Lesson 5: Band and Brand Organization, Protection, and Exploitation

Lesson 5: Band and Brand Organization, Protection, and Exploitation

“Introduction … Sole Proprietorship … General Partnership … Corporation … LLC … Trademark … What’s in a Name? … Your Business Entity … Recap”
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Summaries

  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Introduction > Lesson 5 Introduction
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Sole Proprietorship > Sole Proprietorship
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Sole Proprietorship > Sole Proprietorship
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > General Partnership > General Partnership
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Corporation > Corporation Entity
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > LLC > Limited Liability Company
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Trademark Basics
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Benefits of Trademark
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Trademark and Servicemark Registration
  • Lesson 5: Band and Brand Organization, Protection, and Exploitation > Recap > Lesson 5: Recap

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Introduction > Lesson 5 Introduction

  • There are several types of business organizations you can conduct your business under.
  • We’ll explore the differences of organizing your business as a sole proprietorship, a general partnership, a corporation, and one of the most popular forms in the entertainment industry, the limited liability company, or the LLC. And lastly, you’ll learn the particulars of protecting those names, marks, or logos used to distinguish your business from others in the marketplace, the service and or trademark.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Sole Proprietorship > Sole Proprietorship

  • The first topic we’re going to deal with is business organizations.
  • I’m going to talk about four of the primary types of business organizations that are used in the United States in regards to entertainment companies.
  • If you’re in a foreign country, be sure to check with your state, or your province, or even your federal government to find out what types of business organizations in that jurisdiction are similar to the ones that I’m going to discuss.
  • The first type of business organization is the sole proprietorship.
  • The sole proprietorship is an individual, one person doing business.
  • Now, do you have to conduct business all by yourself? Is it possible to involve other individuals in your business? Well, yes you can.
  • It’s very important if you do that- and you’re going to have to hire people like accountants, and attorneys, and maybe even business consultants- make sure that you have written agreements or letters of engagement clearly outlining the duties and responsibilities, and particularly noting that these people are hired help and not owners of your business.
  • Well, I’m telling you, if you don’t have a written agreement clearly identifying him as hired help, once your business becomes successful, you might have a claim from cousin Charles saying that he was in fact or he thought he was a partner in your business and had an ownership interest in what you thought was your sole proprietorship.
  • While the sole proprietorship might sound like the kind of business entity you want to use for your business, some say that there is one drawback to using this type of entity.
  • Sole proprietors can be held personally liable for debts of their business.
  • So you may want to consider a sole proprietorship as the form of business you want to use to conduct your business under.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Sole Proprietorship > Sole Proprietorship

  • The first topic we’re going to deal with is business organizations.
  • I’m going to talk about four of the primary types of business organizations that are used in the United States in regards to entertainment companies.
  • If you’re in a foreign country, be sure to check with your state, or your province, or even your federal government to find out what types of business organizations in that jurisdiction are similar to the ones that I’m going to discuss.
  • The first type of business organization is the sole proprietorship.
  • The sole proprietorship is an individual, one person doing business.
  • Now, do you have to conduct business all by yourself? Is it possible to involve other individuals in your business? Well, yes you can.
  • It’s very important if you do that- and you’re going to have to hire people like accountants, and attorneys, and maybe even business consultants- make sure that you have written agreements or letters of engagement clearly outlining the duties and responsibilities, and particularly noting that these people are hired help and not owners of your business.
  • Well, I’m telling you, if you don’t have a written agreement clearly identifying him as hired help, once your business becomes successful, you might have a claim from cousin Charles saying that he was in fact or he thought he was a partner in your business and had an ownership interest in what you thought was your sole proprietorship.
  • While the sole proprietorship might sound like the kind of business entity you want to use for your business, some say that there is one drawback to using this type of entity.
  • Sole proprietors can be held personally liable for debts of their business.
  • So you may want to consider a sole proprietorship as the form of business you want to use to conduct your business under.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > General Partnership > General Partnership

