of Merger: $42
  • Send the notice of the merger to the California Secretary of State: $100

Total filing fees: $372

In addition to these filing fees, you are required to publish notice of your Articles of Incorporation and Statement of Merger in a local newspaper if your Arizona business is located outside of Maricopa or Pima County: Each approved newspaper sets its own prices, which I’ve seen range from less than $40 to over $400. In my experience, the fewer approved newspapers in the county, the higher the publication fee.

All of this does not include attorneys’ fees. I tell my prospective clients to expect this total process to take 3-4 hours of my time. (My current rate is $275/hour, so up to $1,100.)

Cost to Move an LLC from CA to AZ

Moving a limited liability company from California to Arizona is much less complicated than moving a corporation. Thankfully, this does not require a merger.

  • File the Statement of Conversion with the ACC: $85
  • Along with the Statement of Conversion, file the Articles of Organization: $85
  • Once these filings are approved, file a Statement of Conversion with the California Secretary of State: $30

Total filing fees: $200

The form for each Statement of Conversion is provided by their respective states. Like a corporation, if your Arizona LLC is not located in Maricopa or Pima County, you must publish a notice of your Arizona LLC in an approved newspaper. As stated above, each publication sets its own prices and they can vary greatly, so it’s often worthwhile to call all the approved newspapers in your county, unless you have your heart set on publishing in a particular one.

Of course, there is also the fee for your attorney’s time. I tell my prospective clients to expect this process to take 2-3 hours of my time (so at my current rate is $275/hour, it would be up to $825.)

Moving an Entity from California to Arizona Without an Attorney

You are not required to use an attorney to move your business entity from California to Arizona. You can submit these filings yourself. However, I strongly recommend that you consult with an attorney along the way. I’m working with a client right now who is doing their own merger. Each step of the way, he checks in with me via email, and I helped him write the notice of the merger to the California Secretary of State.

I have another client who came to me after trying to move their entity themselves and it backfired. He tried to move his California corporation to Arizona using a Statement of Conversion. The ACC approved it, but the California Secretary of State won’t accept a Statement of Conversion as a way to move the entity out of the state. He essentially wasted his money and time filing the Statement of Conversion in Arizona, because I still have to file the Statement of Merger and the subsequent notice to California to achieve his goal of moving the entity out California. It probably cost him more trying to do it himself, because I also called the Secretary of State’s Office to see if I could untangle this mess and merely send a notice of the conversion – which they said is not permitted.

I frequently say it’s easier and cheaper to avoid problems than to fix them. If you’re preparing to move your business to Arizona, please contact me if you need help – whether you want me to do everything for you or be available to help you do it yourself.

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Funny but Binding Contract Terms for Late Payments

January 14, 2021 by Leave a Comment
“Pizza” by stu_spivack (Creative Commons License)

One of the biggest challenges facing small businesses seems to be getting clients to pay their bills. Dealing with non-paying clients or delinquent clients is one the most common complaints I hear about from other entrepreneurs. Your first line of defense against these people is in your contract.

Create an Upside When Clients Don’t Pay – in Your Contract

You can put anything you want in a contract, as long as it’s legal. (This is why you can’t have a legally binding contract to buy/sell heroin or a human kidney.) Most contracts include a provision about a late fee, so if your client is late in paying you, you can make them pay more, up to the maximum interest rate allowed by law.

If you are a professional creative, such as a website developer, graphic designer, or photographer, you can put in your contract that you won’t give the client the final deliverables until they’ve paid the balance on their account. This is an effective way to hold your clients’ financial feet to the fire.  

Don’t Publicly Shame Your Clients

No matter what you put in your contracts, don’t shame your clients for being late in paying their bill. Don’t put in a provision that says if they’re late, you can put up a sign or billboard, or hire a skywriter to tell the world that the client didn’t pay their bill. That doesn’t help anything. That could easily backfire because it makes you look like a jerk.

