Attempt to control artist through LLC???
January 18, 2007 4:35 PM   Subscribe

can someone form an LLC specifically and solely based on another individual's work/product -- without telling/consulting them? A *LOT*--

Of course, I know that I would need to sign something to be legally bound to an agreement, but I'm completely perplexed (and angry) and trying to figure out why this happend:

I am an artist, (paintings), only recently doing my first shows/sales. Lot of committment and significant financial support from my non-romantic partner/housemate/best friend who offered me this ipportunity to develop my work with his financial support. Statements of paying him back entailed "I don't expect or require anything, but if you become a huge success, it would be nice to know you could pay back something. I wouldn't turn it down." This statement did not change until recently---when I made my first
sale. (cah-ching!).

I had formed a business identity for myself, with cards, print materials, logo, typeface, and I was in the process of building my website under my trade name which I expected to use to encompass all my current and future actions as an artist.

I then went out of town for the holidays (2000 miles out) and was gone for several weeks. During that time I got an email from my friend saying that he had formed an LLC under my artist name/identity (using it for the name of the LLC) and did this primarily becuase he realized that he could get a tax advantage if he formed a company quickly, and he also decided that making himself sole owner of my trade name would entice me to
work on an agreement with the company in which he would also own everything else I've created and will create in the future (all rights, everything) because I suddenly "owed" him a specific amount of money for his contributuions to me and my art, which is the same amount of money he submitted for expense deductions for his LLC. These included the $500 for the accountant to set up the company, my christmas present, food purchases he told me to make, items for his home that I did the physical picking out and bringing back to the house, insulation in the room I use as a studio... cash he gave me when he was gone for a week with the car and groceries were needed. Airfare that he loaned and was repaid, etc. I am expected to repay him for all these things--wasn't even in the state when he purchased a $400 tool!

Needless to say, I refused to agree to have my name taken without my consent or knowledge, and registered as a legal LLC basically making it impossible to protect it myself (I didn't think it was necessary since i had just started out.

He is attempting to coerce me into entering into an agreement whereby my art is owned by this company, and to which all profit go. THe company will still pay for art supplies, and if and when my debt is "paid off", I might be "cautiously" considered for a share in the company. Unfortunately, as described, if I continue to owe and incur debt for the expenses of the company, that will never happen.

I don't understand how this could in any way be legitimate, and I am not doing anything with this person and I have insisted that he release my name so I can register it myself as planned. He refuses, stating that he did this for my benefit and thinks it would be a waste to use another name for his company.

If, on the slim chance, I were to enter into an agreement (that I knew about and was consulted in), I would expect to represent myself as (my business name) and form the agreement with (other name LLC), retaining my IP and moral rights to what I create, regardless of how profit shares and such are divided.

Yes, I can just drop this and use some other name. Unfortunately I made a huge mistake and found a name that is personally meaningful and can't be altered and not lose that significance. I fully expected to protect it, and it is valuable only to me. My friend said if I refuse to consider working with him, he will just dissolve the company and let the name become available to "the next person who wants it" rather than change the LLC and at least give me warning so I can register it safely.

My friend seems to think that I am going to make some money with my paintings, and with my tiny, new start, it looks positive but that guarantees nothing. I am dedicated and I think I will only get better. This whole fiasco may have cost me my first solo show and reception in NY state, and that was a big deal. I am stuck for the moment and somewhat at the mercy of my friend, because we had been operating on a financial agreement that he just stopped when I balked at my name, and for the short term, I am stuck without repleneshing paint and its just a mess all around.

I am shocked that he formed this LLC, seizing my name and expecting to structure this entity based entirely on me and what I do--without saying a word to me (and expediting the process so it would be done before I returned to the studio/house--which he is also charging me for). He is bullying me into signing onto this company (with no rights or profit shares) with my name as leverage (which will not work, and I've made that clear), I think he may be afraid of what to do with this defunct company and having to justify those expenses.

I would really like some constructive advice--I'm ashamed and frustrated, so constructive criticism is welcome to, but I've already done the beating myself up part.

