Bill Bernard, Author at BOTTLED BUSINESS SENSE

COHABITATION PROPERTY RIGHTS FOR UNMARRIED COUPLES

When unmarried couples live together for a while, it is likely that they accumulate a good amount of property. In this case, it is in each person’s best interest to write out a property agreement that spells out who owns what and how the property will be distributed should the couple separate. This is especially important if a couple acquires real estate together. On the other hand, this agreement is probably not necessary for couples who have only lived together a short time and do not have much property.

Without an agreement, you could face expensive and time consuming legal battles, defending your property rights. This trouble can be saved by each party entering an agreement they both consent to, while the relationship is sound.

WHAT A COHABITATION PROPERTY AGREEMENT SHOULD INCLUDE

A cohabitation property agreement is about you and your partner, and therefore, should include what meets the specific needs of your relationship. Most agreements include the following:

How specific assets are owned
Whether, and how, income and expenses are shared
How newly acquired assets are owned?
How bank accounts, credit cards, insurance policies, etc. will be managed
How specific assets will be distributed in the event of a separation, or what process will be used for resolving disputes of property rights

HOW TO COVER YOUR HOUSE IN A COHABITATION PROPERTY AGREEMENT

Because buying a house together is such a huge financial responsibility and can carry emotional ties with it, including the purchase of your home in your cohabitation property agreement is particularly important. Take extra care with your plans to ensure that you do not cut yourself short of your property rights. This part of your contract should cover at least the following:

How the ownership is listed on the deed of the house. If you own the house as “joint tenants with right of survivorship,” when one of you dies, the other automatically inherits the entire house. If you own the house as “tenants in common,” when one of you dies that person’s share of the house goes to whomever he or she names in a will or trust. If the deceased person does not have a will or trust, his or her portion of the house will go to blood relatives according to state law.
How much of the house each partner owns.Additionally, you should include how any portion of the home can be transferred between the partners. For example, if the one who owns less can acquire more by making improvements or mortgage payments, this should be specified in the agreement.
The buyout rights, if any, and how the house will be appraised. Usually, people decide to have their original realtor appraise the house. Then, they allow one partner no more than five years to pay the other partner for the home. This varies, and should be specified to your own specific needs.
What happens to the house if you break up. Decide how the proceeds will be divided upon a sale, who will stay in the house if it is not sold, or what your buyout plan will be.
Eviction: The law in most states says that if someone has been living with you for a certain number of months, he or she has a legal right to live there (even if the person isn’t on the lease or deed). You have to go through a formal eviction to remove the person from the premises. You will have to go to your local courthouse to file a “Complaint for Eviction” or something similar.

Support Payments:

Many people use the term “palimony” to refer to support paid to an ex-partner when the couple was never married. Palimony is not a legal term and carries no legal significance. In fact, members of unmarried couples have no rights to support, unless the two have previously agreed on it. To avoid a tense disagreement about palimony, it is in the couple’s best interest to include whether or not support will be paid in a written agreement. Recently, the California Supreme Court ruled that an ex-partner could sue for support if he or she could show that an implied contract existed between the two.

Importance of Including Income in a Cohabitation Property Agreement:

Creating a cohabitation property agreement in the beginning, while the relationship is still sound can avoid a lot of tension, disagreement, and hassle should the couple break up. Property that is owned separately could be changed by the circumstances or by one of the partners claiming that there was an agreement to something, when there really was not. This becomes even more important when one of the partners makes significantly more money and supports the other partner who has little or no income.

Example: Pat and Sam are unmarried partners who decide to move in together. Pat is a successful surgeon, and Sam is unemployed. They use Pat’s income to purchase a home that Sam will fix up. To protect their individual property rights, just in case they break up, they decide to enter into a written cohabitation property agreement. In the agreement, they decide that after Sam completes the home improvements according to the couple’s plans, they will become joint tenants with the right of survivorship. They also agree that all furniture and fixtures that they place in the home will be owned and divided equally, should they break up. Their agreement explains that if the couple breaks up, that Sam would remain in the house to care for their child, but that Sam will compensate Pat for Pat’s portion within 5 years. Aside from this house payment, no support or other payments will be exchanged between the couple.