I had some ideas that aren’t publicly shaming, but still could make you look worse than your non-paying client if it became public information, like including a provision that says, if you’re more than 90 days late, every time we send you a reminder, the subject line will be, “Hey Asshole! Pay your bill!” As validating as that might be in the moment, it probably wouldn’t be an effective strategy for getting referrals, or even getting them to pay.

Free Ideas for Revising Your Contracts

Recently, I wondered what else a company could put in their contract that would encourage clients to pay their bill and have an upside for the company. For the purpose of these suggestions, “you” and “your” refer to the client and “we,” “us,” and “our” refer to the company.

  • If you’re more than 30 days late paying your invoice, you agree that you will pay for an office pizza party for us every Friday, and we will add the amount to your unpaid invoice as well as send you a photo of us eating pizza.
  • If you’re more than 6 months late paying your bill, we will send a hug-a-gram to your office reminding you to pay us. (It’s like a singing telegram, but instead of singing, they hug you.) We will add the amount of their fee to your unpaid invoice along with a substantial tip.
  • For a web designer: If you are 30 days late paying your final invoice, not only will we not launch your new website, you consent that we can commandeer your current site to promote the charity of our choice.

Final Thoughts

Having non-traditional contract terms is not a new idea. Lots of people have had seemingly crazy provisions in their contracts. I want to do more blog posts this year with sample verbiage for contracts that I would love to write, that would be legally binding, and not your traditional legalese.  

I want to humanize contracts. I love writing contracts in everyday language. Your contract should be written in a way that you and your clients can easily understand it. If you want to hear more about what I’m doing in my business and practical legal tips to run yours more effective, please add yourself newsletter.

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Force Majeure is a Contract Must-Have

February 27, 2020 by 1 Comment
“Disaster” by jiwasz from Flickr (Creative Commons License)

Recently, a member of one of the mastermind groups I’m in asked if he should modify the force majeure provision of this contract template in case he encountered a situation where he was unable to perform as promised due to restrictions related to COVID-19. 

Force Majeure = Worst-Case Scenario Clause

Force majeure comes from Latin meaning “superior force” and applies to unforeseeable circumstances that prevent someone from fulfilling a contract. A force majeure provision will state that One or both sides of a contract are not liable if they’re unable to perform their obligations due to circumstances that are outside of their control.

A force majeure clause might say something like:

Consultant shall not be liable for failure or delay in performance of Services if such failure or delay is a result of causes and/or circumstances beyond the Consultant’s reasonable control and without its fault or negligence.

Including, But Not Limited To . . .

Many times, this provision includes a list of things that qualify as force majeure situations. This list may include, but is not limited to:

  • Accident
  • Illness
  • Riot
  • Strike
  • Natural disasters
  • Terrorist attacks
  • Failure in transportation
  • Acts by deities (I prefer this over “Acts of God” because it’s more inclusive)
  • Fire
  • Flood
  • War
  • Zombie apocalypse

Remember: You can put in anything you want in a contract as long as it’s legal.

It’s important to include the phrase like, “Including, but not limited to,” so you don’t inadvertently limit want counts as a situation when the force majeure clause would apply.

Written Broadly on Purpose

This provision is purposely written broadly to cover any situation outside the person’s control that would impact their ability to perform their obligations under the contract. Going back to the question from my mastermind group, he’s a professional speaker and his provision had the “including, but not limited to” list that included “illness” and he asked the group if he should also include “public health emergencies.”

The word “illness” is broad. It could apply to situations where:

  • You get sick.
  • A family member gets sick.
  • There’s an epidemic in the country where you’re supposed to be going, and officials have closed the border.
  • There’s an epidemic and even though you can get to the location, if you do, you’ll be forced into a quarantine for 14 days afterwards, which will force you to miss your next speaking engagement or otherwise take care of your family.

Mitigate Damage

When a person is required to rely on the force majeure provision of their contract because they were unable to deliver as promised, both sides are required to mitigate their damages. For example, a photographer might have to cancel an outdoor photo shoot due to rain. The way to mitigate that damage is to reschedule for another day.

