Are you a maker or creative who sells online or at events? Are you wondering if you should copyright or trademark your work? Or if you should form an LLC? Watch this video! In EPW Live 009, the 9th video of the EPW Live series, attorney Elizabeth Potts Weinstein shared:
- The differences between copyrights and trademarks, including when each apply in your work.
- What you need on your website, whether you are selling products or just have a “brochure” website.
- Government & other documents you usually need to sell at events and fairs (even if you are from out of town).
- Three factors to consider when deciding if you need an LLC (limited liability company) or if you can just stay simple (for now).
Full Transcript Hey, everybody. It’s Elizabeth Potts Weinstein, and this is Legal 101 For Makers and Creatives. If you have any questions as we go along, whether you’re watching the recording or whether you’re watching live version right now, feel free to ask it in the comments. I will answer the questions either as we’re doing it live, or I’ll come back and answer them later. Sometimes, I don’t actually see the questions in real time, so if I don’t answer it live, I’ll come back and answer it later. Hi, Erica.
First, I wanted to address who this is for. First, this is for people who are makers, creatives, artists, artisans, people who are making some kind of creative product. I’m not really gearing this towards service providers. This is for people who have a business where you’re making a thing, some kind of product. It may be something that is a hand‑created product. Eventually, you may actually have factories that makes the products for you, but right now it may be something that’s handmade. That’s how this is geared.
Second, I’m an attorney here in California, in The United States, but a lot of what I’m covering is applicable to people everywhere, because there are general principles that apply. Trademarks, copyrights, these are things that apply to business owners all over the world. I’m going to be talking about most of these topics at a relatively high level. When there are things that only apply to people in The United States, I’ll let you know.
Also, even if you are operating right now in Canada, or in Australia, or wherever you are, it may be that someday, you may grow bigger. You may decide that you want to sell your products online. You may want to have a distributor in the United States. You may want to go to a trade show in the United States. It’s important to become aware of what issues you’re going to eventually need to deal with, whether they’re in The United States or just in another country in general. Having that in your radar for the future is a good idea, even if you don’t need it today.
Let’s go ahead and get started talking about all these different topics, because it’s a lot of different things we can cover. The first is about copyrights and trademarks. What are the differences between copyrights and trademarks? When did they come up for you as someone who is a creative person? Copyright is something that all of you will be dealing with, because you’re already dealing with it even if you don’t know. A copyright is automatically created as soon as you create something that is tangible. Tangible could be a physical thing that is a created, or an electronic thing that is saved. You write a book in a Word document, you save it on your hard drive, or you take a photo and you save it as an electronic file on your camera. The second you create that, you have a copyright rights in it. However, you can register that copyright with the copyright office in your country and get more rights. What rights you get of course you get depends upon your country and who the office is, depends upon your country.
Here in the United States, it’s United States Copyright Office. How it works in the US, is that if you want to be able to sue anyone, you have to register the copyright. Of course, you can register the copyright right before you want to file a lawsuit. If you register the copyright within three months of your creation of that creative thing, you have the right to get statutory damages. That’s really helpful, because it could be hard to prove what your damages are if someone steals your stuff, especially if you haven’t made any sales yet. The statutory damages are fixed damages that are actually in the statute, so you automatically get those. It makes it very helpful.
Registering your copyright is not something that you necessarily have to hire a lawyer to do. Sometimes you want to hire a lawyer for the first time to help you navigate that, but a lot of people just do it themselves. It’s a bit of logistics, but it’s something that you can do online or something that you can also do via paperwork, filing it via mail, but that’s much more expensive in some cases. How much it costs depends upon what you’re doing. Typically, it’s $35. How it works depends upon what kind of copyright, what kind of thing you’ve created. It’s a little bit different whether or not it’s electronic files like photography or where you’ve written a book, or whether or not you’re an artist who’s created art work or a mini statue, that’s an individual, one copy of things, whether you’ve created a design for something. It’s going to be a little bit different in how you do it. It’s something that you can go on copyright.gov, for example, if you’re in the United States, and it has instructions on how to do that. That is something that a lot of people can just do themselves. You want to get into the habit of doing that, and create a process for how you do that in your business.
