Making Your Band into a Brand: Does Your Band Need an LLC?

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While it’s not strictly necessary, an LLC can help your band. Whether you’re rocking out with your audience in a packed concert or recording a new song in a quiet studio, there are certain risks and responsibilities your band may encounter. An LLC can help to limit those risks and protect the interests of your band and its members.

What is an LLC?

A Limited Liability Company (LLC) is a company that can be essentially anything you want. Once established, the LLC can operate as a full legal entity separate from any members, owners, and employees. You can think of it like a person. In much the same way that you are a legal person when you’re born and given a social security number, an LLC becomes a legal “person” when it’s made.

What does this mean for your band?

As a legal entity, an LLC can do everything a person can do: make contracts, own intellectual property, sue and be sued. All of these can be helpful benefits for your band.

Contracts

With the ability to make contracts under its name, the LLC will be the party responsible for executing the contract. You may sign the contract under the authority of the LLC, but you will not be personally responsible. This means if you cannot pay or otherwise perform under the contract, the LLC is responsible instead of you. Others may sue the LLC for breach of contract. Even if they sue the LLC and take all of its property, they can’t come after your personal property. Only in very rare and egregious circumstances will they pierce through the LLC to reach you.

Intellectual Property

LLCs can also help to keep your intellectual property organized. You can set it up so that the LLC (and not the individual members) owns all the copyrights to your music. This will make it easier to share profits and reduce friction between band members over who owns the copyright and who receives the royalties.

Dissolving the LLC

If your band ever breaks up, you can dissolve the LLC. The law provides automatic and simple processes for the dissolution of an LLC and the distribution of any remaining assets. This can help you avoid conflicts between band members.

Other Benefits to LLCs

Clarifying Expectations

Like we said before, an LLC can be essentially anything you want it to be. You create it by filing articles of organization and creating a legal contract called an operating agreement. You can do whatever you want within this operating agreement. One benefit is that you can assign individual band members, managers, agents, and other people specified roles, responsibilities, and benefits. This can help to clarify expectations and let everyone know what to do. And, in the event that someone can’t or won’t live up to those expectations, the operating agreement can provide a remedy for you.

Fiduciary Duties

LLCs create what lawyers call “fiduciary duties.” Fiduciary duties exist between the members of the LLC, and between the members as a whole and their employees, managers, and officers. This means that everyone must act with:

  1. A duty of loyalty—They will not exploit the LLC and its members for personal benefit or for the benefit of a third party.
  2. A duty of care—They must do their best in good faith to advance the interests of the LLC as a whole.

Let’s say a manager becomes a member and starts to exploit the LLC for the record label’s interest. That person has breached their fiduciary duty and can be sued and expelled from the LLC. They must then return any assets they took and provide compensation for any damage they have done.

Better Credit Options

Because LLCs can form contracts, they can have credit scores. This can be helpful, especially if your own credit score is not so good. If you wanted to, say, lease equipment, you may not be able to do so under your own name. The LLC can have better credit than you or any of the other band members. Many businesses actually prefer to give financing to business entities rather than individuals.

Tax Benefits

Finally, there are tax benefits for LLCs. As a business, you can “write off” the costs of doing business, the depreciation of instruments and other equipment, and possibly even the costs of promoting and advertising yourself (though this may vary). You would not be able to do this as an individual when filing your taxes, unless you can honestly claim you’re fully self-employed as a member of the band.

Also, the LLC—just like a person—pays its own taxes. If the LLC makes money, it pays corporate taxes. You only pay whatever income comes through the LLC to you as part of your income taxes. This means you can “hold” money within the LLC and wait to distribute it to yourselves until the right time (like when taxes are lower).

Call Cornerstone Law Firm for help.

As you can see, there are lots of great benefits to forming an LLC for your band. If you’d like to set up an LLC, call Cornerstone Law Firm. Our attorneys have experience with drafting operating agreements and other organizational documents for lots of LLCs. We can help with yours too. Give us a call today to set up a consultation!

3 Ways to Protect your Company’s Intellectual Property

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When you have employees sign agreements with your company, it’s important that you keep in mind how those agreements contribute to protect intellectual property. As a general rule, employers who employ someone to work at their company do not have any right to restrain those employees from taking with them their knowledge or skills gained at the company. If you have sensitive intellectual property that you don’t want exposed to a competitor, what should you put into your employee agreements when someone starts? Can you add something to their employee agreement after they’ve started if you realize you didn’t have it in writing already?