I’ve seen a professional speaker get into a situation where something interfered with his ability to travel to an event. The speaker and the event mitigated their problem by having him present remotely instead.

Always Have a Lawyer Create Your Contracts

Most, if not all, of the contract templates I create for people to use in their business includes a force majeure provision.

To date, I have never seen a contract template that was downloaded from the internet that was good to use as written. When it comes to the contract templates that impact your life and/or livelihood, it is worth the investment to hire a lawyer to draft or at least review the contract before you use it with a client. You don’t want to find out the hard way that there are gaps in its terms.

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How to Use the Attorney General to Go After Bad Clients

September 19, 2019 by Leave a Comment
“Stairs to Subway” by Giuseppe Milo from Flickr (Creative Commons License)

One of the frustrations I hear about from entrepreneurs is getting stiffed – either they paid a company to do a job and they didn’t perform, or they did a project or task for a client and they didn’t pay. In many of these situations, the amount in question is low enough that it’s not worth it to hire a lawyer or even put in the time and effort to take the other side to small claims court.

Even if a client hires us to send a demand letter, there’s always the risk that the other side won’t comply, and then they’ll be in the same position as before, but now they have our bill to pay too.

If the client in question is a business, there may be options to go after them through the government at no cost to you.

Attorney General Consumer Complaints

Check the Attorney General’s (AG’s) Office website for the state where your non-performing client lives (not where you live if you live in a different state). For every state that I’ve checked for a client to date, the AG’s Office has had a division or at least a page on their website for consumer complaints. Typically, it’s a form where you provide your contact information, a summary of the situation, and the remedy you want.

If the AG’s Office thinks your complaint has merit, they’ll investigate the situation, including them sending a copy of your complaint to the company and with a firm deadline for providing a response. Even if your client didn’t respond to a demand letter from you or your lawyer, they will likely be more inclined to respond to the AG’s Office.

In my experience, companies are motivated to resolve these matters quickly and avoid the risk of having fraud charges filed against them. This may result in the client paying you, performing as they were supposed to, or giving you your money back.

Pros and Cons of Going Through the AG’s Office

Pro: It’s free to file a complaint. You don’t need a lawyer to do it; however, it may be prudent to have a lawyer help you fill out the form to make sure you’re presenting the most compelling argument in light of the applicable laws. Your lawyer may know the key phrases to use to convince the AG’s Office to take your complaint more seriously than if you’d written it by yourself.

Con: You have less control over the situation. If the AG’s Office pursues the matter and files a complaint in court against your client, you will not be the plaintiff. The state will be the plaintiff. You will be less involved in the negotiations and settlement (assuming there is one).

Pro: It’s less work for you. If you were pursuing this matter directly against your client, such as filing a lawsuit, there could be meetings and calls with you lawyers, documents to review, and other work where you would need to be involved. Or if you were doing it on your own and going to small claims court, you would still have to prepare your Complaint (lawsuit), file it, get the other person served, and show up for your court date.

The AG’s Consumer Complaint is the Hidden Alternative

Most people I’ve spoken with about these types of business challenges, don’t know about Consumer Complaints. I’ve suggested it at least three times in the last two weeks to friends and clients alike. I can’t say this option is available in every state, but it’s worth investigating if you have a non-performing client that’s a business.

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New Photographers: Signed Contracts Needed at the Start of Every Project

July 31, 2019 by Leave a Comment
“He Walks Dogs” by Damian Gadal from Flickr (Creative Commons License)

I recently heard a question from a new photographer. They are new to the business and focused on building their brand and rapport with potential clients. Their question was, “Should I have a contract on hand at the beginning stages of my business?”

My response was an emphatic: “Yes!”

Photography Contracts: Every Job, Every Time

A contract is a relationship management document. It puts everyone on the same page about what each side is giving and getting and sets the expectations about how each side should behave.