One of the great advantages of copyright law that’s going to apply to you the most, because a lot of you are not going to go on suing people. One of the great advantages of copyright law is the DMCA Takedown. If someone copies your work, you created this amazing product, and then someone steals your design, and starts selling it on eBay, they start selling it on Amazon. They take your photos, and they just put them on Facebook, or whatever. You may want to utilize a DMCA Takedown Notice to stop them from doing it. That can be a lot easier than having to file a lawsuit. I’m not going to go into all of the details of DMCA Takedown, but the important thing for you to know is that you don’t have to actually go to them, you go above their head. If they are posting stuff on Amazon, if they’re posting stuff on eBay, if they’re posting stuff on Facebook, you don’t have to go to them, you go to eBay, Amazon, Facebook. It’s a great tool that you can use, so that’s something to be aware of. Trademarks.
Some of you are going to utilize trademark content, if you want. It really depends upon how you’re doing business. Trademarks are the words, phrases, can be graphical elements, symbols, even sometimes be smells, and sounds, and all kinds of abstract things that you use in conjunction with the sale of a product or service. For example, the word Nike, or even the little swoosh thing for Nike. It’s something that customers associate. They associate that symbol or that word with the source of a product in their heads. It’s from the perspective of the customer. Some of you may not have a trademark, really, because you have these products that you sell and the trademark just maybe your own name, and maybe your name isn’t distinctive enough to really trademark. Some of you may have a very distinctive name, they actually could trademark. That’s a whole giant topic that we could talk about.
Some of you may have a distinctive brand that you’ve come up with, and so that may be your trademark. Some of you may have multiple things that you can trademark, multiple different brand names. It’s not necessarily the name of your business, it’s not necessarily the name of every single product you have. What is your trademark? It’s something that a lot of times we would need to talk about it detail. It depends upon the particular business. Typically, it’s something like Nike. It’s something that encompasses entire line, or entire brand, not just one product usually. You have some automatic trademark protections in United States under state law, in places where you’re actually making sales, for as long as you make sales, but it only as in those places. If you’re selling your product in your hometown, and at this trade show, or whatever. In those towns, you have some trademark protection, but not in the next state, because you haven’t many sales there yet, or maybe [inaudible 9:24] couple states, because you made sales online, but not in all 50 states.
The idea of registering a trademark with the Patent and Trademark Office, is then you get dibs in all 50 states on that name. Now, one of the big difference is logistically between copyrights and trademarks is that copyright registration is automatic as long as you fill the form right, you get it. Trademark is different, trademark office actually examines your trademark. There’s a person, an examiner who looks at your application, and decides whether or not you deserve a trademark. Every trademark does not get through, and there is somewhat of an arbitrariness [laughs] to whether or not they get through. Sometimes a trademark should get through, and it doesn’t, sometimes I’m surprised that one gets through. It’s not something that’s a guarantee and it costs a lot more money. This is not something that costs $35. Whether or not you need a lawyer, a lot of people need a lawyer to help them through this. Some of it is because there are technicalities that you can easily mess up and also because there is a strategy to it. There are things about it that are not logical, that are bizarre, frankly. [laughs] It is a strange little art. If you’re thinking that you might need a trademark, it’s something that is a complex question.
I also have clients who are in other countries who are now importing into the United States who decide to get a US trademark. Sometimes it’s shocking to them how the process works here. It’s very different than other countries. In other countries, it’s more kind of like how a copyright works, where it’s kind of automatic, where here in the United States, it’s an examination process. That’s the difference between copyright and trademark, and it’s important to think about how those two dynamics work in your business. The next thing I want to talk about are websites. Some of you may have a website. You may not have a website at all yet. Some of you may have a website that really is just a brochure website, and what I mean by that is a website that just kind of talks about the products that you have, you can’t actually buy anything on your website, and then some of you may actually sell your products on your website.
The second thing that you may want on your site is a set of terms that is applicable to what you’re doing, and where the people who are on your site actually agree to those terms, especially if they’re actually buying products from your site. If you just have a brochure website where the only thing someone can do is look at your stuff, maybe they can sign up for an email newsletter, but that’s all they can do, you don’t actually sell stuff on your website, you might want to have a set of terms that just says, “Please, don’t steal my copyrighted mark,” or something like that, but that may be all that you have. This is more addressing the people who have actually selling products. If you’re selling products on your site, I see a lot of people have some kind of page that describes what their refund policy is, that kind of thing. Most people have something like that.
I think the biggest place it’s going to come up for a lot of you, and I’m seeing a lot of this lately, is in charge‑backs on credit cards. Let’s say someone buys your product, then they come back 45 days later and say they want a refund. You say, “Look, my refund policy is 30 days, it’s been 45 days, I’m not giving you a refund.” Then they do a charge‑back on their credit card because they’re mad. You may or may not actually give them a refund, who knows, but you are sticking by it for whatever reason. You want to be able to go to Visa or American Express or Stripe or whoever is your merchant account, or PayPal, and say that this is your policy and they didn’t go by it. You want to be able to point to how they agreed to those terms. I’m seeing a lot of charge‑backs lately.