Here are 3 things that we recommend putting in your employee agreements:

1. Confidential information clause.

Many employee agreements include a confidential information clause. This section of the agreement restrains the employee from using confidential information in future employment. It’s important to note that Pennsylvania law restricts the scope of these clauses to information that is truly confidential. Although not in Pennsylvania, a story that illustrates this point comes from Chicago courts, where Jimmy John’s had all its employees sign confidential agreements in an attempt to keep them from competing at other sandwich shops in the future as employees. This was held to be a violation of the law, in that there was nothing confidential about making sandwiches.

Similarly, you can’t just say that your information is confidential: you have to have something that is worth protecting. This “thing” that you want to protect could be a trade secret, a confidential process or even something like a customer or employee list. Confidentiality clauses are great, but they only protect that which you are already protecting. This is why it is best to supplement your confidentiality clauses with protection on your server and computers, as well as an employee handbook that reminds employees of the types of information that they are not to share with outsiders. In some cases, courts will even allow you to enforce this once they leave and go to another company.

2. Work for hire clauses.

Employees who work for you and come up with an invention, even on company time, may still be able to claim that they have ownership of rights of the invention. That’s why it is important that employers have a clause in their contract that says that anything that is invented in the scope of their employment belongs to the employer. Once again, as above, this is not a catch-all clause. The property that is being referenced must be something that was actually invented, and not merely some new way of doing something that is already in existence. An employee who is increasing their skills or doing better at the job that they are assigned has not invented something just because they have a better a way of doing it within the company. However, if they’ve invented something brand new, something that no one else has ever thought of, something that’s new both inside and outside of the industry, a work for hire clause can ensure that the invention belongs to the company and can only be used by the company in the future.

Courts have traditionally upheld these restrictions, especially where patents are involved. Having a work for hire clause in the agreement allows the company to be owner of the patent, rather than the individual or team that worked on it. This is also why it is important to have standard employee agreements across your whole company. If several people collaborated on the idea, it is important that all of them have signed some form of this agreement.

3. Trade secrets.

What happens when you discover something that can’t really be patented but which is a secret in your industry? Maybe it’s a special technique that no one else has figured out, a special recipe that’s impossible to reverse engineer or duplicate, or a complicated piece of machinery that is only used at your company? Your company may be able to restrain others from using it by claiming the trade secret doctrine. Trade secrets are a complicated area of law and they are claimed far more commonly than they are able to be proven. Nonetheless, if your company really does own something that is a secret, protecting it becomes vitally important. That is why you want to have an agreement with your employees that identifies the trade secrets and makes it clear to the employee that the employee can’t use it outside of the scope of the company’s employment, including once they leave. Such agreements are enforceable but are strictly construed against the employer.

Can I require existing employees to sign new agreements?

This brings us to an important question. What if you’ve been working with certain employees and you become concerned that they may use your intellectual property or leave your company? If that’s the case, it is still possible to have those employees sign agreements, but courts have generally held that you have to offer the employees something new—something more than ongoing or continued employment—in order for them to be legally enforceable. Some employers will offer a bonus for those that sign the agreements and others have offered promotions and a raise. It is important that any such contract be supported by some additional consideration that the employee was not entitled to already.

Conclusion

Contact the business lawyers at Cornerstone Law Firm to support your business. If you own a business with intellectual property, it’s important that you have lawyers who understand the world of IP, including copyrights, trademarks, patents, trade secrets and more. At Cornerstone Law Firm our business attorneys have litigated these cases to the highest level and can explain the ins and outs of your situation to you. Contact us today for a consultation on your business needs and let us help you figure out how to protect yourself now and in the future.

Does it have to be Notarized?

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We are often asked by clients whether it matters if a certain document is notarized. Under Pennsylvania law it is a very rare circumstance that a document must be notarized. The reason a notary stamps a document is to confirm that the signature is from who it purports to be from. This means that if Bob Smith says that they signed the document, the notary has checked the ID of Bob Smith and confirmed that it is indeed Bob Smith.

Beyond that, a notary stamp does not prove anything about a document. It does not prove whether the document is legally binding, whether it’s valid, whether there are defenses to it, or who is at fault for not upholding the contract that it is on.

