Legal IM Questions -Round 4

Mont, these threads of yours are totally awesome. Seriously, sign me up for a copy of your book when you launch.

I saw in a previous thread you stated that it's plain stupid not to have an LLC as an internet marketer. I talked to two different counselors at SCORE (SCORE | Small business mentoring and training | SCORE) to determine what type of entity to form (LLC / S-Corp). Both of them insisted that as the sole owner of an LLC there's NO real protection of my assets. "If somebody sues your LLC, they're going to see you're the sole owner and sue *you* as well". Their advice was that I should get business liability insurance.

What are your thoughts?
 


Let's say I have a website called "howtogetadivorce.com" or something that offers articles on divorces, taking steps on how to get one, etc that promotes an ebook on how to get a divorce. Even if the site never mentions any statutes or case law (basically anything specific) could I be sued for giving "legal advice"? What factors could play into it (disclaimer at bottom of site, having taken law classes even if not a lawyer, etc)?
 
Hey Mont, to piggy back on the setting up a corporation question.

What are your thoughts on setting up say an S corp through Legal Zoom vs using an attorney? My first instinct was to pay an attorney but I have noticed quite a few WF members using Legal Zoom.

Some of the arguments I have heard in favor of using an attorney are individualized advice about what kind of entity to setup and tax ramifications for doing so. But if you basically know what kind of entity you want to use and why, do you still really need an attorney to help with the filing process?

For larger businesses especially with W-2 employees and lots of liabilities, I could definitely see the need. But as affiliate marketers, is the business complex enough where we should definitely err on the side of caution and utilize an attorney to incorporate?

Thanks.
 
Corp/LLC questions:
Several of these have popped up, and the actual book has the entire first chapter devoted to these issues. To reiterate, yes, I think you should have a "business entity" set up in almost every case. Running an online biz as a sole prop is just asking for trouble.

LLCs are state-specific. As Motivated mentioned, some states give no more real additional protection to single-member LLCs then they do sole props, others do, but that varies by state. They aren't hard to set up though, and are still never going to leave you worse off then operating as a sole prop. Typically a better option is some type of Corp.

I'm (personally) a big proponent of Sub-S corps in a lot of situations. There are some pretty big (legitimate) tax savings to be had at higher levels of income by splitting the treatment of income between wages and distributions. I discussed it a bit more in an earlier thread, but its a bit beyond the scope of this post (guess you'll have to buy the book ;) ). Just remember that an S-corp is just a C-corp that has made a specific election with the IRS to be taxed more like an LLC (no biz tax, only taxed at the owner's personal level). C Corps and S corps have all the same protections.

To the Q about a foreign person owning an LLC. You can't own one individually if you are not a citizen of the state you are applying in it for. You can't actually be part of a Sub-S corp either, because they specifically exclude foreign citizens. C corp you can, especially if you have some sort of U.S resident that is a "partner" (beyond the scope of this post, but I know foreigners who make a U.S. person a 1% owner just so they can get a U.S. corp setup in a specific state with all the protections, and they still call all the shots, make all the profits, etc). Best to consult an attorney in the jurisdiction you want to incorporate in to discuss your particular facts.

Good to see all the business entity/LLCs/Corp questions, those are the #1 issues I see people not doing right in the IM world.
 
motivated said:
Mont, these threads of yours are totally awesome. Seriously, sign me up for a copy of your book when you launch.

I saw in a previous thread you stated that it's plain stupid not to have an LLC as an internet marketer. I talked to two different counselors at SCORE (SCORE | Small business mentoring and training | SCORE) to determine what type of entity to form (LLC / S-Corp). Both of them insisted that as the sole owner of an LLC there's NO real protection of my assets. "If somebody sues your LLC, they're going to see you're the sole owner and sue *you* as well". Their advice was that I should get business liability insurance.

What are your thoughts?
Click to expand...

Would a way round this be to have another shareholder with a small stake in the company, then they would not look at it as one person being the sole owner. Or would they just see that they are there for that reason, or sue them also?

These have been some of the best threads on the entire interwebz, by the way. I disagree with Unarmed Gunman, you should just keep making these threads.
 