Liability for Debts:

Unmarried partners are not responsible for each other’s debt unless they have a joint account or one is a cosigner or guarantor for the other. This is different from married partners who can be held liable for marital debts. In some states, registered domestic partners are responsible for all debts acquired for basic living expenses, like food, shelter, and clothing.

Property Rights of a Surviving Cohabitating Partner:

A surviving partner has no property rights to the deceased partner’s individual property – unless a partner leaves property to the surviving spouse by will or trust. Now if the couple owns real estate as joint tenants with rights of survivorship, then the surviving partner will inherit the deceased partner’s half. But as you can see, these are very specific examples.

Some states that recognize domestic partnerships do have rights to inherit a portion of the deceased partner’s property. However, the best way to provide for the surviving partner is by leaving a will or living trust.

Need More Information About Property Rights? Get a Free Legal Consultation.

Property agreements are very important and useful tools for protecting the property rights of unmarried, cohabitating partners. The agreement should be designed according to the couple’s specific situation. If your certain circumstances are complicated or you have questions about how your property rights can be affected by your relationship, consult WFB Legal Consulting, Inc.–lawyer for bussiness today for a free initial legal consultation. A BEST ASSET PROTECTION Services Group.

HOW DO I KNOW IF I AM AN EMPLOYEE OR INDEPENDENT CONTRACTOR?

There is no set definition of the term “independent contractor” and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In handling a matter where employment status is an issue, that is, employee or independent contractor, California starts with the presumption that the worker is an employee. Labor Code Section 3357. This is a rebuttable presumption however, and the actual determination of whether a worker is an employee or independent contractor depends upon several factors, all of which must be considered, and none of which is controlling by itself. Consequently, it is necessary to closely examine the facts of each service relationship and then apply the law to those facts.

For most matters before the Division of Labor Standards Enforcement (DLSE), depending on the remedial nature of the legislation at issue, this means applying the “multi-factor” or the “economic realities” test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:

Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
Whether the work is a part of the regular business of the principal or alleged employer;
Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
Whether the service rendered requires a special skill;
The kind of occupation, regarding whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
The length of time for which the services are to be performed;
The degree of permanence of the working relationship;
The method of payment, whether by time or by the job; and
Whether the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877)

LAWYER FOR BUSINESS: WFB LEGAL CONSULTING, INC.—A BEST ASSET PROTECTION SERVICES GROUP

WHEN AND WHY SHOULD YOU REVIEW YOUR ESTATE PLANNING DOCUMENTS?

It is very important to periodically get out your estate planning documents and review them. You can pick a date that will be easy to remember such as your birthday, the beginning of the year, or a particular holiday, and do it every year. Everyone has changing circumstances in their lives, so for your planning to most benefit you and your loved ones when the time comes, keeping your estate planning documents up-to-date is important.

Very common issues that lead to the need to review estate planning documents are the birth or passing of family members, a need to change your fiduciaries (Executor, Attorney-In-Fact, Medical Agent, Trustee) due to the named agent’s passing, incapacity, or personal situation that prevents them from serving such as an illness in their own family or a relocation to another state, change in marital status, etc.

When drafting documents, it is important to name successor agents, so that during your incapacity such changes will already be addressed, but if you have capacity and are aware of the unavailability of your first named agent it will serve you and your family best to update your documents to have a valid first and second, and possibly even third choice, particularly in the case of an expected long term incapacity or a long term trust.

Likewise, if you have minor children and you have named a guardian for them in your Will, it is very important to review often to make sure the family you have named is still the best situation for your children, considering the demands on that family, any special needs of you children, relationships and school districts, etc.

Also, when initially doing your estate planning, hopefully, you coordinated all beneficiary designations with your Will or Trust terms. Oftentimes people change jobs, or their bank merges with another, etc. and life insurance and retirement plan beneficiary designations need to be made. It is important to review your documents and maintain consistency. For example, if your Will directs your assets to a revocable trust you don’t want to negate that credit shelter planning by having the new beneficiary designation go directly to your spouse.

There are a multitude of situations that could create the need for review, including anytime real property is purchased. This is particularly true of property purchased in another jurisdiction or investment property. In those cases, you may wish to review your ability to avoid probate. Each and every property you own outright is subject to probate in its local jurisdiction at the time of your death, but there are methods of avoiding probate in multiple jurisdictions such as having an entity (i.e. trust or LLC) own the property, or if a joint owner with rights of survivorship (i.e. your spouse) survives you.

