Setting a Solid Legal Foundation for Your Podcast | Gordon Firemark

Most podcasters have yet to take steps toward legally protecting the business and brand behind their podcast. That's because the legal side of content creation seems complex and intimidating, but it doesn't have to be! In this episode, Gordon Firemark (The Podcast Lawyer™) explains how an LLC can protect your content while legitimizing your podcast and even save you money! Get ready to learn how you can benefit from using an LLC to lay a solid foundation for your podcast!

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Takeaways

Podcasters should consider their podcast as a business and be aware of the risks they face.
Forming an LLC can provide liability protection, flexible management and financial structures, potential tax benefits, and increased credibility.
Alternatives like insurance and strong contracts can be viable options if an LLC is not the right fit.
Consultation with a lawyer and tax advisor is recommended when considering forming an LLC.

Chapters

00:00 The Importance of Considering Your Podcast as a Business
02:06 Risks Faced by Podcasters
03:02 The Need for Legal Protection
03:58 What is an LLC?
05:24 Benefits of Forming an LLC
07:19 Considerations for Not Forming an LLC
09:10 Steps to Forming an LLC
13:25 Reflection and Consultation
13:53 Summary and Closing Thoughts

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Transcript

0:02

You're listening to Podcasting Made Simple. I'm your host, Alex Sanfilippo. For this episode's guide and resources, please visit podprose.com slash 271. And now let's get to the episode. To LLC or not to LLC, that is the question every podcaster should be asking. Whether you are podcasting as a business or consider it a hobby, whether it's just you or a team effort, whether you're aiming to make money from your podcast or just to get a message out and get people thinking and talking or taking action, it is important to think about whether you are in business. Now, for my money, if you're putting out regular episodes of content, regardless of your purpose in doing it. You are engaging in commerce. You're doing the kinds of things that businesses do. And from the legal standpoint, there's a very good chance that you are going to be considered a business whether you intend it to be or not. Hi, I'm Gordon Firemark, the podcast lawyer. Actually, I'm a media, entertainment and business lawyer. I've been helping creators across media and entertainment for my whole career. And my mission is to make sure that you are able to do your thing, to make your content, to entertain, educate, inform, and influence audiences in a way that's safe and smart and effective. Now, because I'm a lawyer, I do have to just make a quick disclaimer here. I am a lawyer, but I'm not your lawyer. So I'm providing some general information that you're going to find useful, I hope. But you shouldn't rely on this as legal advice from either me or from my hosts here today. Okay, so as I said, I want you to do your thing, to make your mark, to influence audiences and to be safe and protected as you do so. And one of the most important ways you can protect yourself is by forming an LLC around your podcast. Now you might be thinking for yourself right now, protect myself from what? Well, let me tell you, some of the most common risks that I see podcasters taking don't even feel like risks at the time. You're going to start a podcast, right? So you grab a friend, you start creating. Well, guess what? You just got into business together. What happens if things don't work out? What if someone stops pulling their weight? What happens when one of you is putting up more of the money or does more of the work and starts to feel resentful about sharing the rewards equally? Ownership and management disputes among podcasters are probably the most common problems I hear about. And honestly, Sometimes creators do things that carry liability. Maybe you use a bit too much of a bit of music, or you say something about a person that isn't true and it hurts their reputation, or your co-host does, or your guest does. Suddenly now you're in the crosshairs of nasty demands or even lawsuits that can cost a fortune. The fact is, making media content is a risky venture. There is liability that can catch you, even if you're doing everything by the book. When you're making media, you're engaging in something that up until very recently was an activity that was really something only big, well-financed companies could do. And while the playing field now is much more level, audiences still think of creators as having vast pools of resources at our disposal. So when they see something they don't like or that hurts their feelings, they go into a get-em mode and they start looking for ways to get some kind of a payday to punish you. So If you're going to be viewed from the outside as a business, shouldn't you take steps from the inside to put up the protections that businesses have? I'm talking, of course, about forming an LLC for your venture. Now, I'll be the first to tell you, having an LLC is not for every podcaster. For example, your business might already be a corporation or an LLC structure. If the podcast is a marketing initiative of an existing company, well, no new LLC is needed. But for most... it's wise to at least consider implementing the legal separateness that the LLC affords. So what is an LLC? Well, LLC stands for