Sorry for the length. I would love some insight from any of you. There has never been any indication that this person was anything but trustworthy and decent. I don't understand. Are there legal implications I'm not getting? What could they possibly be? I don't have anything except my artwork. Only half of which is fine enough to sell.
posted by msshe to Work & Money (24 answers total) 6 users marked this as a favorite
Your friend is nuts, and not at all your friend! I wouldn't worry at all about any of the LLC issues right now. Who knows if he even formed a company, etc. It has nothing to do with you. You need to get your stuff and get out of there. Good luck.
posted by lee at 4:48 PM on January 18, 2007 [1 favorite]

Definitely get a lawyer. I'm only a law student, and not one of American law, so take this with a pinch of salt:

1. You have probably amassed sufficient good will under your trade name for it to be considered as a trade mark. In other words, you may have IP rights over your trade name, despite not having formally registered it as a trade mark, which would make what your 'friend' is doing illegitimate.

2. Its just a company name. You could just as easily create another LLC called "msshe LLC" or something and register your trade name as a trademark owned by that LLC.

3. Whatever you do, get legal advice. And don't sign up with that guy's LLC.
posted by nihraguk at 4:50 PM on January 18, 2007

Pack and move.
posted by Steven C. Den Beste at 4:51 PM on January 18, 2007

He's bullying you into letting him take over completely, and you are right to resist. Do see a lawyer and get this taken care of NOW. Assuming that you did use the trade name, and were not just preparing the use the trade name, court action to require that the LLC be turned over to you (or that it be dissolved / prohibited from using the name) would be one possible avenue.

Don't let him be your Allen B. Klein.
posted by yclipse at 4:57 PM on January 18, 2007

IAAL, but this is not legal advice; consult competent counsel.

He certainly has no right to form a company based on your work and obligate you to participate. It's like if I formed "McIntosh, LLC" and demanded 10% of the sales of every Apple computer. So you would be entirely in the right to go off, form your own company, and forget about him.

The name is the only issue complicating this: if he has formed a legal entity called "Artco LLC", you can't form a company with the same name in the same state. But, depending on state law and on how distinctive the name is, you could probably get away with calling a new company "Genuine Artco LLC" or "Artco Really LLC" or "Artco Pictures LLC" or something. That's one easy out.

The trademark question — whether you can stop him from using the name — is much harder, and would depend on all sorts of fact-dependent inquiries you haven't given us enough information to answer: what the name is and how distinctive it is; how much of a commercial market there is for the product; how much the market identifies the name with you; and so on. Assuming he doesn't intend to try to compete with you using the name, it might not be worth fighting over. If the name is distinctive and associated with you in the marketplace, though, you could probably get a lawyer to send him a cease and desist letter. (And if you expect to hit it big, it would be worth your while to register the mark.)
posted by raf at 5:04 PM on January 18, 2007

Get out NOW!

I'm sorry this mess may have cost you your first solo show and reception. I suggest you keep communication open with that gallery. You don't want to get in the same situation again, with a benefactor with unrealistic expectations, but if they think you were worth the costs of a solo show and reception, then hooking you up with some raw materials would probably be a swingable investment in the business relationship.
posted by Good Brain at 5:09 PM on January 18, 2007

Oh, goodness.

He's bullying you and being crazy, which is bad.

But can I tell you something? I think you probably know, yourself, that accepting a heap of support, especially financial support, sort of.... I'm trying to think how to phrase this without being mean, because I'm sure you're beating yourself up enough.

But I think you have a pretty serious moral obligation to repay him generously, gratefully, and in full. No, not for things you sincerely don't think you owe, but frankly, if the guy has been supporting you financially and otherwise - and providing you studio space, and seemingly perhaps living space - you probably owe him quite a bit.

It seems to me that when you found some success, the guy suddenly went "Holy shit! I may well get screwed!" - not that this thought had never come up before, but when you were a starving artist, it probably seemed to lack urgency.