Another issue to consider is whether your spouse or child (or other beneficiary) has developed a special need, which could be medical, emotional or financial concerns who would benefit from leaving them assets in trust rather than outright. Trusts can be included in the terms of your Will or be written within a separate trust document that will remain private at your death, and with the help of your attorney can be drafted to meet whatever needs your particular situation requires.

Finally, the law often changes, and this can drastically affect estate planning. Our firm holds an annual estate planning seminar, which is complimentary, in order to alert our clients to any changes in the law that may affect them. If it has been many years since you reviewed your documents, it is wise to make an appointment with your attorney to discuss any changes that might need attention. We recommend never going more than five years without reviewing your documents with your attorney, preferably review would take place every three years.

HOW TO CHOOSE A BUSINESS LOCATION

When you start a business, how do you choose the location? The answer depends on your type of business, your customer base and how you sell. For some types of businesses, such as retail stores or restaurants, you need a physical location located where most of your customers are. For others, such as service businesses or ecommerce companies, your physical location is less important, and you have more flexibility in your choice. Here are some factors to consider when choosing your location.

What does your business do? Do you need space to manufacture, store, package and ship products? Then you may need an industrial space. Is most of your work “knowledge work,” such as consulting, which takes place on a computer? Then you can work from just about anywhere.

Where are your customers located? If you plan to sell your products or services online, it doesn’t matter where your customers live since they can buy from you wherever they are. On the other hand, if customers must physically visit your location, this can rule out options such as working from home, since many zoning ordinances prohibit home-based businesses that attract too much traffic.

What materials, vendors or suppliers will you require? Do you need to be physically close to sources of product, or to key vendors? For example, if you need materials to produce a product, the cost of shipping them to your location can be prohibitive if you’re located too far away from your sources.

What’s your budget? If you’re on a shoestring budget, lower-cost options such as working from home, sharing office space or subleasing space from another business. or renting a spot in a co-working space could help you save money.

Will you have employees? If you plan to hire employees, you’ll need space to put them, which will require some type of commercial location. You’ll want a space that is configured appropriately for the layout you need, is handicapped-accessible so you don’t get into trouble with local zoning authorities, and requires minimal if any modifications before you move in.

What type of infrastructure do you need? When choosing your location, keep in mind factors such as Internet access, electrical and telecommunications services. For example, some older buildings aren’t adequately wired to handle the needs of a high-tech company. Along the same lines, your home may not have the Internet access speeds you need to run a home-based business effectively.

What’s on the outside? Don’t forget to assess the exterior of any location you are considering. Who are the neighboring tenants, and are they complementary to or competitive with your business? Is there enough parking for employees and/or customers? Is the location near major highways and/or public transportation so employees and customers can get there easily, and if you need foot traffic, is there plenty of it? Are the common areas well maintained and up-to-date?

WFB LEGAL CONSULTING, Inc.–LAWYER for BUSINESS

A BEST ASSET PROTECTION SERVICES GROUP

THE REALITIES OF SOLE-PROPRIETORSHIPS

Contribution by Mark Kohler

What is a Sole-Proprietorship? A Sole-Prop is the simplest form of doing business. All you need to do is just start selling your product or service. No Tax ID# (“EIN”) is required. No Doing-Business-As Registration (“DBA”) is required (although recommended for marketing purposes). No bank account is required (although recommended for bookkeeping and audit protection). No extra tax return required. All of your income and expenses are reported on your 1040 Tax Return- Schedule C.

The BIG Problems with Sole-Proprietorships:

Tax planning to avoid self-employment tax. One of the primary disadvantages of a Sole-Prop is the Self-Employment tax of 15.3% on your net-income generated by the business. This blindsides a lot of new small business owners with a big tax bill in the Spring of the following year. Again, the tax benefits of owning a small business are fantastic! But after you write-off all of your ‘personal conversion expenses’, and the business still has profit, the SE Tax will kick in on everything else. However, if you don’t have a lot of net-income, don’t worry about the Sole-Prop and consider your next issue with your professional.

