Law Tips for Makers

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Hello, Makers!

When done right, business helps generate some of the most creative, innovative, and thought-provoking and emotional creations. Business is almost like a superpower— but a teachable and learned power.

That’s where Morehous Legal comes into view. We’re business lawyers dedicated to helping you grow. Working with you to help contain costs and find more business. At the core of a lawyer’s training is our perspective, dedication, and strategizing skills. We’re trained and qualified to think 5 steps down the line, knowing where your trail leads down that rabbit hole.

With that power comes responsibility, and that’s we try to fully understand your perspective. We put ourselves in your shoes. Our passion and experience will hopefully help you grow.

We’ve collected a few helpful questions and answers for makers as a whole. Go ahead and check them out below, and do more of what you love.

All the best,
The Morehous Legal Team

Maker Q&A

Q: What’s the difference between a general partnership and a LLC?

A: The true difference is whether you want your personal assets liable to anyone suing you over your business. For instance, the limited liability company does just that; it’s a company that limits your liability.

For instance, you own your car and your house. You start a business with another person, and you both run it as a general partnership, 50/50. Your business partner commits fraud and is on the hook for thousands of dollars. Guess what? You’re now also on the hook for that sum of money. Even worse, your car and house could be levied and liquidated in order to placate any creditors looking to get their money back.

The same scenario with an LLC, so long as your company’s veil is not “pierced”, would instead protect your personal finances from that creditor’s demands. As a result, that creditor could only recoup whatever monies and assets you’ve placed into the company. Under this scenario, and as long as you didn’t put up your car or mortgage, you can still keep your car and mortgage.

Ultimately, it comes down to the risk profile. LLC’s carry less risk than general partnerships. Indeed, they cost more to maintain and setup — but these costs are marginal compared to the risks in operating out of a general partnership.

Of course there are exceptions to every rule, but this is a steadfast general rule of thumb. If you think you’re the exception, let us know and let us convince you otherwise — regardless of who you hire as your attorneys, if you even hire attorneys.

Q: What’s an IRS EIN?

A: Your Internal Revenue Service Employer Identification Number is essentially the social security number for your business.

Ideally, this number is assigned to the particular name of your LLC, which then gets recorded into your company’s filling when you first register the company with your state of choosing.

If you’re a sole proprietorship or even a general partnership, you can still apply for an IRS EIN. This is particularly helpful (and required) if you’re running a payroll, either as a sole proprietorship or a general partnership.

Your IRS EIN is completely 100% free from the IRS’s website. Simply go here to grab your business’s EIN.

Q: What agreements should I maybe have with outside vendors? For instance, if I hire someone to make a part for me, do I even need a contract?

A: There are a variety of contracts you might need to have in place. Really, it all depends on who you’re hiring, what’s your relationship look like, and where their skill sets and values really come into play, as they fit into your business. Here are some of the most essential agreements that you ought to look into for your business:

Independent contractor agreement. It’s important to clearly distinguish the nature of your employees or team members. Are they payroll employees? Or are they service providers, hired at will? What are the clear expectations for both the success and the failure of any hired help? If anything goes sideways, and your hired help is across the country, can you even sue them in your local state, or do you have to fly out to wherever they live, in order for you to protect your interests? Important thing to note here is that independent contractor agreements can look incredibly similar, or incredibly dissimilar. Really, this all depends on your circumstances and where your risk points are, to both your business and to your relationships with any hired help.

Non-disclosure agreement. Sometimes there is confidential knowledge and information that’s learned or shared in any working relationship, and it becomes incredibly important to manage that spread of knowledge. A non-disclosure agreement can help protect parties appropriately at the right times. A non-disclosure agreement can also “chill” any potential collaborative relationship, and instantly encourage a sense of distrust between any folks working with each other. Also on another note, investors and financiers will typically not sign non disclosure agreements, mainly because of the long-lasting implications of signing such agreements to finding other potential opportunities. Ultimately, be careful with this kind of agreement, both from implementing and from signing this agreement.