Hey Mont,

If I were to develop an exercise product with a membership area, and I placed a legal disclaimer in a clear and conspicuous area above the fold saying something like: "Read This Before Doing Any of The Exercises in This Program," and the disclaimer contained language such as "You understand that these exercises are for educational use only. These exercises as not to be construed as medical advice. Consult your physician first before engaging in our program . . . you cannot hold us liable under the fullest extent of the law . . . etc. "

Now, even if you have a well drafted disclaimer, and someone injures themselves, do they have a cause of action? And if so, how strong is it? I understand that every case is very fact specific, but in general, how are these issues treated?

Hope that made sense. Typed it out quickly. Thanks
 
mont7071 said:
Corp/LLC questions:
Several of these have popped up, and the actual book has the entire first chapter devoted to these issues. To reiterate, yes, I think you should have a "business entity" set up in almost every case. Running an online biz as a sole prop is just asking for trouble.

LLCs are state-specific. As Motivated mentioned, some states give no more real additional protection to single-member LLCs then they do sole props, others do, but that varies by state. They aren't hard to set up though, and are still never going to leave you worse off then operating as a sole prop. Typically a better option is some type of Corp.

I'm (personally) a big proponent of Sub-S corps in a lot of situations. There are some pretty big (legitimate) tax savings to be had at higher levels of income by splitting the treatment of income between wages and distributions. I discussed it a bit more in an earlier thread, but its a bit beyond the scope of this post (guess you'll have to buy the book ;) ). Just remember that an S-corp is just a C-corp that has made a specific election with the IRS to be taxed more like an LLC (no biz tax, only taxed at the owner's personal level). C Corps and S corps have all the same protections.

To the Q about a foreign person owning an LLC. You can't own one individually if you are not a citizen of the state you are applying in it for. You can't actually be part of a Sub-S corp either, because they specifically exclude foreign citizens. C corp you can, especially if you have some sort of U.S resident that is a "partner" (beyond the scope of this post, but I know foreigners who make a U.S. person a 1% owner just so they can get a U.S. corp setup in a specific state with all the protections, and they still call all the shots, make all the profits, etc). Best to consult an attorney in the jurisdiction you want to incorporate in to discuss your particular facts.

Good to see all the business entity/LLCs/Corp questions, those are the #1 issues I see people not doing right in the IM world.
Click to expand...

+1 rep for taking the time to write all this. The takeaway is to check with someone that's licensed in one's own state for the mechanics of owning an entity particular.

Thanks for the reply, man.
 
Mr. Mojorisin said:
Hey Mont, to piggy back on the setting up a corporation question.

What are your thoughts on setting up say an S corp through Legal Zoom vs using an attorney? My first instinct was to pay an attorney but I have noticed quite a few WF members using Legal Zoom.

Some of the arguments I have heard in favor of using an attorney are individualized advice about what kind of entity to setup and tax ramifications for doing so. But if you basically know what kind of entity you want to use and why, do you still really need an attorney to help with the filing process?

For larger businesses especially with W-2 employees and lots of liabilities, I could definitely see the need. But as affiliate marketers, is the business complex enough where we should definitely err on the side of caution and utilize an attorney to incorporate?

Thanks.
Click to expand...

I think that's a good point, a lot of the "value" an attorney would provide is helping you decide which entity to use and why. If you've done your homework and are sure you know, the actual paperwork on most formation filings is relatively simple. In my state for example, you can setup a for-profit C corp in less than 10 minutes, and do it all online.

I tell clients all the time "Don't pay my ridiculously high hourly rate to do something you can do for yourself." The real value an attorney can provide is knowing the pitfalls, suggesting methods of protection and tax avoidance you might not have thought of, recognizing risks, drafting bylaws or partnership agreements, etc. Basically, things that are more "advice" and less "filling out the same form anyone can download from the State's website and writing their address on it". The actual paperwork, especially for a 1-owner company, is usually not terribly hard, assuming you picked the right form for your unique circumstances.

