Going into business with friends, maybe. What does the law say?

December 8, 2012 4:58 PM

Four friends are embarking on a creative endeavor, which may turn into a business. We just finished making up a logo and are about to purchase a web domain. What sort of legal actions/responsibilities should we be doing to protect all parties and fulfill all legal requirements in the American state of Georgia?

This endeavor may turn into a production studio for tv at some point down the road, but at the moment it's just four friends deciding to work together on some ideas. We've each put in work in different areas and overlapped in others. With paying for tshirts to put the logo on, someone outside the foursome mentioned keeping receipts and books and we all kind of looked at each other and realized we didn't know what to do legal wise or what we don't know that we should know. Should we be taking legal courses? Each of us retaining a lawyer? Following a general course of action? We don't have a lot of financial resources and this is more of labor of love. But who knows in the future?

posted by anonymous to Education (5 answers total)

Easiest would be to form an LLC/LLP. I don't think you need legal courses but it might make sense to talk to an attorney. The LLP, EIN and a business license should be what you need to open a bank account in the entity's name. You probably do also want a CPA on board, even if it's just to handle the annual filings. As long as you're not actually making any money -- labor of love, you say -- I don't imagine there's much chance of needing a whole lot more protection for yourselves.

You could ask the Chamber of Commerce in your town, or any sort of business incubator/young professionals group, if someone is available to mentor you.
posted by dhartung at 6:01 PM on December 8, 2012 [1 favorite]

Good advice above. In addition to the chamber, you might get help from a local or nearby SCORE chapter.
posted by randomkeystrike at 6:22 PM on December 8, 2012 [2 favorites]

that is, a SCORE chapter that is local or nearby, although I have nothing against you talking to a labor union. :-)
posted by randomkeystrike at 8:30 PM on December 8, 2012

The cheap and easy way to do this is:

Become an LLC. Do this the cheap and easy way by filing in Delaware. You can use a cheesy service, like Incorp., to do this for you, for a fee.

You should then get an EIN, just in case, but even that is sort of a second step.

Do not, at this time, take a legal course. Do not bother with a lawyer--AS LONG as you are all agreed that the four of you are equal partners with equal ownership in the company.

The domain should be purchased by the company.

Please be aware however that then the four of you are bound together in this entity. Where three or more people are bound together in an LLC, one of them is later revealed to be an asshole.* **

* ™ me.

** Also the asshole might be you, which is much easier to deal with than someone else being the asshole.
posted by RJ Reynolds at 7:53 AM on December 9, 2012 [1 favorite]

Include something about what happens to someone's portion of ownership with marriage/divorce/death, and about what happens if someone wants to leave the group.
posted by yohko at 5:02 PM on December 9, 2012