I tell my photographer clients to never accept a job without a signed contract, this applies even to TFP shoots (trade for photos). Your contract should outline what the client is hiring you to do, how/when you’ll be compensated, how the client can use the images, and who owns the copyright. It should also have terms that address how problems will be resolved.

If the Prospect Balks at a Contract

If you have a prospective client who says they “don’t think a contract is necessary,” turn and run. This raises to red flags for me: either they don’t understand how the business works, or they have devious reasons for not wanting a contract that could bite you in the butt in the future.

One of the best pieces of advice I got early in my career was, “You never regret the client you didn’t take.” I have had no regrets about declining a representation when a client balks at how I do business. Every time I decline one of these clients, I feel like I’ve dodged a bullet.

Don’t Worry that Requiring a Contract will Push Clients Away

Don’t worry about being perceived as “pushy” my holding firm that a contract is required. You can be polite and respectful while say, “This is how I do business. If you don’t want to sign a contract, that’s fine, but you won’t be working with me.”

You set the rules for how you work with clients. If they balk at your contract (assuming it’s reasonable), they shouldn’t be your client. A reasonable client would expect you to require a contract. A person with any business acumen won’t want to work with you without one.

Let the prospects who don’t want contracts to self-select out. If you have problems with a client at the beginning of the relationship, it’s an indicator that they will be problematic throughout the project.

If the prospect asks for a referral to another photographer, I recommend saying, “All the reputable photographers I know won’t take on a client without a signed contract.”

It’s Cheaper and Easier to Prevent Legal Problems than to Fix Them

This has been proven time and time again in my legal career. When a client comes to me with a business dispute, one of my first questions is, “What does your contract say?” When my client doesn’t have a contract, I have to piece together the terms of their agreement from emails, text messages, and the parties’ actions. Often my client spends more just having me piece these things together than what it would have cost them to have a custom contract template made.

Additionally, in a dispute, it’s much easier to create a demand letter than references the terms the other side agreed to and back them into a corner where they have to try to defend the indefensible rather than assert what the terms of the agreement are from the assembly of bits and pieces of communications and actions that the other side can more easily debate.

Lights Camera LawsuitTM

There’s always a need for quality legal information for photographers. That’s why I created an online course called Lights Camera Lawsuit: The Legal Side of Professional Photography to address photographers’ most important questions. I want you to feel secure in your business, confident in the way you operate day-to-day, knowing that you’ve set yourself up to get paid what your worth without incident.

At $497, the course contains nearly six hours of legal information you can immediately apply to your business. That’s less than what I charge for two hours of legal work for clients!  

Please subscribe for more information and to make sure you don’t miss out on any special offers or discounts.

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Photographer Disputes: What Happens If You Don’t Deliver

July 25, 2019 by Leave a Comment
https://www.flickr.com/photos/76377775@N05/8560939745
“Las Fallas Valencia Spain Angry Woman” by Keith Ellwood from Flickr (Creative Commons License)

As I was researching photographers’ legal questions, I stumbled onto a question posted by an upset client: “The photographer hasn’t given me my photos. It’s been six months. What can I do about that?”

Whoa! That sounds exceptionally bad. I’m curious how complex this project was and when the photographer said they’d deliver images to the client.

I don’t know the circumstances regarding this person’s situation, but here’s what could happen if a client is unsatisfied with your work, or worse, you fail to deliver as promised.

Check the Contract’s Dispute Resolution Provision

Whenever anyone comes to me with a business dispute, like “They didn’t pay me,” or “I didn’t get what I paid for,” the first question I ask is:

What does your contract say?

Your photography contract should have a dispute resolution provision that states how disputes are going to be resolved, where it’s going to be resolved, and which state law governs the agreement.

One of the most common dispute resolution clauses I put in photography contracts says if there’s a dispute, the parties will try, in good faith, to resolve the matter within 30 days. If that doesn’t resolve the matter, then the parties agree to resolve the matter is a court located in Maricopa County, Arizona, and the agreement is governed by Arizona law. (I recommend Maricopa County and Arizona law because that’s where I’m located. You don’t want to pay for your lawyer’s travel expenses if you don’t have to.) I usually include a clause that says the losing party must pay the prevailing party’s attorneys’ fees and costs.