Liability exposure from your product, services or location. Another primary disadvantage of the Sole-Prop that most people are already aware of is the owner’s personal exposure for the liabilities of the business. Thus, carefully analyze where the risks exist and if you indeed have exposure. If you do, you may want to consider setting up an entity even if it is unnecessary for tax purposes or any other reason. A strategic option is setting up an LLC, but taxing it as a Sole-Proprietorship. This way you get asset protection with an LLC, but don’t have the cumbersome tax reporting of a S or C-corporation. However, if you are running a zero to low exposure business, forget about setting up an entity and move onto the next level of analysis.

Anything GOOD about a Sole-Proprietorship?

Simple and easy (nothing to sign. Just say it- “I’m in business!!!”)
In business NOW (test out your product and service)
No State or Federal Filing (a DBA may not even be necessary)
No Bank Account (however I would like you to set one up separate for the business)

What if I have a partner or investor in the business? If you have a partner or investor in your business, it’s almost a given you will form an entity rather than operate as a Sole-Prop. Simply by definition, if you have a ‘partner’ than you will be taxed as a partnership, need to file a partnership tax return, and have the personal vicarious liability exposure for your partner’s actions. Not to mention you will want to document your relationship with those individuals you are doing business with and be careful not to open yourself up to a lawsuit with a ‘hand-shake deal’.

Where you live and do business does matter. It’s important to realize that if and when you set up an entity, it’s absolutely critical you establish the entity in the state where you are doing business. If you don’t, more than likely you won’t receive any benefit from the structure. As such, when you do your cost benefit analysis, look specifically at your state and it may be more advantageous to operate as a Sole-Prop. For example the filing fees for an entity can be extremely high in states like Texas, or Illinois, and the on-going minimum tax for an entity can be too expensive in states like California.

Business goals and marketing plans. If you are investing in a robust marketing plan and working hard to ‘brand’ your company name or product. Setting up an entity initially may be a wise move to protect your name (at least in the State where you are doing business). Starting out as a Sole-Prop may be cheap and easy, but could cause you some money and headaches to re-brand and start over later. Moreover, you may want the legitimacy and image of having something more established like an LLC or Corporation and forming an entity would be more strategic than looking like a start-up in the garage doing business under your personal name as a Sole-Prop.

Administrative costs and demands of setting up an entity. If the costs of setting up and maintaining an entity far outweigh any benefits they offer, than a Sole-Prop makes could be the perfect fit. If you don’t have a tax, liability or partner issue, this is when using a Sole-Prop tends to make the most sense.

I often tell clients that unless there is a major liability issue, starting out as a Sole-Prop is a great fit. Don’t get too complex too quickly. Make sure the business concept is viable and making money before investing in a more advance structure.

Bottom line action items:

If you anticipate making more than 30k in net-income before year-end, consider the S-Corporation.
If you have liability exposure, consider a single member LLC to create protection, but the simplicity of tax reporting as a sole-proprietor.
If you have partners or investors, consider an LLC so you can avoid the vicarious liability for your partner’s actions, and have the Operating Agreement for the LLC to document the ‘agreement’ between each of you.
If you need the credibility and image of a formal ‘Inc’ or ‘LLC’ behind your name and plan to invest in your brand and image, staying away from the Sole-Prop could save you a lot of headaches down the road trying to re-brand your company name, etc.

BEST ASSET PROTECTION SERVICES GROUP

WFB Legal Consulting, Inc.

Lawyer for Business

UNDERSTANDING THE IMPLICATIONS OF DEFINED VALUE CLAUSES IN ESTATE PLANNING

Taxpayers sometimes employ a so-called “defined value clause” (“DVC”) in connection with a gift of property that is difficult to value, such as an equity interest in a closely-held business. In the case of such a gift, the value of the business interest – the amount of the gift – is never really “established” for tax purposes unless the IRS audits the gift tax return. DVCs are aimed at such audits.

What is it?

A DVC may be used where the donor seeks to keep the value of the gift at or below his remaining gift tax exemption amount. In the event the IRS successfully determines that the value of the shares of stock (or partnership units) gifted by the taxpayer exceeds the taxpayer’s available exemption amount, a DVC provides that some of these shares or units would be “returned” to the taxpayer, as if they had never been transferred.

The IRS has challenged DVCs as being against public policy, on the grounds that they enable the donor-taxpayer to retroactively adjust the number of shares transferred, depending upon an IRS challenge years after the transfer. However, a number of courts have found that DVCs are acceptable where the “excess” amount was not returned to the donor but, rather, was redirected to a charity. (Alternatively, some taxpayers have directed that the excess be used to fund a zeroed-out GRAT.)