So I think that you might certainly end up wanting to talk to a lawyer, but I would really suggest talking to him first, and saying something like "Look. I hope for nothing more than that I become rich doing this, and the first thing I'll do will be to repay you, because you helped me get here, and of COURSE I want to do the right thing! Can we sit down and talk about this?"

Maybe I'm deluded, but I think a lot of the time you can resolve things without getting all sue-happy. Try telling him you understand his fears, but absolutely intend to do the right thing here.

(Of course, if you actually intend nothing of the sort, don't say that.)
posted by thehmsbeagle at 5:09 PM on January 18, 2007

Response by poster: I did use the trade name, but had only just barely started. I had a sale at my first show (November--really recent) and I had only designed my logo and gotten the cards printed in early November as well. I had my cards inserted in the fra
of my paintings, I've applied to shows using this name, I gave my print materials to the director of the show in NY. The domain registration was in November as well. But the site is not fully functional (I think he's done something) but I did have a site up and public from my free webspace courtesy of my ISP... I'm afraid that such brief and small scale use (although fully active--as much as I could muster!) is not enough to have common law protection. Besides, the LLC registration went through.

I do not want a legal fight, but if I knew there was a way I could recoup my my identity (he could just change the name on his LLC by amending the A of O, and should have done that in December.

I don't want an LLC, I don't have enough capital to take that on - yet. I can't afford a lawyer, not in my wildest dreams. My friend has another company and makes 100K a year as VP of yet another one. I don't want to waste time in conflict, but I am angry that I don't have non-hostile/affordable recourse that would allow me to keep the name I am committed to. I know I should not be emotional about it, but its based on some very significant things and I finally made it work. Ugh. Thanks guys for the genuine and sensible advice. I know I was naive and it cost me. I don't understand this kind of behaviour. Again, thank you so much.... msshe
posted by msshe at 5:16 PM on January 18, 2007

In my state (probably yours as well) a LLC or other corporation for that matter must be named as such "msshe LLC". However you have been, presumably, not using LLC, INC., or Corporation in your marketing materials (business cards). Further, dealings you have been making with gallerys or patrons who purchase your work has been done under your own name and your trade name. You can use a trade name, legally, with out it being tied to a corporation. I think it costs $15 to file the paperwork to register a DBA alias "Jane Artist D.B.A msshe" this would let you stake a claim to 'msshe' not 'msshe llc' even as far as letting you open a bank account under that name (i think). Go to the county/city web site download the DBA form and mail it in.

As for the money he's given to you, there is no contract. Maybe it was a gift. Moral issues aside, legally he can't sucker you into a business agreement with something that started as a friend helping a friend.

With nothing to sell from his LLC to compete against you the only thing he can do is lawyer up to keep you from 'doing business as' the name you have a prior claim to anyway.

That said, maybe he really is trying to help, or maybe he's trying to take advantage of you.
posted by dirtylittlemonkey at 5:24 PM on January 18, 2007

If you're not willing to marry someone, trust them to give you a kidney, know that they would not violate your privacy, and are absolutely certain that they would make a decision based on your collective interests other than their own, and/or make money a secondary consideration to a perpetual business relationship, then you shouldn't be in business with them. (You can marry people like that, just don't go into business with them!)

I absolutely could not be seduced into a business relationship with 99.9% of the people I know. It is virtually certain to cause stress, amplify greed, and minimize compassion, so anyone you might be ever considering being in business with should be more trustworthy and rock solid than Jesus. OK, bad example. But you get the pix. Somebody who is good.

I say all this because if you have any doubt about the wisdom of packing up and walking out, cast out that doubt. You are seeing a level of disingenuity that usually waits a while before coming out. It's just plain evil. Run, run like the wind and make your own way. If not tonight, then this weekend.

Indentured servitude, slavery, and prostitution are illegal for the most part. I can't determine if your 'friend' wants some of them or all of them from you? What a zoo!

Oh, and by all means, get better at using the word 'friend'. There's nothing friendly about exploitation and control.

Good luck. Are you packed, yet?