Regardless of what the contract states about resolving disputes, my first step in most disputes is sending a demand letter that puts the other side on notice that further legal recourse will be sought. This letter lets the other side know that the offended party is serious and willing to fight, and it gives them a chance to resolve the matter before it will be taken to the next level.

Report to the Attorney General’s Office for Consumer Fraud

You may not know this, but your state’s Attorney General’s Office may have a forum to submit a consumer complaint and report suspected fraud. Arizona has this, and it’s not a fun process to go through the subsequent investigation, which could include being subpoenaed for a deposition under oath and/or having a claim for fraud filed against you. If a court found that you committed fraud, it could have devasting consequences for your business, including your ability to be a professional photographer. Taking a client’s money and failing to provide the images could easily be an act of fraud.

If a client wanted to pursue this option, they don’t need a lawyer to file a consumer complaint. They can go online and get the form themselves. The Attorney General’s Office would foot the bill for the investigation, and likely expect to be reimbursed by you if you lose or come to a settlement. Conversely, if a consumer complaint is filed against you, you should hire a lawyer to represent you.

Bad Review

The least problematic a dissatisfied client could do is leave you a negative review on Google, Yelp, or Facebook, or they could post about you online on their social media accounts or their website. As long as everything they post about you is true or their opinion, it’s perfectly legal.

Hopefully, you never find yourself in this type of situation, but if it happens, please don’t ghost your client. Keep the lines of communication open as you work towards a resolution. One of the most common complaints I hear from customers is that the person they hired stopped responding to emails, calls, or texts, and so they felt like they had no choice but to ask a lawyer or the state for help.

Lights Camera LawsuitTM

There’s always a need for quality legal information for photographers. That’s why I created an online course called Lights Camera Lawsuit: The Legal Side of Professional Photography to address photographers’ most important questions. I want you to feel secure in your business, confident in the way you operate day-to-day, knowing that you’ve set yourself up to get paid what your worth without incident.

At $497, the course contains nearly six hours of legal information you can immediately apply to your business. That’s less than what I charge for two hours of legal work for clients!  

Please subscribe for more information and to make sure you don’t miss out on any special offers or discounts.

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Why Contracts Have So Many Definitions

February 28, 2019 by Leave a Comment
https://www.flickr.com/photos/eleaf/2561831883
”
Iron Horse Bicycle Race Durango Women 10″ by Eleaf from Flickr (Creative Commons License)

This week, I had a chat with someone who was concerned about the media release provision in a contract to be in a cycling race. It said by signing up for the race, you give the organizers permission to use any video or images of you, your likeness, you name, and your biographic information for any purpose without need any additional information from you. He was worried that the race organizers could sell his life story without his permission.

I’ve seen this provision on every race contract I’ve signed – and it wasn’t one of the ones I altered. This type of provision is on lots of contracts, event tickets, even on A-frame signs around the state fair. Organizers want to use the photos from their event to promote the organization and its activities. They want to be able to make you their poster child if they snap an amazing photo of you. They want to be able to caption a race photo with “Chris Jones, 37, of Truth or Consequences, New Mexico . . .”

These organizers don’t want to sell your story to make the next Lifetime Movie. I know this because (1) they don’t know your life story and (2) they’re not in the business of sell stories for the next movie of the week.

This conversation reminded me of why contracts have so many definitions. Sometimes they start with pages of definitions. They help eliminate confusion and avoid disputes when questions arise down the line.

If there is a dispute about the meaning of a word in a contract, and both sides have a reasonable interpretation of it, the court will side with the person who didn’t draft the contract, unless the contract states otherwise. (Check your jurisdiction’s rules to see if the same rule exists where you live.)