Limited Liability Company. So there it is, front and center. Limiting the liability of its owners is one of the key benefits to having an LLC. LLCs are recognized under the law in much the same way that corporations are. They're treated as a separate legal person that can have legal rights and incur liabilities. But like a corporation, the owners of a properly established and maintained LLC won't be held to account for the company's liabilities. So the LLC acts as sort of a shield. An LLC is formed by a relatively simple filing document called articles. You file it with the government of the state in which you're forming it, and then the members, that's what the owners of an LLC are called, enter into a contract between and among themselves and the company. That's the operating agreement. That operating agreement acts like the bylaws or constitution of the company, setting out the rules for how the company is going to be owned and managed, how the profits and losses will be allocated. And it sets forth answers to lots of the what if questions. What if we want to bring in new members? Or what if someone wants to leave? What happens if someone becomes disabled or dies? What happens if we decide to sell the company or just to close it off? So you can see the LLC does more than just protect owners from liability. It provides an ownership structure. You know, I talk a lot about what I call a podcast prenup, a document or structure that handles those what if questions. So everyone knows what's supposed to happen if these various things happen. The LLC and its operating agreement can be that structure. And LLC also provides a survivability. Since it's a separate person under the law. the company can continue operating, it can stay alive after one of the owners leaves or dies. And I'll tell you, that is not what happens when there's a sole proprietor or a partnership. The LLC can also take on the role of the employer. Again, separating the owners from the risks and liabilities that having employees can entail, and it can set up pension plans and benefits programs and all those kinds of things as well. And all of the people who work in an LLC, whether they're members of the company or not, independent contractors and employees, whatever, they should all be signed to contracts outlining their job responsibilities, their rights, compensation, benefits, and the contracts should make it very clear that what they create belongs to the company. Next, the LLC could offer tax advantages. Now, I'll just say another little disclaimer, I am not a tax expert at all. So you will definitely want to talk this over with your accountant or tax advisor, but LLCs and corporations can take deductions as business expenses for some of the kinds of things that an individual taxpayer can't. So it's worth exploring. And although it isn't probably an issue for most podcasters, an LLC can also provide a way to finance operations, to raise capital by selling equity interests, shares, membership interests to investors. And ultimately, an LLC projects a kind of stability and longevity. Essentially, it gives your podcast some additional street cred with vendors, guests, audiences, sponsors. People like to do business with companies. They feel more secure with the perception that the people behind it are more serious, more professional, and just more businesslike. So, why might you not want to form an LLC for your podcast? Well, first, of course, is the cost. Forming an LLC is going to cost some money, but maybe not as much as you fear. In some states, It could be under $100 in government fees and even less on a year-to-year basis after that. But in others it can be several hundreds or even approaching $1,000 a year. And then there's the hassle factor. Having an LLC and that terrific separateness I spoke of also means that you've got more administrative stuff to handle. It's not by any means a big hassle, but there are some government filings, record-keeping and reporting that do take a little time and energy. Or... You may not want people to see a company in the mix. If you're a very personal brand, you might find that people prefer to deal directly with you and not with your company. But that's rare, and when it is an issue, there are ways to deal with this. In fact, a lot of celebrities use companies whenever they do business. And if an LLC doesn't seem like the right fit for your podcast, there are alternatives that offer some of the same benefits. For example, getting a good set of insurance policies in place can be a substitute for the LLC liability shield. In fact, I often recommend both an LLC and insurance for clients that can manage it as a sort of belt and suspenders approach to this. And you can use contracts with your partners, co-producers, co-hosts, and others, even your guests who work on the show with you. And those deals can establish who's in charge, who gets what, and so on. But I've just got to say, I think forming an LLC is the better decision for most folks. The benefits over time will certainly outweigh the costs. And if you're serious about podcasting, if you want to be perceived as a professional, having that business entity in place just makes sense. So if I've got you thinking that an LLC is the right answer for your podcast, what are you going to do to make it happen? Well, the steps are pretty straightforward. First, you have to figure out in what state the company will be located. Now, some