War story: I went into business with a guy once. He invested 20k. I told him he would not lose it. The business failed in 2 years. So I wrote him a check. I had to take a loan to do it. He tried to talk me out of it, telling me he was a big boy and could stand the loss. That was irrelevant. He would have done the same for me. Choose very, very, very carefully!
posted by FauxScot at 5:43 PM on January 18, 2007

Response by poster: thehmsbeagle: I absolutely and completely agree with you. I did say that I would pay him back and have done so whenever I could. There was a clear agreement (I thought) that there was no way I could pay him back until I made some sales to do so. When he started charging me for things that I had never even seen, gifts that were not misinterpreted and even signing me up for things online or in town at a cost that I did not want to do (he even filled out and sent in my voter registration before I decided if I was able to be a resident here). I do not assume I owe this person nothing and I am grateful for his financial support and I always assumed I would pay him back. I can't right now. When he started this fiasco, I offered to write a letter giving him legal rights to the marital assets I cannot afford to access myself (creepily enough, my ex claimed that he was "doing me a favor" by not disbursing the funds and placing them with his brother, a VP at MLynch and I need a lawyer to have anything done and that is not a possibility. My friend could afford the lawyer, and I offered any and all amounts that were reasonable and valid (I also asked him repeatedly to work out something more formally with me so that we both knew what was expected and recieved and due. So, I have a way to pay him back in full, and offered to put that in writing because I do not expect a free ride. But it is hard when something is represented under certain conditions and those conditions arbitrarily change. It would be unconscionable for me to fly off and giggle that I never had to pay him anything back. I'm just having a hard time dealing with this fairly on my small level. I did not balk at his taking a majority of the profits of my sales, but I hope that we could have a sliding ratio so I could at least keep enough initially to buy some socks or a pair of shoes. I don't even know what a movie theatre looks like, I don't buy books, clothes (art clothes at goodwill-only) and nothing else. I have no leisure activites, I spend nothing on myself that is not absolutely crucial. No, I lie. I did by a pair of 3 dollar arch supports for my 4 dollar used shoes because my heelspurs were so painful. I am diligent about doing nothing that could be seen as reckless when it comes to someone's financial help. I was also doing specific household chores for an "allowance" because I do NOT feel right just being handed money. But I also don't think that dollars indicate someones ethical value, and I also think that my meeting and exceeding the expectations described in the "offer" mean something too. Being broke doesn't make me less of a person or dismissing basic decency rights and less wrong.

This is not an argument for getting out of responsibility, but
why is monetary value the only recognizable measurable
value.... aren't there other (and far more meaningful) things that ought not be "worthless"? Uh-oh, I'm waxing tangential here. Sorry. I would really value an editor right about now. Thank you all, again, for your responses. msshe
posted by msshe at 5:55 PM on January 18, 2007

You say you cannot afford a lawyer and that this guy can. I'd certainly try to reconsider that. Regardless of the support he's given you in the past, this guy is trying to screw you over. Personally, I wouldn't take that lying down. There's certainly someone in the community who would be willing to give you genuine legal advice for a low fee.

Yes, please move out ASAP.
posted by muddgirl at 6:01 PM on January 18, 2007

I see this as two separate issues:

(1) An intellectual property issue: can he legitimately set up a corporation in a name in which you have developed a artistic/commercial reputation?

(2) A contract issue: whether you have a contract to repay him for things he gave you, and whether, as part of such a purported contract, he has any legitimate claim to ownership of things you produce.

Nobody can force you to participate in a business that you had no role in setting up. Forget about that.

(Your friend is nuts.)

posted by jayder at 6:09 PM on January 18, 2007

Some attorneys, who are interested in art, would probably trade legal services for artworks. (I am an attorney, and if any cool artist approached me with such a trade proposal, I would jump at it!)
posted by jayder at 6:11 PM on January 18, 2007

There are groups like Volunteer Lawyers for the Arts in almost every major city.

They will give you an honest perspective, good legal advice and help you figure out what to do next.
posted by Gucky at 6:45 PM on January 18, 2007

You are in the strong position here. All he's got is guilting you and bullying you. You currently own all the property that he is trying to get transferred to himself. Don't let him get away with it - all your future earnings are NOT something you give away like this.
Do not give up your rights.
Force him to negotiate on your terms, or he doesn't get to negotiate at all.