Going back to the would-be racer, I told them if they had concerns about what a term in the agreement meant, they should email the organizers for clarification. (Never be afraid to ask questions about a contract before signing it.) If there’s a dispute later surrounding the meaning of the provision, they would be able to use the email response as the basis for their reasonable belief as to what it meant and to counter any contradictory statement by the other side.

If you’re in a situation where you need to create, draft, or negotiate a contract, please call a contract lawyer for help. (This week, my editor sent me an FYI email about a company in Columbia that is selling a “Pack Of Professionally Drafted Legal Contracts” for $24. I responded with “Let me know how that $24 contract holds up when challenged in court.”)

Thanks for reading this post. If you liked this post and want to know more about my work, please subscribe to the Carter Law Firm newsletter where I share behind-the-scenes information and readers get exclusive access to me.

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How to Legally Use User-Generated Content

January 31, 2019 by Leave a Comment
https://www.flickr.com/photos/zoidberg72/16243539933
Selfie by dr_zoidberg from Flickr (Creative Commons License)

Here’s a question I get from companies and their marketers: What are the legal dos and don’ts for using user-generated content? These are situations where a company wants to use a photo, video, or text created by one of their fans, usually from a site like Instagram, Facebook, or Trip Advisor. Many companies merely want to approach the person through the platform where they found the content they want to use and ask for permission to use it. While this strategy is convenient, it may not be in the company’s best interest.

Using Content Within a Platform

It’s easiest when a company wants to share someone’s post within the social media platform – e.g., sharing someone’s Instagram photo on the company’s Instagram. Many social media sites build this option into the platform where you don’t even have to ask for permission to share someone’s post on another’s account.  

Of course, I’m a risk-adverse lawyer so I tell my clients to review the terms of service first to see what happens just in case it turns out the person who created the post you shared didn’t have the right to do so and now you have to deal with the fallout. Depending on the circumstances, I might contact the person to ask the person if they took the photo (which would indicate if they’re likely the copyright holder), try to verify that the original poster is complying with the platform’s rules

Using Content Across Different Platforms

Here’s where it gets a little more complicated. These are the situations where you want to take content from someone’s post on one platform and share it on a different social media site, your website, or another third-party platform. For this situation, I recommend you have a contract drafted by a lawyer. You could have them create a template for you if curating user-generated content is part of your marketing plan.

If I were creating a contract template for obtaining permission to use content created by a user or fan, I’d likely include terms such as:

  • The user owns the IP in the content: either they created it or they have permission to use it
  • The user has authority to grant the company permission to use the content
  • The user grants the company a perpetual, irrevocable, worldwide, sublicensable, paid-in-full, royalty-free license to the company to use the content for any purpose without needing the person’s consent or credit, including the creation of derivative works (or in the alternative, that the user grants the company a copyright assignment)
  • The user will reimburse the company’s legal fees and damages if it is accused of wrongdoing because the company used the user’s content

Such a contract would also include boilerplate verbiage, like a dispute resolution provision that states how the company and user will resolve disputes if one occurs.

Always Apply Reality

In any potential legal situation, be sure to apply reality. If a company wants to use a photo with two people in it, whoever posted the image may not be able to speak on behalf of the other person in the photo, and you may need release from identifiable people to avoid being accused of violating their right of publicity.

Additionally, it will likely take longer to get permission if you want to use images and other content across platforms. Be sure to build that into your timeline if your marketing plan involves using user-generated content.

There are also those who may question whether it’s worthwhile to have a lawyer create a contract for these circumstances. When there are no issues, a contract may seem superfluous; however, contracts are imperative in situations where there is a dispute and/or the parties forget the terms of their agreement. When you work with your lawyer to create you contract, make sure it has provisions that will apply to situations that are likely to occur as well as the worst-case scenarios.

If you liked this post and want to know more about my work, please subscribe to the Carter Law Firm newsletter where I share behind-the-scenes information and readers get exclusive access to me.

