Table of Contents
Comprehensive Guide to Starting an Online Magazine Without Legal Issues
Choosing the Right State for Your Business
When setting up an online magazine, the first decision involves the location of your business. The state in which your business is registered impacts your income tax level. If you reside in a state with no income tax, this might be an advantageous location for your business.
Furthermore, privacy matters. Certain states, such as Minnesota and Wyoming, allow for the owner’s details to be kept confidential from the public, a key factor for those seeking privacy.
Deciding on a Business Structure
The structure of your business — whether an LLC, S Corporation, or C Corporation — is a critical decision. C Corporations are often avoided due to their double taxation. For most online magazine owners, an S Corporation or LLC tends to be the most advantageous. If your business is expected to have significant profits and you plan to work in the business, an S Corporation is often the recommended choice.
Essential Contracts for Your Magazine
Additionally, if your magazine will be featuring advertisements beyond platforms like Google Ads, contracts with these advertisers are essential to clearly outline the terms of the relationship.
Internal Agreements and Contractor Relations
If your magazine will be employing independent contractors, it is advisable to have agreements in place. These agreements are vital for two reasons:
- Intellectual Property Ownership: They can specify that your business, not the contractor, owns the rights to the work produced.
- Confidentiality Provisions: These protect your business’s sensitive information and trade secrets.
Employee Relations and Policies
For your in-house team, an employee handbook is generally more practical than individual contracts. Handbooks outline company policies and procedures, and they can be updated without requiring employees to agree to new terms. It is a best practice to have employees acknowledge that they have received and read the updated handbook.
Protecting Your Intellectual Property
Your magazine’s brand name, logos, and creative works are your intellectual property. Consider trademarking your brand name and logo and copyrighting your written, visual, and video content. Registering these protections solidifies your exclusive rights to these assets.
Registration and Compliance Requirements
The legal structure of your magazine extends beyond just the initial setup. Engage with an attorney who is familiar with local jurisdiction requirements for city, county, or state registrations.
Tax Responsibilities and Reporting
Be prepared for your obligations regarding sales tax and payroll tax. Your state will have specific guidelines on how often these need to be reported and paid, whether monthly, quarterly, or annually.
Insuring Your Business Against Risks
In the world of publication, legal risks such as defamation are a reality. Insurance can help to mitigate these risks. Consider policies that protect against potential torts related to privacy and errors in publication.
Starting an online magazine is an exciting venture, but it is imperative to navigate the legal landscape carefully. This guide serves as a starting point, but it is essential to consult with a professional attorney who can provide advice tailored to your specific situation and needs.
As always, before making any decisions based on this information, consult with an experienced attorney. Use this guide to identify topics and questions to discuss with your legal advisor.
Online Magazine Setup
How do you avoid the most common legal problems when setting up an online magazine?
So this is a new company. Maybe it is a blog that makes money through affiliate links or selling some services. Maybe it is an online magazine, which is much like a blog but often makes more money through advertising. Perhaps there is a portion of the magazine that is behind a paywall. And the paywall is a spot where, if users pay, they have access to more information.
Location and Privacy Concerns
So here is what I would be thinking about. First, in which state is the owner located? Because usually, you are going to be taxed at the income tax level in that state. If you don’t have a state with income tax, great. That may be a good state to be located in.
I would also ask the owner, “Are you concerned about privacy or is your name going to be associated with the business?” There are certain states. Minnesota, Wyoming, etc., where the owner can be kept confidential from the public. Now, the government is always going to know who the owner is because tax authorities need to know that. So if it is important to keep the owner’s name confidential, we would probably look at setting the business up in a state where confidentiality of the owner is preserved. That might be Minnesota, for example, if the owner is here. But Minnesota has a state income tax. And so we might take that into consideration and look at a different state. Let’s say the owner lives in Texas. Where there is no state income tax, I believe. A Texas owner would probably not want to set up a Minnesota LLC. We would probably look at a Nevada LLC. So privacy of the owner and income tax considerations are important.