Notary stamps are typically strongly recommended on wills because the person who signed it will not be alive when it is testified to. Notary stamps are important on Power of Attorney documents because of how important the powers are that the person is giving away. And, of course, banks and insurance companies often require documents to be notarized before they are mailed in to prove that it really is who is signing it, since they won’t meet the person.

Beyond these situations notary stamps really aren’t required. This is common question that we get. “I signed this document, but it’s not notarized. Does this mean I can get out of it?” The short answer is no, at least not because of the lack of a notary stamp. Now none of this means that getting something notarized is a bad idea, but simply that it does not in and of itself make a document any more binding than it already was.

If you are looking to dispute a document, notarized or otherwise, Cornerstone Law Firm can help. Contact us today for a consultation.

Contract Basics: The Pen Actually Can Be Very Mighty

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You would be hard-pressed to find an adult in the United States who never has signed a contract. You rent an apartment; you sign a contract. You enroll your children in daycare; you sign a contract. You borrow money for school; you sign a contract. You join a gym; you sign a contract. This does not include the plethora of subscription services so common these days like entertainment streaming, cell phones, music services, product delivery services and so many more. We execute many contracts without a second thought, but not all contracts are created equally. Signing on the dotted line for that hotel room or rental car does not carry the same weight as entering into an agreement to buy or sell real estate, but the legal obligation you create when doing so remains the same.

Although the law is concerned where a contract is procured through fraud, misrepresentation, or duress, the courts aim to preserve our autonomy to contract with one another freely. The law does not concern itself with whether the terms of the agreement are reasonable or whether any party possessed enough knowledge to enter the agreement. The parties to any contract can have different levels of sophistication, and bargaining power might be unequal, but each one is legally bound to know the terms of the contract entered. The stroke of that pen comes with a duty to understand the document, and that is where many fall short.

Contracts can be difficult to understand simply because of the manner in which they are drafted. The legalese in many standard provisions can seem unintelligible to most, and some contracts will contain dozens of these confusing terms. However, ignorance is no excuse under the law, particularly when an agreement contains a provision indicating that the parties agree that its terms are fair, just, and reasonable. It is customary for contracts to contain such provisions which serve to cut off future challenges to that contract by one manner or another. These can be explicit waivers of rights, such as waiving your right to a jury trial to resolve future disputes, or implicit waivers like the one above. When you agree in writing that the contract is reasonable, you waive your right to challenge its reasonableness in the future even if you did not understand what you were signing.

While most would think to enlist the help of an attorney for contract drafting or negotiating, contract review is just as important. Agreements involving large sums of money or long-term obligations are most critical. A 5-year service contract can look great today, but circumstances can change for either party over that long a period, and that must be considered. An agreement requiring a sizable non-refundable down payment could result in a great loss if the agreement falls through for a reason other than a breach. From lawn service contracts to pre-nuptial agreements, any legally binding document must be reviewed thoroughly to ensure that you understand both your obligations and your rights under it.

Whether you need a contract drafted, negotiated, or reviewed, the experienced attorneys at Cornerstone Law can help. Contact us to schedule a consultation today.

Copyright Clearance in Self-Publishing

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Self-publishing is a growing industry and an incredible opportunity for authors to get their message out without the interference of a publisher or publishing house. But self-publishing also comes with a number of legal dangers, including copyright infringement. If you are using images that you yourself did not create, whether photos or drawings, then this article is for you. Here are a couple tips on how to avoid copyright issues when publishing a book.

1. Fair use does not mean what you think it means.

A common response to these copyright concerns is to say that fair use will protect you in your use of images. If your book is educational in nature, fair use is especially tempting. But there are a few things you should keep in mind. The first is that fair use does not just mean what you think is fair. It is a complex legal doctrine that relies on four factors, and the way these factors are analyzed by courts is not always the way you might expect them to be. For example, the “educational” nature of a work is more complex than simply saying it teaches something. And even if you don’t expect your book to sell many copies, its commercial nature already puts judges in a skeptical position on a fair use claim.

A second thing to keep in mind is that fair use is a defense. That means it is only implicated when you are being sued. For most individuals being sued means you have already lost. The costs and stress of a lawsuit are enough to overwhelm most people and persuade them not to move forward. Such parties often settle or pay out the demands from someone who claims they were aggrieved in the copyright process. In short, do not simply rely on your understanding of the factors that you look up online in considering fair use. It is important to have a legal opinion before you rely on it in publishing photos.