Non-compete agreement. In the State of Tennessee, it’s incredibly important for non compete agreements to not be overly broad or burdensome to the individual whom which the agreement seeks to bar from competing. In other words, judges and courts in the State of Tennessee really hate when agreements prohibit ex-employees or independent contractors from making a living in their field and area of expertise. This decision of reasonableness relies on a variety of factors, but namely geographical restrictions and time restrictions. Typically, these agreements will bar someone from competing within X amount of miles radius, within a Y amount of months or years. Your important takeaway here is, don’t just freely sign any noncompete agreement. Make sure you completely and 100% wholeheartedly understand the repercussions of signing something like this. Otherwise, you might be forced to live with the consequences of the agreement, and ultimately suffer financially and emotionally.

Works for hire. Sometimes, it’s incredibly important that you own all the copyright and intellectual property rights that come with hiring an independent contractor. Sometimes, it’s incredibly important for your employer when you’re that independent contractor. A works for hire agreement provides the transfer of copyright interest in an author’s or creator’s work to another individual or entity. Importantly to note that without this, the original author and creator retains his or her copyright in that work produced.

Requirements contracts. Often, you’ll need to purchase parts or supplies that are incredibly important to your business, and you might not order enough. Worst case, you may need to order more supplies in one month, but the supplier wants to charge you an unfair premium for those supplies. Carefully reviewing your supplier contracts and purchase orders can help you manage these risky situations, which can significantly reduce your business’s viability and turnaround time in fulfilling its orders to customers. Ultimately, make sure you have some variances spelled out in any supplier contract or purchase order, in order to protect yourself of an influx, both positive or negative, in your product demand.

Q: Where can a lawyer help me and my business?

A: The best lawyers help you in ways to strategize your business, and identify the riskier parts to things working out.

Once you identify any of the risks in your business model, execution, and or vision and idea, you can start designing around those limitations and flaws. Even more, these lawyers can help you get into situations with all eyes open.

One of the hardest things to being an entrepreneur and business owner is not knowing things that can potentially ruin your business. An experienced lawyer doesn’t know the answers to those pitfalls, but knows the logic and framework in asking questions, where they can help get those pitfalls out of the quiet parts of your brain.

The easiest way through business is not picking fights and going against the current, where you’ll surely be swept away by the currents. The best lawyers can help you strategize around those strong streams, so you can get to where you want, with the lowest amount of risk as possible.

These lawyers are able to take a primarily defensive way to approach law, and turn them into revenue generating concepts and principles for businesses. These are the lawyers that deserve your money and more importantly, your time and energy.
We can always make more money, but we can’t make more time and energy, can we.

Q: What are normal pricing arrangements with lawyers?

A: Lawyers can charge a variety of ways. Typically, transactional attorneys will charge either by the hour, or a flat project fee. Here are the breakdowns of those fee arrangements, along with others that might be able to help you, wherever you are with your business:

Hourly. Sometimes, you might need fairly brief legal review of a purchase order, do-not-compete, independent contractor agreement, or anything else in your business. These kinds of tasks are best to hire lawyers on an hourly basis.

Fixed project fee. This is becoming ever so more common in the legal field. Long story short, if you have a set of legal tasks that need to be performed, and they’re relatively predictable and not novel, then go ahead and ask for a flat project fee. Take entity creations, for example. Most entity creations are vanilla, and can be great value for both businesses and lawyers. Experienced lawyers don’t have to work very hard to get the documents needed for a stellar entity creation matter. At the same time, there’s a tremendous amount of value to a business owner in sitting down, talking things through with a lawyer, and then having them create your entity. Fixed project fees typically work well here; they net the lawyer more money than an hourly arrangement would’ve provided, and they can provide immense value for the business owners in delivering the services.

Rush matters. Sometimes, lawyers and outside vendors don’t understand the rush that you, the business owner and entrepreneur, may have in completing any number of tasks. For any legal services that need to be completed in a fast amount of time, have an open discussion with that attorney about rush matters, and get a firm promise from that attorney on when you can expect delivery of those services. Having that open conversation with an attorney can get you so much value.

