Starting a Design Business

Starting a business can be overwhelming and intimidating. Laying a strong foundation for a business from the beginning can help avoid potential legal issues down the line. Designers are most interested in doing the fun and creative stuff. Legal stuff is often uncomfortable, boring and scary. But it doesn’t have to be that way. The law is there to protect you and not something you need protection from. It’s better to be proactive in business rather than reactive. If you are a designer or creative and are starting your own business, there are a few legal steps you should take to fully protect yourself and your business:

I. Set up a legal structure

Setting up a legal structure separates the business owner’s personal and business assets and liabilities and protects the business owner from the liabilities of the business. Most solopreneurs or small businesses believe that they’re either too small to register their business or are not generating enough revenue to formalize their business. The no. 1 reason you should register your business is because you want to create a separation between your personal assets and liabilities and those of your business. If you don’t then you’re on the hook for everything that your business does. If someone decides to sue you or you cause damage to someone’s property or someone gets injured while they’re on your property, you are 100% responsible for paying to settle those issues. If something happens to your business and someone sues you for a million dollars and your business does not have the money, then they can take your car, home or any other personal assets to pay it off.

Some business structures available to you are sole proprietorship, partnership, C Corporation, S Corp. and limited liability company.

Picking the right fit for your business will depend on the type of business your run, whether you are concerned about liability, will you hire employees or contractors, if you are going to draw a salary from your business as a way of lowering self-employment taxes, are any of the business owners non US residents, do you want to raise capital from investors, do you anticipate giving equity to investors or employees. All of these are important considerations to discuss with your attorney to help you determine what’s right for you.

II. Create Legal Contracts

Handshake deals and pinky promises may have been cool when we were growing up. They seem easy and hassle free, but they just don’t cut it in the business world. If you are in a service-based business, a client service agreement is an absolute must have. It governs the relationship between you and your client. It is not only a promise to the client regarding what will be given to them, but also serves as a protection for you as a designer and your hard work. Not having a written contract can lead to disagreements, disputes, uncertainty, and ambiguity.

I recently had someone contact me about getting her contract reviewed. The person who contacted me, let’s call her Stephanie, is an interior designer. She had an issue with one of her clients where the client wasn’t paying and she had to get a lien on the client’s property and all of that cost her more time and money than it was probably worth. She had been using a contract that one of her colleagues in the industry had given her. She asked me if I could review her contract and give her an estimate on how much it would cost her to revise it. I reviewed her contract and saw that it was more like a proposal than an actual contract. Of course, it was missing important language addressing payment terms, her services, deliverables and timeline because of which she landed up in the situation. She asked me to send her a template of what a contract looks like. So I emailed her one and she immediately responded that a contract was too formal and not in line with the kind of clients she deals with. She said that she was afraid she would scare away a potential client and lose out if she gave them a contract.

The fact is that contracts have the opposite effect. They don’t scare away clients but make both parties feel secure because they know exactly how much they are paying or getting paid, and what services they will get and perform for the amount contracted for.

III. Secure your Intellectual Property

As a creative, the most important intellectual property right that you may be confronted with is copyright. Copyrights automatically attach as soon as a work is created. Getting copyright registration over creative works has some benefits – enforcement of rights against people who steal or copy the work, creates licensing opportunities, and it creates a public record of the work. While working with clients, copyright ownership in the works created is dictated by the contractual relationship between the creator and the client. You can license the rights in your work, in which case you keep your copyright. Or you can assign copyright to your client, or you may be creating the work as “work made for hire”. In both these cases it means the copyright in your work belongs to the client. The terms under which you part with your copyright are entirely yours to negotiate, but once an agreement has been reached you may need the client’s permission to use your designs again. Regardless of what rights you’ve given your client, you should ensure that you retain the rights to show the work as your own in your portfolio. If you don’t, it could come back and bite you.

At Nupur Shah Law, we help with trademark strategy, applications and prosecution. We help with reviewing your work and determining the best possible protection available to you.

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