2. There are more sources than ever for photos you can use.

Just as self-publishing has lowered the barrier to entry on publishing documents, there are more places than ever to obtain legitimate free photos to use without paying royalties or without fear of a lawsuit. Please note that Google is not one of these places. Rather, it is important to go through legitimate vendors who secure the rights to photos and can provide print licenses for their use. Of course, you can also obtain photos through other sources, such as through local artists or designers who can create work for you.

Conclusion

Publishing a book is an exciting opportunity, but it can come with legal dangers. Be sure to consult an intellectual property lawyer for sound opinions on what photos you can use and what ways to avoid potential legal trouble. At Cornerstone Law Firm our copyright attorneys can view manuscripts for you and give advice on civic photos and whether you can use them. Contact us today to set up a consultation.

When a Contractor Doesn’t Finish the Job

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Cornerstone Law Firm offered a legal tip to Redfin on how to handle things when a contractor doesn’t finish a home renovation project.

“If you find yourself in a situation where a contractor has not performed as agreed upon, you have legal remedies. You can first reach out to your state’s Attorney General’s office and file a complaint. The office will investigate the claim and encourage the contractor to remedy the issue if your complaint has merit. If this doesn’t work, you can file a complaint at a local District Court, which can handle judgments up to $12,000 and is designed to be accessible to the public. You can also research other options to take against licensed contractors who don’t honor their contracts. For example, Pennsylvania’s Home Improvement Consumer Protection Act provides strong statutory language against contractors who fail to abide by the requisite legal requirements in entering into and completing home improvement contracts.”

For an extensive overview of ways to deal with unfinished renovations, read the full article here on Redfin’s blog.

 

How Businesses Use Small Claims Court to Save Money

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One of the best kept secrets in business law is how companies can use small claims court to save money. In Pennsylvania, Magisterial District Courts (sometimes called “MDJs” for the Magisterial District Judges that sit in them) act as our small claims’ courts. Learning to navigate them can save time and money. MDJs have concurrent jurisdiction with the county Courts of Common Pleas for claims up to twelve thousand dollars, meaning you can file your claim in “big court” or in the MDJ.

Suing Without an Attorney

When small businesses have minor claims against business associates or customers who haven’t paid bills, the MDJs are a great venue to consider. Going to court in an MDJ does not always require the services of an attorney. Technically, any corporate entity, whether an LLC, a corporation, or similarly otherwise, is required to hire an attorney. This is because a corporate entity cannot represent itself the way an individual can. A corporate entity is technically a separate person. However, in practice, most MDJs allow a business to be represented by an owner or other representative pro se. As a practical matter, this means that businesses can pursue overdue bills, deadbeat tenants, and contract-breaching business associates without the expense of hiring a lawyer.

Of course, there are many benefits to having a lawyer, but even businesses that utilize the services of a corporate attorney will seek advice from this attorney on a specific case before deciding whether to undertake filing the suit and handling it themselves.

Small Claims Court is Quick

Another reason that small businesses utilize small claims court in Pennsylvania to save money is because the process to file in the MDJ is fast and leads to a hearing usually within around sixty days. Compared to filing in the Court of Common Pleas (the court that governs a county), this is lightning speed.

The MDJ will have one day of hearings, without any “discovery” process for producing documents between the parties, and without the litigation that accompanies the months of waiting on a response. MDJs don’t require complicated pleadings, and typically make a decision the day of the hearing or within a few days thereafter.

Small Claims Court gets the attention of your adversary

A final benefit to the MDJ process is that it is typically a simple way to get someone’s attention. It shows that you’re serious about collecting an overdue bill and triggers them to pay an attorney or at least respond. If they fail to show up to court, judgment is issued against them. Although you have the right to appeal from an MDJ decision within 30 days, as a practical matter, it often ends disputes and allows the parties to settle in the courtroom.

Conclusion: Call us for advice on how to handle your MDJ hearing

Our attorneys have helped business clients with hundreds of appearances before MDJs, and we’re ready to help you.  Call us at Cornerstone Law Firm today to discuss how your business could save money by utilizing small claims court.