Bonus: Do-not-exceeds. If you hire an attorney that’s both experienced in what they do, and passionate about delivering the right service to you, then you should know about do-not-exceeds. Simply put, ask if an attorney agrees to not bill you past a certain amount. That’s it. If the lawyer feels comfortable agreeing to a do-not-exceed, you’ve most likely found a lawyer that feels confident in the task at hand, to know that they’ll be compensated fairly for the work they’ll put in for you. This way, you can better plan your finances and anticipate cash flow. This level of planning and assurances better help you and your business to grow.

These are just a few, and the most common, pricing arrangements you can have with attorneys. This all stems from the concept of open and honest communication, about your needs and about the lawyer’s capacity and experience. Once all of that is out in the open, really productive things can start to happen.

Q: Do I need a trademark? What about copyrights?

A: This turns into quite a conversation. It’s rather simple, but many people don’t get to hear it from a lawyer first. So here are your simple and absolute truths.

Everything you create that gets manifested into some tangible form of representation, i.e. a photograph, piece of art, both 2D and 3D, even a scoring of music, automatically carries copyright to you.

Copyright protects your creative product and prohibits others from literally copying your work, creating other works that directly use your work, or even from making works that seem really close to yours!

The question becomes, do you decide to register your copyright? That comes with certain pros and cons, but we’ll go into that at another time. The most important think to realize is, you automatically have a copyright in 99.99% of things you create, and those are your rights that you own. You literally have to explicitly sign them away, for anyone else to own copyright in your work.
Now trademarks are another form of intellectual property protection for you, the creator. Trademarks can be functional, like the design of a bottle cap or can lid. Trademarks can also be ornamental, strictly on the basis of aesthetic design, like the shape of a bottle or the three NBC notes on TV, or even the Frank Underwood table-knock from Netflix.

To understand the difference between trademarks and copyrights, look to the purpose of the protected work. Trademarks are meant to help consumers understand the origin of goods. It’s the intangible goodwill of a company, the level of recognition, that’s protected by trademark. On the other hands, copyright applies to creative works as an expression of creativity.

In other words, you can register copyrights to gain significantly added protection from others looking to copy what you’re doing, and you can apply for a federal trademark if you’re looking to create a brand that aspires to become a stamp of trust for your goods.

(There’s a lot going on with this topic, but hopefully this helped, at least a little.)

Q: How do I price my creative work?

A: Really depends on where the value is, and how much it literally cost you to produce your work. Let’s work backwards.
Let’s say you’re selling physical goods. What kind of profit margin would you want and expect from each sale? For instance, are you expecting to bank $5 from every candle sold in your Etsy store?

Fantastic! How much do the materials cost you, on average per candle? Did you factor in your time? How about the materials used to ship the candle? How about its label?

Let’s say it takes $3.50 to produce that one candle. Excellent, now we know we should sell that candle for at least $8.50, without shipping and tax.

Okay, that’s great. What about selling your photography prints or other pieces of reproducible 2D art? It comes back to, what kind of profit do you want and expect to make after making that sale.
When you’ve got that figured out, then do a gut check on the market and who you’re selling towards. Will that buyer spend $X.XX on your product? No? Then is there a creative way you can bring your price and cost down, while maintaining your creative integrity and delivering that value to your customer?

Remember, price is the result of someone’s willingness to pay for your good or service. Simple. In order to figure that out, you have to start somewhere and truly listen to how the market reacts. Keep doing that and adjust as you go. You’ll naturally find the right balance.

Have Any Questions?

If you have any questions we haven’t answered here, let us know at hq@morehouslegal.com. We’re always trying to make this better and more informative, so that we can continue helping people and helping bridge the gap between founders and lawyers.

Law Tips for Makers

Get free legal pointers, specifically for makers, sent to your inbox.