states really sort of roll out the red carpet for new business entities, and you might find that. it's more advantageous to form someplace other than your home state. But do beware because in many instances you'll still have to register at home and pay taxes there and so on. So the cost savings may be illusory. Next, prepare and file articles of organization with the state that you've selected. And then draft an operating agreement that clearly defines how the company will be managed, a framework for decision-making processes, how profits will be distributed and other key aspects of your operational plan for the business. You'll also need to write up some minutes of your first meeting of members. I put that in air quotes because if it's just one person in the LLC, or if everybody's in agreement, you can do everything in a written consent document. You'll need to issue membership certificates, get a federal tax ID number and open the company's bank accounts. And then you're ready to start operations. Now I know this actually sounds sort of complex, but it's But not really. The truth is, it's actually pretty quick. Other than waiting for the government offices to do their part, which can sometimes take a few weeks, even though it's really just stamping a form and entering data into their systems, the rest of the process can usually be handled in just a day or two. But you will probably want to engage a lawyer to help you with all this. It doesn't need the cost of fortune. Most of us will set a... very reasonable flat fee, and the benefit is that you get basically a turnkey LLC with all the documents prepared for you. You just sign a few things, mail them out, and you are good to go. Now, I also know there are services out there, online businesses that say they can help you file and form your LLC for just a fraction of the cost of using a lawyer. I actually have very mixed feelings about these. Now, obviously, I'm a lawyer, and here's the thing. I get lots of clients who come to me after one of these rapid zoom, fast services. messes their LLC up and they need to fix things or they didn't get all the documents they need so they still have to hire a lawyer. I think these outfits are a little like vending machines but your business isn't a candy bar. Would you get a haircut or a medical procedure done by a vending machine? Imagine that a machine with a big hole that says haircuts $1 insert head here. Would you stick your noggin in there? You might get a great haircut if your head and your hair are perfectly average but You could also wind up missing an ear. So at least reach out and consult a lawyer. Most of us will do that for free and we can lay out our recommendations and the costs so you know what you're getting into. Anyway, after the LLC is established, there are a few other small tasks that need to be handled. Any pre-existing assets of the venture, like existing podcast episodes, a trademark title, contracts with sponsors or vendors. All of those things need to be transferred into the company and accounts need to be made changed over to the company name and those kinds of things. You also need to sign employment and independent contractor agreements with all the personnel. And you'll need to keep good records of your business's revenues, expenses, and profits, decision-making, relationships with vendors, client sponsors, and so on. So to recap, forming a limited liability company can offer liability protection, flexible management and financial structures. potential tax benefits, and it lends credibility to your podcast. But it does come at some cost. It requires a little effort to maintain, and it may not be entirely congruent with the image you want to portray. Alternatives like insurance and strong contracts could be viable options if an LLC really isn't the right fit for you. But this decision, whether to form an LLC, is really a critical one, and it really does depend on your particular needs and aspirations. So take a moment. Reflect on your goals and objectives. consider the potential upside and the risks of not creating a business entity, and figure out a game plan. Oh, and it's often a good idea to start your LLC right at the beginning of a calendar year or calendar quarter. That just keeps the bookkeeping and accounting a bit simpler. And please, do consult a lawyer and your tax advisor about this. Just because you can do something yourself doesn't mean you should. So there you have a survey of the landscape of LLCs. from understanding what an LLC is to the roles within an LLC and the reasons for and against forming one for your podcast. We've also discussed the steps you take to form one and the various things you need to consider once it's established. I'm Gordon Firemark, the podcast lawyer, and I just wanna leave you with this thought. Remember, the best investment you can make for your podcast is to lay a strong foundation for it. And always keep in mind, in the world of podcasting, it's not just about making some noise. It's about making the right kind of noise. And sometimes that means taking big, bold actions and calculated risks. And having an LLC for your podcast can just make that easier since, you know, you've got some structure and protection in place. Thanks for being here. If you enjoyed this episode, please visit podprose.com slash two seven one. Then share the link with one person that you believe it would add value to until next time. Thank you for listening.