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Side Hustle Contracts

January 24, 2019 by Leave a Comment
https://www.flickr.com/photos/joybot/6701744493
Do the Hustle! by Joybot from Flickr (Creative Commons License)

Note: The links for Chris Guillebeau’s books are affiliate links.

I admire people like Chris Guillebeau who run with ideas and make stuff happen. He’s written a number of books, including The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future. The most recent book of his that I wrote was Side Hustle: From Idea to Income in 27 Days where he walks you through, day-by-day what you should do to launch a side hustle business. It’s a good book, but Chris and I disagree about how to approach contracts.

Day 14: Contract

Chris calls Day 14 “Set Up a Way to Get Paid.” This chapter covers selecting a payment system, creating invoices, and using simple contracts. For your contract, he says you only need to specify what you’ll do, how much you’ll get paid, when you’ll get paid, and “any protections you require.” Chris also says that that you can communicate all of this via email without needing a separate agreement document.

<cringe><shudder>

While Chris is technically right, I would never advise a client to operate their business this way. This is the type of contract that works when nothing goes wrong; however, contracts exist to save you in two situations:

  1. When there’s confusion about the parties’ obligations, and
  2. When there’s a problem or dispute.

Always Have a Separate Written Contract

If there is situation where lawyers are needed to resolve a dispute, the first thing I ask my client is “Where’s your contract?” If it’s a series of emails, and perhaps some text messages, and phone calls or conversations you claim occurred, the first part of my job will be compiling the terms of the agreement.

When there’s a single agreement, all the terms are in one place. And when the contract requires that all changes must be in writing and signed by both parties, it minimizes the risk of confusion or a he-said-she-said situation.

When you don’t have the terms of the contract in a single document, it opens the door for complications in the future. In many cases, it’s more cost-effective to have a lawyer create a contract template for your side hustle than to have to hire one to piece together the terms from the parties’ communications and actions. 

Minimum Contract Terms

In general, I don’t advise people to write their own contracts (unless they have a law degree or sufficient contract experience), but here are the basic terms I’d expect to find a side hustle contract:

  • Parties to the contract
  • Purpose of the contract
  • Payment terms, including what happens if the customer doesn’t pay (e.g. entrepreneurs who require ½ the fee up front and ½ upon completion)
  • Intellectual property terms – related to creation, assignment, and/or license
  • Where and how problems will be resolved, including the venue, jurisdiction, and which state law will govern
  • If/how the parties can make changes to the contract
  • “Entire agreement” – all the terms in the contract are in the agreement
  • “Severability” – if the contract has any invalid terms then the parties will throw those out and the rest of the contract will remain
  • A provision that states if a party chooses not to use a right granted by the contract, they don’t waive their right to use it in the future

When I approach a new contract for a client, I try to mentally walk through the customer’s journey and address the problems that the client is trying to avoid and pre-plan how you want to deal with problems when they occur.

Using a Lawyer for your Side Hustle

If you’re going to have a side hustle, I recommend you sit down with a lawyer for an hour. Tell them your goals and your budget. An understanding lawyer will tell you about the legal issues you need to be aware of, can do a quick trademark search to see if the name(s) you want to use are already registered, and they can tell you want you can do yourself and what tasks you should hire a lawyer to do for you.

A Few Final Thoughts

Thinking about what missteps I’ve seen companies inadvertently commit, here are a few extra tidbits of information:

  • The terms of service for a website, online course, or mobile app are contracts. Write them or have them created with care.
  • Please don’t rip of another company’s terms of service and just change out the company and product names. That’s a recipe for trouble. You don’t want to represent that you do things that you don’t. I’ve also seen situations where the company’s terms of service says that it’s governed by New Jersey law and the company has no connection to that state. (The company they stole the terms from was in New Jersey.)