May 2021 Update

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May 2021 has been filled with trials and advanced litigation for the attorneys of Cornerstone Law Firm. On the civil side, attorney Joel Ready spent time litigating a partnership dispute in Lehigh County court, giving advice to several businesses to avoid personnel and human resources litigation, promulgating discovery in personal injury cases based in Berks County and preparing for a summer of trials. A number of Cornerstone Law’s criminal clients were able to obtain trial dates this month, allowing them to finally pursue their innocence in a proceeding before a jury.

On the transactional side, several businesses hired Cornerstone Law Firm to draft contracts and to create new bylaws and other operating agreements for their businesses and nonprofits. These ranged from employment agreements to more complex inter-business cooperation agreements, and also agreements to resolve potential areas of dispute between rival businesses.

Attorney Crossett has been involved in several mediation for personal injury clients, obtaining settlement for car accident victims and those injured in other accidents. Furthermore, Attorney Crossett has finalized complex land deals this month for clients with conflicting real estate claims.

At Cornerstone Law Firm we are happy that the world is slowly getting back to normal, and we are looking forward to the nice weather in the summer months!

The Importance of Putting it in Writing

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One of the most common causes of legal disputes is the failure to get an agreement, however small, in writing. Today, on the Cornerstone Law Blog, we want to tackle why it is so important to put your thoughts in writing when you and a friend or business associate are agreeing to a contract.

To begin with, it’s important to note that agreements are typically binding even if they are not in writing. Contrary to popular belief, most oral agreements are legally enforceable—if you can prove them (although there are exceptions, such as when dealing with land, with contracts for goods over a certain price, and in certain industries such as home improvement).

So why is it important to get your agreement in writing if it can be enforced even without a written document?

Why get it in writing?

  1. The most important reason is it is hard to prove what an oral agreement was for.

    Unscrupulous parties can lie about what was agreed to, and even when everyone is being honest, people’s memories tend to fade surprisingly quickly. Relying on someone else’s memory to agree with your own is a recipe for disaster in enforcing your contracts.

  2. Misunderstandings are harder to smoke out and deal with when a contract is not written down.

    It may sound funny, but there have been many lawsuits litigated over something as simple as the meaning of “here.” If someone agreed to bring a product “here,” where is “here?” If the agreement was made over the phone, one person may have assumed that “here” meant someone’s home, when in fact they meant their business some many miles away. Sometimes this type of disagreement can be cleared up easily, but in other cases it can be a mistake that can cost substantial sums of money.

    The point is this: without putting something in writing and taking the time to clarify simple points of misunderstanding, you can end up in a contract dispute that neither party brought about by their malice or ill will.

  3. It helps you to think about things that you weren’t really considering when you first made the contract.

    If two people get together and agree orally to a “handshake deal,” they may not be thinking about questions such as, “What happens if a pandemic shuts down the world and one side can’t deliver the product because the government won’t allow it?”

    And what happens if there is a good-faith dispute over the contract? Do the two of you first have to go and deal with it in front of a board of arbiters, or do you go straight to court? And which court? Where can you be sued? What do you do if a labor shortage or a war in another country suddenly makes it impossible to get the raw materials necessary to produce the product you’ve ordered? 

There are hundreds of potential questions that a good transactional lawyer can help you to work your way through. Even without the involvement of a lawyer, there are things you may think of as you put the agreement in writing that will help you to confront potential misunderstandings and disagreements that will cause problems down the road. 

How can you put it in writing without being overly difficult?

Sometimes business owners in particular are concerned that continually putting contracts in front of their clients or customers will cause them concern and will scare them off of working with them further. In most cases, this concern is not well-founded.

Most customers understand and even appreciate the time that you will take to put things in writing. But if they don’t or if you are concerned that the time necessary to reach a written agreement will make it difficult for you to continually get new contracts drafted, one approach is simply to put everything into an email or even a text message.

Once again, putting everything in writing will help you to confront disagreements that may arise between you and the other party. In most cases, it is best practice is to say, “Are you in agreement with all of these things?” at the end of the email (or something to that effect). Getting them to respond back will in many cases create a binding written contract between you two. 

Note: this article is not meant as legal advice.

There are specialized areas of law where a simple email or text message is not sufficient. It’s important that you talk to a lawyer about your specific concerns. But in the meantime, we hope that the tips in this article will help you in your day to day business and personal affairs to ensure that your contractual agreements are being memorialized in writing.

For help in drafting or reviewing contracts, contact Cornerstone Law Firm today.