The IRS very recently announced its intent to issue regulations on the use of defined value clauses by estate planners. The use of defined value clauses to mitigate gift tax impact on the transfer of hard to value assets has long been an item of IRS scrutiny. While the Service has lost a number of tax court challenges to defined value clauses, the Service’s decision to include these clauses on the 2015-2016 Treasury Priority Guidance Plan Project nevertheless demonstrates its intent to continue to pursue limits on their use.

Several different types of defined value clauses commonly used have nevertheless withstood IRS scrutiny, utilizing both formula allocations and price adjustment clauses. Critical to structuring a defined value clause is ensuring that the transfer was implemented properly and that no pre-arrangement exists between the transferor and the transferee.

More recently, however, the Tax Court in Wandry, T.C. Memo. 2012-88, approved a DVC where the “excess” was returned to the donor, and not to a charity. In that case, the taxpayers gifted LLC interests to their issue, but instead of stating the number of LLC units being transferred, they phrased the gift in terms of “that number of units which had a value equal to the taxpayers’ remaining exemption amount” (in other words, a fixed dollar amount). If the appraised value of the LLC interests was successfully challenged by the IRS as too low, then the number of units originally calculated as having been gifted (on the basis of the taxpayer’s appraisal) would be adjusted downward, to reflect the greater value per unit determined by the IRS, and the donor’s relative interest in the LLC (post-gift) would increase. The Tax Court ruled that what the taxpayers had gifted was LLC units having a specific dollar value – the exemption amount – and not a specific number of LLC units.

The Wandry decision may encourage more taxpayer-donors to employ DVCs, notwithstanding that the IRS did not acquiesce in the decision. Before doing so, however, it is important that taxpayers look beyond the immediate transfer tax consequences of such an arrangement. They also need to consider various income and other gift tax consequences that may result from an adjustment triggered by a DVC.

Closely-held businesses, the transfers of interests in which are the usual target of DVCs, are often formed as pass-throughs such as partnerships, LLCs or S corporations. A gift transfer of an interest in such an entity carries with it certain “tax attributes.” For example, every member, including the recipient of the gift, must include his allocable share of the partnership’s income on his income tax return, whether or not the entity distributes such income. If the donor-member had contributed built-in gain property to the partnership, a portion of the donor’s income tax liability as to such built-in gain shifts over to the donee-member as a result of the gift; on a subsequent sale of the property, a portion of the built-in gain would be taxed to the donee. In addition, if the pass-through entity makes cash distributions to its owners, the donor and the donee would each receive an amount in accordance with their respective pro rata shares (before any Wandry-adjustment). What if the original transfer was treated as a part-sale/part-gift because it resulted in a reallocation of partnership debt among the members?

Because the Service will likely move forward in scrutinizing the construction and implementation of defined value clauses, estate planners must ensure such clauses are properly constructed and strictly implemented according to the terms. Accordingly, some of the questions to ask your estate planning professional when structuring defined value formula clauses in order to avoid gift tax consequences on asset transfers, are set forth below. Simply, you want to avoid transfers that will trigger gift tax imposition.

What are the grounds for IRS challenges of defined value clauses?
What types of defined value clauses have failed to withstand IRS challenges?
How to best structure defined value clauses
How to structure defined value clauses involving non-taxable entities other than public charities

The foregoing highlights some of the issues that need to be considered before embarking on a gifting program which depends upon the use of DVCs. While a DVC is a useful estate planning tool, it does not lessen the need for a solid appraisal. Moreover, as with all estate planning in the context of a closely-held business for example, the donor and his beneficiaries have to consider the possible ancillary consequences of their gifting decisions.

SIMPLE “FEHA” DISTINCTION BETWEEN RACE HARASSMENT v. DISCRIMINATION

To prove a violation of FEHA (Fair Employment and Housing Administration Act) for race discrimination (Ca. Gov’t. Code §12940(a)), you have to prove that you suffered an adverse employment action because of your race and that you suffered damages therefrom.

Alternatively, to prove a violation of FEHA for race harassment, (Ca. Gov’t. Code §12940(j)(1)), you have to prove that you experienced severe or pervasive conduct or comments based on your race that changed the fundamental nature of the workplace environment, rendering it hostile to you based on your race.