The idea is that the more you can show that they agreed to those terms by the fact that they clicked a box, by the fact that there was a place where they actually had to agree to those terms, that you actually had terms and conditions, the better. It makes it much more likely that you’re going to be able to prove that up to your merchant account. That’s why I think it comes up for people the most. The next topic I want to talk about are the government documents and other things that you may need if and when you’re going to be a vendor at an event, things like that. This isn’t just about government documents, it’s other things too. For many of you, you may start out selling your products in person at an event. In the beginning, it may just be local events. Eventually, you may be traveling to other places. This is where it comes up a lot is you may have it down in your location what documents you need.
You may be shocked [laughs] when you go to a different state or different country by what things you may need in that other place because it may be radically different than what you need in your location. It’s good to just be aware of the types of things that will come up. First, if you don’t have this already, especially for those of you who are starting up very small at the very beginning, I highly recommend that everybody have a EIN, an Employer Identification Number, even if you’re a sole proprietor. This is something that’s free. You get it instantly online from the IRS.gov website if you’re a company, for those of you who are in the United States and have a Personal Social Security Number. If you’re from another country and you’re going to be at an event in the United States, I highly recommend you have a tax ID number for your business before you get here and deal with getting that because you’re going to probably need it.
It may be a bit of a rigmarole for you to get. It’s totally possible to do. I can give you a link from a company that helps businesses that are outside the United States get tax ID numbers. You have to pay the company to do it because they help logistically, but you don’t have to pay the IRS as far as I know. The idea is that this is just a number. You don’t have to actually pay taxes to get the number. This is just an identification number that doesn’t give away your personal information. It’s a number for your business to have. You don’t want to have to give your personal social security number to anybody, random people. You don’t have to give it to the event host. You don’t want to have to fill up forms all over the place with your personal social security number. You want your business to have this number even if you’re a sole proprietor. That’s one of my first tips for everyone, especially in the beginning when you’re starting out. What documents are you going to need if you’re going to be a vendor at an event or have a table at an event?
First, in some locations you’re going to need to have some kind of business license or permit if you’re going to be a vendor selling things. I say in some locations because it really depends. Most likely, the event is going to tell you these things by the way. It’s just good to be aware that they’re coming because it may take you time to get them. You may get a bunch of ducks in a row to get them. Some states, some counties, some cities require it. Some don’t. Sometimes, you only need the permit if you’re selling certain things, if you’re selling food, for example. Sometimes, everybody needs it. Sometimes, you only need it if you’re going be doing business activities in that state for a certain number of days per year. Sometimes, everybody who does anything for any amount of time needs it. It really depends, but something to be aware of. The second thing’s whether or not you have to deal with sales taxes just by being a vendor.
In some states, even if you sell anything or even take orders to deliver later, because you have a physical presence of taking order in that state, you have to have a sales tax permit or whatever they call it in that state because it’s enough access for that state. In some states, sometimes you don’t even have sales tax. I think California is like 15 days in that state. It will only be you have enough days. Some states obviously don’t have sales tax. Every state has its own set of rules. The event most likely will tell you what that is, but you’d want to find that out before you’re going to a new state. The third thing ‑‑ and this isn’t a state law thing, this is more of something that you may want to think about getting ‑‑ is liability insurance. Most likely, the event place is going to require you to have a vendor’s coverage policy.
They’re going to want to be named on the policy. This is something that you want to have set up before [laughs] you are ready to go to events. You’re going to want other business insurance too to cover if someone steals your laptop or whatever at the event. If someone comes into your booth and they trip and fall inside your booth, that’s one of the things that it covers. Business liability insurance is not that expensive. It’s really important when you’re doing things in person. That’s just general advice for everybody. When you’re doing this in person, you never know if some random person is going to break their leg in your physical space. That’s what this is covering. It’s important for you to have but also a lot of events are going to require that you have it, so good to have that arranged ahead of time. Last thing I want to talk about is when do you need an LLC or a corporation. I get this question a lot because there’s a lot of articles out there, blogs and what have you, that say every business should be an LLC or corporation. If you’re a legitimate business, this is what you’d be.