Choosing a Business Structure
All right, then, once we have identified which state to set the business up in, we would look at LLC or S corporation. Why not C corporation? Because C corporations are taxed twice and serve for most business owners, that is not the way you would want to go. There are some exceptions, like if you don’t plan to have profits for a number of years or if you are doing special tax planning where you want the C corporation to be able to deduct certain expenses that an S corporation couldn’t.
But, by and large, an S corporation or LLC are the best options. So from there, “Do you want an LLC or an S Corp?” is the question. If you are going to be working in the business and if the business is going to have significant profits, then generally speaking, you want it to be an S Corp. And in fact, even if you are not working in the business, you probably want it to be an S Corp. I have a separate video on trying to decide between LLC and S Corp, so I am not going to go too deep into that. We will add the link later when this video is published.
Key Contracts for Your Online Business
Best Practices in Contractual Clauses
If you have affiliate links, it is important that you have a disclaimer related to those. And then, once you have contracts for all of your important relationships with the outside, you will want to think about any contracts you have with important relationships on the inside. So, that is independent contractors. You will probably want an independent contractor agreement. Or at least consider whether to have one.
Why is that important, by the way? Two really big reasons. One, you designate who owns the intellectual property contractors are creating. The default is contractors own it. So if you are paying them to create something for you, you want a contract that gives you the intellectual property rights.
The second reason is you need to have confidentiality provisions in there. If you don’t, you are essentially waiving trade secret rights as it relates to any confidential information the contractor has access to. So, for example, with an IT company who has access to all data in your computer, you are running the risk of waiving all of your trade secret rights if you don’t have a confidentiality provision in your contract with the IT provider.
Handbook Flexibility Explained
Next, think about the relationship you have with employees. Now, usually, you don’t have a contract with them. You have an employee handbook, and that employee handbook sets forth all your policies and employees’ rights and procedures as it relates to the employee relationship.
Now you might say, “Why not have a contract with employees? Why is it an employee handbook or policy?” You can change employee handbooks and policies at any time in the future. You don’t need employee permission to do that, but contracts require employees to agree to the new terms. So usually, you only use contracts for something that won’t be changing, and you are locking in rights of an employee and an employer. Whereas an employee handbook, which is a collection of employee and HR policies. You can change that handbook at any time. All you need to do is notify the employees that you have changed the policies and they are now subject to it. A best practice is to also have the employees acknowledge that they received the handbook and have read the updated handbook. But that isn’t always necessary.
Intellectual Property Safeguard
So now we have talked about the big relationships. Relationships with the outside, relationships with the inside. What else should a magazine or a publication business be attending to?
You may want to trademark your brand name. You may want to copyright what you create. The artistic works that you create, whether it is videos, text or images. And you might want to register those intellectual property protections. If you have any slogan or logo, you might consider trademarking that. You will need to set up an entity. We talked about that in the beginning, and you might need to register in a city, county, or state. So you will want to work with an attorney familiar with those in your local jurisdiction.
Navigating Tax Obligations
A magazine doesn’t have any requirements to get licensed, but you probably have a requirement to register with your state. Especially the state tax authority, because you may have an obligation to start collecting sales tax. You may have an obligation to start collecting payroll tax. And then, typically, you have tax returns associated with those. And you want to know in advance, “Are those due monthly, quarterly, or yearly?” It depends on your state. And then, even within states like Minnesota, your obligations may depend on how much you are actually collecting.
Those are some of the big legal concerns or steps to avoid problems in the future. You might also consider getting insurance to mitigate any risks that you have out there. For example, the risk with a magazine is potential defamation. So you want insurance against that. Perhaps intrusion upon seclusion. I will cover that probably a little bit later today or in another show. But you want some protection for the tort of inclusion upon seclusion, and that is where you publish private information and you have legal liability for it. You might also want liability for some sort of errors in what gets published, or you might want insurance for that liability.
So essentially, just to recap, that was. “What factors you consider when setting up a legal structure and avoiding legal problems for a startup online magazine?”
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I am Aaron Hall. An attorney for business owners and entrepreneurial companies. It was a pleasure talking with you today and answering your questions from an educational perspective. As I always say, before you rely on any of this, consult with an attorney. It is my hope that you use these questions to identify topics and questions to bring up with your attorney. Until the next live session, I hope you are doing well. Take care.