Conceivably you could have damages for harassment while working and other damages arising out of the adverse employment action, such as a termination for example.

INTERACTION BETWEEN SPENDTHRIFT & DISCRETIONARY TRUSTS TO OBTAIN BEST ASSET PROTECTION GOALS

A spendthrift trust is a kind of trust that limits or altogether prevents a beneficiary from being able to transfer or assign his interest in the income or the principal of the trust. Spendthrift trusts are sometimes used to provide for beneficiaries who are incompetent or unable to take care of their financial affairs.

If a trust incorporates a spendthrift clause, the beneficiary is precluded from transferring his interest in either income or principal. Accordingly, the beneficiary’s creditors will not be able to reach the beneficiary’s interest in the trust.

The protection of the spendthrift trust extends solely to the property that is in the trust. Once the property has been distributed to the beneficiary that property can be reached by a creditor, except to the extent the distributed property is used to support a beneficiary. If a trust calls for a distribution to the beneficiary, but the beneficiary refuses such distribution and elects to retain property in the trust, the spendthrift protection of the trust ceases with respect to that distribution and therefore the beneficiary’s creditors can now reach trust assets.

A trust is called “discretionary” on the other hand, when the trustee has discretion (as to the time, amount and the identity of the beneficiary) in making distributions. Because the trustee is not required to make any distribution to any specific beneficiary, or may choose when and how much to distribute, a beneficiary of a discretionary trust may have such a tenuous interest in the trust so as not to constitute a property right at all. If the beneficiary indeed has no property right, there is nothing for a creditor to pursue. The statutes that follow this line of reasoning essentially provide that a trustee cannot be compelled to pay a beneficiary’s creditor if the trustee has discretion in making distributions of income and principal to begin with.

If the trustee of a self-settled trust (where the creator of the trust is also a beneficiary of the trust), has any discretion in making distributions, then the creditors of the settlor (creator) may reach the maximum amount that the trustee may distribute in his discretion to that particular settlor-beneficiary.

Consequently, when a trust is self-settled, to obtain any asset protection for the settlor, discretionary powers should be avoided in favor of a more desirable standard, emphasizing the fact that the trustee “may” exercise his discretion in designated allowable types of distributions, but only if he/she so chooses.

WFB LEGAL CONSULTING, Inc.

A BEST ASSET PROTECTION SERVICES GROUP

7 LEGAL STEPS YOU MUST TAKE BEFORE OUTSOURCING CONTENT CREATION

Identify your content needs.

In order to hire great content creators not to mention put together the kind of contract we’ll discuss shortly, you have to first define what types of content you need.

For example, you could include:

Weekly blog posts
Social media updates
Guest blogging
Email marketing
Pay-per-click ad copyrighting

Identifying the specific types of content needed may not appear to be a legal step. However, at the outset, these are incredibly important things to consider, all of which will enable you to outline both your job advertisement and various aspects of your contractual agreement.

Assign copyright.

The act of simply paying someone does not automatically turn over copyright of that content to the end user. Unless you specifically list the terms of use in your contract, the content creator maintains ownership of that content. In this case, you only have an implied license, therefore, you’ll need express permission to re-purpose any of that content for other things, such as turning a blog post into an eBook or social-media posts.

It’s also important that you consider protection against indemnification for images or content that may be the property of others. At the end of the day, you will be responsible if the content published on your site or in your materials is found to breach copyright law.

For text-based copy, using a service is standard practice. But with image attribution, this is particularly difficult, since there’s no good way to test the copyright short of either buying the rights or waiting for an angry digital millennium copyright act notice from the infringed-upon owner.

3. Clearly outline outsourcing requirements.

Be as specific as possible when outlining requirements so that freelancers know your expectations, including bench-marking and measuring success or failure. You may also want to include a Service Level Agreement that clearly outlines performance details and standards.

Consider legal liabilities in your content.

You may need to take further precautions if the content you’ll be outsourcing is subject to any regulatory requirements. For instance, if you’re publishing medical content or financial advice, you may need to include relevant disclaimers or ensure materials produced meet certain standards to protect yourself legally.

If the content you publish on your website is something you could be held legally liable for, be sure your outsourced creators are able to meet any necessary requirements.