I will add to that however, that in all my years of practicing law and doing IM work, I have never once talked to someone that said " I wished I had done all my corp work myself instead of paying my attorney." Attorneys add value often in telling you what you DONT know (and might never have thought of), not just serving as a glorified secretary filling out forms. I think its often worth paying for a few hour's of a smart attorney's time (after you've done the homework) to have them look over what you've done or decided, offer insight, suggest changes, etc. The peace of mind, plus what its worth if they catch a detail you screwed up or never thought of, is usually well worth it.
 
onlinemoniez said:
Hey Mont,

If I were to develop an exercise product with a membership area, and I placed a legal disclaimer in a clear and conspicuous area above the fold saying something like: "Read This Before Doing Any of The Exercises in This Program," and the disclaimer contained language such as "You understand that these exercises are for educational use only. These exercises as not to be construed as medical advice. Consult your physician first before engaging in our program . . . you cannot hold us liable under the fullest extent of the law . . . etc. "

Now, even if you have a well drafted disclaimer, and someone injures themselves, do they have a cause of action? And if so, how strong is it? I understand that every case is very fact specific, but in general, how are these issues treated?

Hope that made sense. Typed it out quickly. Thanks
Click to expand...


Yep, it makes sense. The stronger the disclaimer, the better. The more up-front you can make it so they can never say " I never saw it, it was buried in the fine-print legalese somewhere else, etc" the better.

For a good example, the P90X DVD workout system that is sold via infomercials is worth looking at. Every single video starts with an auto-play disclaimer on the DVD that you can't skip over. Its reiterated at the end, and is somewhere on all the printed materials too.

It's important to remember though, that all this is stuff that helps you out when somebody files a cause of action (or works to dissuade them or their attorney from ever filing suit.), but it DOES NOT prevent somebody from suing.

I think alot of people mistake taking appropriate steps as being the same as preventing them from being sued. No matter what you do in almost any scenario that comes up, YOU CAN BE SUED! You can take every precaution, use every disclaimer, etc but you can never stop yourself from being sued, you are only setting yourself up better to win if you are. The suit may be dismissed, you may win easily, etc, but people can still sue for just about any reason. I see a lot of people in the IM world say things like " i can't be sued, because I did xyz" WRONG. you can always BE sued, you just are more likely to win because you took these steps.
 
Can you live in a foreign country (USA specifically) and solicit business in that country without having any work visa, or citizenship - if all transactions and services are internet based? Would it be considered that you are working in that country? To note: Your biz is regged in your home country. (example: selling ad space on a website, or other internet based services) how does internet biz come into play in this situation.
 
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allco said:
Can you live in a foreign country (USA specifically) and solicit business in that country without having any work visa, or citizenship - if all transactions and services are internet based? Would it be considered that you are working in that country? To note: Your biz is regged in your home country. (example: selling ad space on a website, or other internet based services) how does internet biz come into play in this situation.
Click to expand...


That's a really good question, I'm not sure I know the answer.. :)

If you were on a visa, then I'd say it depends on the visa (Many specifically exclude work-for-pay in the visited country). Since it sounds like you are talking about visiting from a country that the U.S. doesn't require a visa, then I can see a scenario where, since its all online anyways, you might not have any problems. The "soliciting on U.S. soil" is the concern I suppose, the actual online work you are doing would be fine if you were in your home country and working remotely with U.S. citizens. The fact that you are now doing the same thing, but actually physically present in the U.S. (thus creating a "nexus", and likely subjecting you to U.S. jurisdiction) is the sticky point.
Realistically, if your concern is getting deported, I'd probably try to set up the business relationships either before I left my home country or after I got back, but I'm not sure if that works in your situation. I think if you are "benefiting" by being in the U.S. to make the contacts/sign up business, then I think you are running a bit of a danger if someone is really watching you. Realistically, I don't know 1) how any authorities would even find out 2) why they would care at all as long as you weren't breaking any laws or violating any visa terms.

I don't get stumped too often, but that one is hard, I've never had an issue like that and don't have any experience to pull from. I'll get some other lawyer's thoughts and post later if I hear any interesting other opinions. Great question +rep.
 
Thanks for the response. From Canada. Appreciate if you can post anything you find from your lawyer friends ;)
 
NightG said:
Let's say I have a website called "howtogetadivorce.com" or something that offers articles on divorces, taking steps on how to get one, etc that promotes an ebook on how to get a divorce. Even if the site never mentions any statutes or case law (basically anything specific) could I be sued for giving "legal advice"? What factors could play into it (disclaimer at bottom of site, having taken law classes even if not a lawyer, etc)?
Click to expand...


This comes up a lot, and LegalZoom has been sued several times for exactly this. The rule of thumb is 1) incldue disclaimers on every page 2) make the user figure everything out themselves, don't try to "lead them to water' with helpful support or recommmendations, act more like a vending machine than a trusted helper. I would leave out any mention of having taken law classes, your qualifications, etc.
 