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Filed Under: Business Law, Internet law Tagged With: , , , , , , , , , , , , , ,

Legal Checklist to Protect Online Entrepreneurs

January 17, 2019 by Leave a Comment
Labib Ittihadul from Flickr (Public Domain)

I was recently asked to create a list of what legal steps an entrepreneur should take if they operate solely online to protect their business. The person who asked appears to be primarily a YouTuber. Here’s the list I created for him: 

1. Consider having Two LLCs. One is a holding company for the intellectual property and licenses the IP to the other LLC to use it. This way if the holding company is sued for infringement, there are no assets to be collected if the holding company loses the lawsuit. We recommend this tactic for many businesses, not just online entrepreneurs.

2. Create an Operating Agreement if the LLC has more than One Owner.  Yes, this includes if you go into business with relatives, best friend, or romantic partner. This is a master document that lays out how the company will operate, each person’s obligations and responsibilities, and how the owners will address problems when they occur.

3. Move your Website to a Server Outside the U.S. The reason for doing is if there is ever a court order against the website, it will be more difficult to enforce if the website is house by a company outside the U.S. and not bound by U.S. law.

4. Register your Trademarks with the USPTO. So many legal issues could be minimized or avoided if every company properly registered their trademarks. This could include company names, product names, event names, logos, and slogans. When you have a registered trademark, you can stop a competitor from entering the marketplace while using a trademark that is confusingly similar to yours. If you have a strong international presence, it may be wise to register your trademarks in multiple countries.

5. Create a Copyright Strategy. Many professional content creators do guest posts for and collaborations with others and allow guest posts on their sites. It’s best to have contract templates for these situations that include clarification about who owns the copyright, what the other person gets, any limitations regarding the content, and an indemnification clause if appropriate.

Additionally, your copyright strategy should address when and how you can use others’ materials. You should have an understanding about fair use and where to look for materials that come with a license to modify the original as well as a license to use it for commercial purposes.

6. Consider Registering your Copyrights. You do not have to register your copyright to get your copyright rights, and you do not have to register everything you create; however, it’s beneficial to have the discussion about what you might want to register. You are required to register your copyright if you want to sue for infringement. Additionally, I frequently recommend registration to people who want to license or sell their copyrights.

7. Create an Action Plan for Addressing Suspected IP Infringement. Decide how you want to respond to suspected infringement before it occurs, so that you or your lawyer can be prepared to respond based on your desired outcome when it happens. Depending on how you want to respond, there may be things you need to do before the infringement occurs to best protect your rights.

8. Have a Contributor Contract Template. This is the contract you will use with people who contribute content to you, your site, your channel, or a social media account. It will state what rights each party has to use the content – most likely that they own it, and they grant you a license to use for certain purposes. It should also have an indemnification clause to protect you in the event you’re accused of violating another person’s IP rights or other legal wrong by using what the contributor provided to you.

9. Have an Influencer Contract Template. This is the contract to use when brands hire you so that the expectations on both sides are clear, and you state that you comply with FTC regulations. (You should probably have internal documents about FTC compliance as well.) Companies that hire influencers may have their own contracts that they want to use, but having your own template will help you analyze their contract to see how well it addresses your needs and concerns.

10. Create Website Terms and a Privacy Policy. These documents may need to comply with U.S. privacy laws, the Canadian Anti-Spam Legislation (CASL), and the General Data Protection Regulation (GDPR), and manage the expectations of visitors to your website. Many of the new privacy laws interfere with how many companies collect and use others’ personal information. These issues are complicated. Many people copy another content creator’s terms and privacy policy, but that could be a recipe for disaster if what you use is insufficient for your needs.

This may not be a complete or comprehensive list of legal steps to take to protect your business. It’s always best to consult a lawyer who understands the legal implications related to your business, preferably someone to specializes in business, intellectual property, and internet law. Hopefully this list gives you a place to start to evaluate your legal needs as a professional content creator or online entrepreneur.

If you liked this post and want to know more about my work, please subscribe to the Carter Law Firm newsletter where I share behind-the-scenes information and readers get exclusive access to me.

Filed Under: Business Law, Intellectual Property, Internet law, Legalities of Blogging Tagged With: , , , , , , , , , , , , , , , , , , , , , ,
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