For example, offer to be the owner of the LLC, and he a shareholder. That way he will get his money back and then some, if you succeed.

If he won't accept that deal, (and a sweet deal it would be for him compared to the status quo) then just keep the status quo. Any time he complains or tries to guilt you, you can rebut that you offered him his share and he turned it down. Or tell him the offer still stands.

If he is going to play hardball, you will have to do likewise. The good thing is, you hold all the cards. Use them.

I've noticed other people do this - when someone else holds the cards, especially if that someone else is a nice person, they play hardball to push them into doing what they want. It often works. Don't fall for it.
And don't play nice if he isn't going to.

You can totally satisfy all moral and financial obligations to pay him back without taking his exploitative route.
posted by -harlequin- at 7:11 PM on January 18, 2007

Also, it sounds like even small amounts of money are an issue, but you might want to look at registering your name as a trade mark.

More importantly, if you can't afford to register the trademark, keep an eye out for him lodging an application for it, so that you can lodge an objection to the application before it is granted (on the pretty solid grounds that you are already trading under that name, while he is not). Preventing him from owning the trademark could save some future headaches.

IANAL, my understanding of trademark law is highly limited.
posted by -harlequin- at 7:17 PM on January 18, 2007

It also sounds like you need a part-time job, or another (less manipulative) patron. Part of the problem is that you are dependant on this person, which gives them a big hammer with which to pressure you into making a big mistake.
posted by -harlequin- at 7:23 PM on January 18, 2007

Find a lawyer who will give you a free consultation. Then you can at least find out how the lawyer might help you and what it would cost, so you can then decide if it's worth it.
posted by mbrubeck at 8:37 PM on January 18, 2007

When he started charging me for things that I had never even seen, gifts that were not misinterpreted and even signing me up for things online or in town at a cost that I did not want to do (he even filled out and sent in my voter registration before I decided if I was able to be a resident here).

These are huge huge red flags describing controlling, borderline abusive behaviour. It's already escalated and may continue to do so. Follow all the good advice above to get yourself some legal advice and to help you sever all ties, better than needing one later for restraining orders and suchlike.
posted by shelleycat at 10:20 PM on January 18, 2007

Yeah, give him the arse. Then, when you have what you think is the money you fairly owe him, give him that. Then give him the finger.
posted by flabdablet at 12:34 AM on January 19, 2007

My jaw hit the floor when I read this. I really hope you get out of that house and that "friendship" as soon as possible and free yourself from this toxicity.
posted by loiseau at 9:10 AM on January 19, 2007

I am an attorney, so let me give you the usual disclaimer: "The following does not constitute legal advice."

I don't have a lot of time to go through all the issues right now, but let me say a couple of things.

First, I'm not sure what state you're in, but in most cases, an LLC is the most favorable corporate entity to have as a small business. There isn't as much paperwork as a corporation. I'm not sure why you think you need capital in order to operate one. As long as you have some nominal capitalization, you're good to go.

Second, I always tell clients that if they can work a matter out without getting lawyers involved, then they should do it. Talk to your friend honestly and frankly about how you feel. It's likely that he thinks after all he's done for you, you'll leave him holding the bag. If this isn't your intention, assure him this is so. You also need to become a member in the LLC, so your rights are protected.

If he is being unreasonable, ask around and see if there are any attorneys who work with small businesses. They will have familiarity with corporations law and won't charge you big firm fees. You can also call your local or state bar association. Most of them will have some sort of a referral service.

If you are truly poor, then consider state or local legal aid offices. You have to be near the povery line to use these, so if you are truly a starving artist, you may qualify.

Good luck, and don't worry. It'll all work itself out.
posted by reenum at 12:38 PM on January 19, 2007

he even filled out and sent in my voter registration before I decided if I was able to be a resident here

In some states that is a criminal offense plain and simple.
posted by grouse at 5:47 PM on March 28, 2007

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