I'm a real noob when it comes to all this incorporation and tax stuff and am really glad to have found this thread :)
Also it's great to see you're putting up a guide for us IMers, this is really a niche with high demand and low supply...

Anyway, I'm living in Austria, though I'm not registered here (!). My country of residence (is that the one to be found on the passport?) is Germany.

In order to avoid the long wait for checks, currency conversion and my non-existent knowledge about how to deal with my tax issue (making money online, residency in germany, living in austria but not registered), I thought of forming an LLC in the US, tieing it to a US corp bank account and doing all my tax stuff over there (hoping I wouldn't have to worry about german/austrian tax crap).

Here come my questions:

1.) With the above setup, would I still have to pay taxes in AT/GER even though I paid them already in the US?

2.) I researched a lot about LLC vs. C/S corp but it's quite hard to find solid advice for non-US residents. What would you recommend? (I have no partners/employees)

Would appreciate any help with this.

P.S.: In your guide, please also include a chapter or two for international affiliates...it seems that almost nobody specializes in this field.
 
Awesome thread(s) mont7071, I have a quick question if you don't mind:

For asset protection with an existing corporation, are you able to setup a secondary corp (i.e. subsidiary) and transfer the monies from your original corp to this newly setup corp?

For example, let's say you have a relatively successful IM corp which contains a large sum of business income which is currently held by the corporation. As IM is a risky business, you could potentially get sued by anyone for anything. I guess the biggest issue would be getting sued and potentially losing everything you've earning so far that's remaining in the original corp.

Would setting up a secondary corp and transferring the existing business assets to the new corp (of course covering all the tax obligations to the government as needed) protect you from any liabilities that your original corp may encounter? If your original corp gets sued, and there are essentially no business assets left in this corp (as they've been transferred to the secondary corp), is the person suing able to go after those monies?

Would love to hear your thoughts on this. Thanks man.
 
Hey,

So whats the deal if you just provide a link to copywrited material ( movie / cd / or w/e has been leaked)

Im not hosting it, creating it, just simply tell people where it is with a link ( Im not currently doing this, just curious)
 
canucksfan19 said:
Hey,

So whats the deal if you just provide a link to copywrited material ( movie / cd / or w/e has been leaked)

Im not hosting it, creating it, just simply tell people where it is with a link ( Im not currently doing this, just curious)
Click to expand...

This is requires offshore hosting. I'm not a lawyer, nor have any real law knowledge, so I am curious to see how this is answered by someone who knows more about this topic.
 
Mont - Been a while.. How about some trademark advice.

Let's say someone trademarked "The Acai Berry Diet".
Can I legally use "Acai Berry Diet", or "Super Ultra Acai Berry Diet"

Their trademark has "THE" in it. I don't wanna use the word THE, and want to add words, but it's still gonna be competitive with them. Note that "The Acai Berry" is not a brand name either, but kind of a general descriptive term of the product.

Thanks!
Berto
 
Berto said:
Mont - Been a while.. How about some trademark advice.

Let's say someone trademarked "The Acai Berry Diet".
Can I legally use "Acai Berry Diet", or "Super Ultra Acai Berry Diet"

Their trademark has "THE" in it. I don't wanna use the word THE, and want to add words, but it's still gonna be competitive with them. Note that "The Acai Berry" is not a brand name either, but kind of a general descriptive term of the product.

Thanks!
Berto
Click to expand...

All the words (The, Acai, Berry, Diet) are merely descriptive, thus they'd never be able to get a trademark for it. If it was something like "The X9 Acai Berry Diet" than that phrase would be trademark-able, but wouldn't have a very strong claim against either of your examples unless you included the unique (e.g. X9) part in your (allegedly-infringing) new name as well.

All trademark claims are fact-specific, but the general rule is that it has to be uniquely identifiable as a "brand" and not merely descriptive. By way of example, "Wicked Fire" is an appropriate trademark for an IM forum, because those are not merely "descriptive" words (in fact, they have nothing to do with what the forum is, they just sound really cool), and it is obviously a unique usage. If Jon decided to claim a trademark for "Marketing Forum" that would NOT be trademarkable, but "WickedFire Marketing Forum" would, for obvious reasons.

Hope that made sense..
 
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