3 Legal Basics of Running a Creative Business
It’s all fun and games until someone gets hurt. If you’re ignoring the legal responsibilities of owning your own business, it’s like swimming with sharks—sans that cute little cagey-thing. You can ignore the hazards for awhile, but eventually you’re going to be missing a leg. (Hey, hey, metaphorically speaking… these are fake sharks we’re dealing with right now.)
Protecting yourself, your business, and your assets is a must in a world that only increases our visibility by the click. But, yeah, yeah, I know, the legal junk is boring, so we ignore it. (Do you like your legs? I hear that fake Jaws soundtrack starting up…)
Whether you’re just starting out or need to get in line, pronto, there are three places you need to focus your legal energy today.
Small Business Legal Basic #1
I love seeing all the collaboration going on in the creative industry today. But as a creative attorney, I have to wonder if everyone is protecting themselves as they should. A collaboration or joint venture contract is essential for creatives who decide to work together. It designates the responsibilities of each partner, helps to maintain confidentiality and outlines the liability each party has.
Of course, if you’re just starting out in business, you’ll also need a client contract that protects you if your client disappears without paying or is unhappy with your services. It can be difficult to know if you’ve done this correctly yourself, even if you’re the best Google searcher in the world. Grab my free contract checklist (HERE) to find out if your contract is legit, or where it could use some improvement.
Small Business Legal Basic #2:
Your Business Structure
Forming a limited liability company (LLC) protects you, the business owner, from bad stuff that happens during the work day—you know, like when you really shouldn’t have let your employee borrow your car—and debts, aka all the credit card bills you've been racking up with the latest online courses you just had to have (#guiltyascharged). So if your company is sued, you’re not dipping into personal bank accounts and assets to pay off the debt. The bottom line: You could lose your business, but still have a place to live and a car to drive.
Small Business Legal Basic #3:
Whether you’re raking in the dough or barely squeaking by in your business, you need to have a handle on your bookkeeping. I know, I know, I’m rolling my eyes at MYSELF. At the very least, keep your business checking and savings account separate from your personal bank accounts. Save receipts from all of your business expenses and hire a bookkeeper if you have trouble reconciling your accounts. Your CPA will thank you (aka, you won’t spend so much money with them), and you won’t have to be surprised by an untimely audit. It’s way easier to cleanly say, “here ya go Uncle Sam” if he comes a knockin’ than it is to freak out a la Britney Spears circa 2007.
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