Preparing in advance for termination.

Ideally, you’ll find in a freelancer a long-term partnership for your content creation needs. But since turnover is inevitable, it’s far better to protect yourself up front. Your termination clause is hugely important, as it sets forth the conditions under which the customer may exit the outsourcing relationship.

The termination clause needs to outline the common reasons that give rights to you and your company to exit the clause along with the rights of the contractor. It’s also wise to include both party’s respective rights upon termination with regards to ongoing privacy and protection as well.

Put it all in a contract.

Once you’ve covered all your legal bases, document them in a formal written contract that both you and your freelancers will sign. In most cases, it’s a good idea to consult with an actual lawyer to do this.

Take out an insurance policy.

Last, it’s definitely worth investing in an insurance policy when it comes to protecting your legal rights as a content creator and purchaser. At the end of the day, you need to be prepared for any legal ramifications that could occur from the content you publish, or, at the very least, be fully aware of who’s liable for anything that may occur.

Though the Internet has blurred the rules and lines concerning outsourcing, it’s best to stick to guidelines and follow the rules to protect yourself. If you have any doubts, always consult a lawyer.

FIVE WAYS TO SABOTAGE YOUR LIABILITY PROTECTION AFTER INCORPORATION

Many new business owners understand that incorporating or forming a Limited Liability Company (LLC) helps shield a business owner against being held personally responsible for their company’s liabilities and debts. This is known as the corporate shield or corporate veil as it separates your personal assets from those of the business.

Liability protection is not absolute and there are several instances where a business owner can be personally liable in business despite the fact he or she created a business entity.
Here are five of the most common ways this can happen:
1. Negligence and Personal Liability
In many situations, the limited liability protection from an LLC or corporation will not shield you from being liable for your own personal negligence. A person is typically liable for his or her own personal conduct when that conduct injures someone else. For example, if an electrician installs some wiring in a customer’s home and forgets to cap a live wire, the electrician can be personally liable if someone gets electrocuted. Likewise, if you’re driving to a client meeting in a company car and are negligent and hit someone, you can be personally liable for any injuries and damages.
2. Fraud
If you make untrue claims about a product or service, this is considered fraud. For example, if you’re marketing a milkshake supplement and guarantee that customers will shed 20 pounds per month just by drinking it, this could be a clear case of misrepresentation or fraud. If you claim that your glass container is BPA-free (when actually it does contain BPA), this also is fraud. In such cases, both the manufacturer as well as the company selling the product may be liable.
3. Personal Guarantee on Business Loans
When you first start your business, many third parties and creditors won’t be willing to do business with your LLC or Corp, as the entity is brand new and probably does not have a lot of assets or hasn’t built its own credit history yet. As a result, a bank or landlord may require the business owner or LLC member to “personally guarantee” a loan or lease. If you sign such an agreement, then you will be personally liable for those specific obligations.
4. “Piercing the Corporate Veil”
Many new business owners form an LLC or Corporation and then continue to operate their business as if that business entity didn’t exist. It’s very important that you follow through with all corporate formalities required for your LLC or corporation. For example:
• Pay your business’ state and federal taxes
• Don’t commingle your personal and business finances
• File your annual report (if required by the state)
• Keep up to date with your corporate minutes and resolutions (if necessary)
• Record any changes with ‘Articles of Amendment’ (if necessary)
• Have a board of directors and hold annual meetings of shareholders (if necessary)
You’ve got to make sure that your corporation or LLC remains in good standing. Why? Because if your business happens to be sued and the plaintiff shows you haven’t maintained your LLC/Inc to the letter of the law, your corporate veil is pierced and you can be personally liable again.
5. Conducting Business Out of State
If you’ll be conducting business in a state other than the state where you formed your corporation or LLC, you will need to obtain authority to do so. In most cases, this entails qualifying as a Foreign Corporation or LLC within the state that you will be doing business. Specific licenses and permits may also be required for certain types of businesses as well.
For example, let’s say you run a small software development company based in Nevada and your company serves clients located outside Nevada. At this point your company is most likely not considered to be operating out of state. However, once you open a small development office with a few employees in California, your business will probably be considered to be doing business in California and you will have to file a Statement and Designation by Foreign Corporation form with California.

Author: Bill Bernard