The answer is it really depends in the very, very beginning of a business. It depends on a couple of different factors. I want you to think about it from three perspectives. The first is from a very practical perspective of your business. Looking at your business, is that do you need to be an LLC from a marketing perspective? Some of you may be not selling directly to consumers, not making most of your money selling directly to consumers. Maybe you’re actually going to be selling wholesale to bigger companies who are actually going to put your products in stores. They may need you to be a corporation or an LLC. You may need to be that way to appear bigger on the contracts when you’re dealing with legal, whatever it is. You need to do that to make those deals work, then that’s what you need to do.
I have people who sell products and people who sell services who are dealing with big companies where they form LLCs or corporations purely for that. From a marketing perspective, it can make a lot of sense to be an LLC or corporation. I wouldn’t necessarily do that at the very beginning unless you know that’s going to be your strategy. It really depends upon your product and what you’re doing. The second issue is from a liability perspective. Managing liability, the risk that someone’s going to buy your product and injure themselves somehow, or they’re going to walk into your booth and break their leg, this kind of stuff. There’s a lot of ways to manage that. One of the ways we already talked about is insurance, right? There’s other ways to manage it too. Another way to manage it is by having terms on your website. There’s a lot of ways to manage the risk of your business. Having an LLC or corporation is just one more way to manage risk. It depends on what you’re selling. Are you selling things that people could possibly injure themselves with?
Some of you may be selling food products. You may be selling lotions or beauty products, things that are actually more likely for someone to potentially be harmed versus a sweater. How could someone harm with a sweater? I don’t know. I guess maybe it can catch on fire. I don’t know what they could do. I’m a lawyer, so I can make up something. The idea is that there’s some products that potentially have more risk for harm, could you theorize something much more easily than other products. It also depends upon do you have employees or not along with the liability. If it’s just you and you’re the only person in the business, you can control everything that’s going on in the business because you’re the one doing everything. If you have 10 people working for you, one of them may go off and do wacky things. You can’t watch everybody all the time. The person going off and doing wacky things, saying who knows what to vendors, saying who knows what to customers may cause liability for you before you can fix it.
Once someone has employees, typically, you want to be an LLC or a corporation because both the liability of the employees suing you when you have fired them or whatever as well as the liability for them doing wacky stuff. Of course, if you have 10 employees, you can afford to be an LLC or corporation most likely. The third thing is the financial issue like I was getting to. It does cost a little bit more to be an LLC or corporation, both the forming of it, which isn’t that expensive. It does cost something even if you do it yourself as well as the ongoing administrative cost. Corporation is a little bit more than an LLC. If you’re in the United States, an S corporation, you’re going to have ongoing tax filing cost.
By the way, you can be an LLC that is taxed as an S corporation. It can be even a little bit more complicated. That’s a thing you can ask question about. I can go into more details about it if you want. It can be worth those extra administrative cost if you’re making enough money in your business where you can benefit from the tax savings of being an S corporation. If you’re making 10 grand a year on your business…I say making, I don’t mean the gross income of your business. I mean you’re personally taking home 10 grand a year. The extra administrative costs aren’t going to make any sense. You’re not going to save any taxes by being an S corporation. If you’re taking home $100,000 a year, then the tax planning options that you’ll get from being an S corporation will be great. There’ll be a lot of things you can do. Right now, we’re in a place here in September where the government may be changing how the tax structure works for S corporations. When you’re watching this recording, [laughs] I have no idea exactly how this will work in the future.
How it works right now is that there’s two different ways S corporation can take money out. You pay yourself a salary, or you can pay yourself dividends. The idea is that you can tax yourself. You have money that comes out as ordinary income tax and then money that comes out where you’re paying yourself. Still ordinary income tax, but you don’t have to pay self‑employment on top of it. How that works in the future may be different. It may be that this money is being paid to you as more like dividends of a corporation that you own, like on the regular stock exchange. We’ll see how that works. That gets into a lot more technicalities.
Also, we don’t know what’s going to happen with tax money in the future. The short answer for that is for a lot of people who aren’t making in the high five figures or six figures, it’s not a big tax savings. It’s more about whether you need to be an LLC or corporation for marketing purposes and whether or not you need the liability protection.
That’s all I have to say today for the Makers and Creatives Legal 101. If you have any questions let me know. You can go to elizabethpw.com for a ton of free information, blog posts, videos. All kinds of things. One thing I wanted to let you guys know about. If you ever have quick questions, just a couple questions you want answered because you’re stuck on some legal issues I have these quick calls that are 15 minutes for $100. That’s just a really great way to get a few questions answered, so you can get unstuck on some legal issues. If you go to elizabethpw.com you can find out some more information about that. I hope this was helpful for you guys. I’ll see you guys next time. Bye‑bye.