  • Does a general partnership have to be in writing? Well, I certainly urge partners to have a written agreement, but the courts can enforce an oral agreement to be considered as a general partnership.
  • A written partnership agreement should contain a number of things.
  • A written partnership agreement should spell out the contributions, either in money or in services, that each of the partners are making to the venture.
  • Lastly, the partnership agreement should have a provision dealing with the dissolution, the dissolution of the partnership.
  • When a partner leaves the partnership, the partnership dissolves.
  • If you have a written partnership agreement hopefully there will be a provision stating that if a partner decides to leave, there is a way for the other partner, the partner that wants to maintain the business, to buy out the other partner’s interest.
  • Many bands conduct their business as a general partnership.
  • We didn’t have a written partnership agreement.
  • Now, we didn’t have a written agreement, and this is one of the reasons why I urge you, if you’re involved in a partnership agreement, to have a written agreement that really says what happens should one of the partners leave and your business dissolve.
  • Will the other members that want to maintain the act, will they buy out that other partner’s share? And how are they going to be paid? Will they be paid immediately in one lump sum payment? Or can they be paid in installments over a period of time? All of those things can be covered, and should be covered in a written general partnership agreement.
  • Well, you might ask, what about liability in regards to a general partnership? Who is liable? A general partnership is treated like a sole proprietor in regards to liability.
  • Let’s say you have a partnership of three people.
  • The partnership agreement specifies that each of them are going to incur a third of any liability or loss.
  • Well, in a general partnership, one partner can be sued for the entire amount of a debt.
  • In regard to income taxes, partners, general partners, are considered like sole proprietors in that whatever percentage interest is in the partnership agreement, and any profits or losses are accounted for on their personal income tax returns.
  • General partnerships need tax identification numbers to open bank accounts and to also file informational schedules on their personal income tax returns.
  • Any profit or loss of the general partnership is added to or subtracted from each individual partner, according to their percentage ownership as determined by the written partnership agreement.
  • Just like a sole proprietorship, a general partnership might incur losses over the first two or three years, so it’s important for the general partners to have a written agreement indicating what percentage of those losses there each going to incur.
  • Just like the sole proprietorship, a general partnership might be a great way to go for a band, or a new business that’s just starting that doesn’t expect to incur a lot of liability initially, and also expects to have a number of losses for the first couple of years.
  • So there is some cost to forming a general partnership, but overall it’s less expensive than forming the next type of business entity, the corporation.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Corporation > Corporation Entity

  • Whereas a sole proprietor or a general partner can be held personally liable for the debts of the sole proprietorship or the partnership, the shareholder who is an owner of a corporation cannot be held personally liable.
  • Only the assets of the corporation, the corporation’s building, the corporation’s car, bank accounts, can be used to satisfy the debts of the corporation.
  • Many people say, in the case of a C corporation, which is a corporation that can have unlimited shareholders, incorporating provides like an umbrella to shield the shareholders from any liability that might rain down on the corporation.
  • While I say that shareholders are generally not liable for debts of the corporation, it’s important to note that the corporation has to maintain its business and comply with all of the formalities of their state’s corporate laws.
  • What are some of those formalities? Well, you have to maintain a corporate record book which shows that the corporation has a board of directors, who the board of directors are, and would also indicate that everyone, the shareholders, were given proper notice of the election of the board of directors.
  • You must maintain those shareholders meetings over the course of the life of the corporation.
  • If you don’t, then a creditor could sue the corporation and pierce that shield of liability and hold the shareholders personally liable.
  • So it’s important for shareholders to understand that they must bear the cost of not only establishing that corporation, but maintaining it and making sure that they’re complying with the state laws and the formalities of doing business as a corporation.
  • That’s many times why people decide to first start their businesses as sole proprietorships and partnerships, because of the expense of starting and maintaining a corporation.
  • A C corporation that can have unlimited shareholders does have to comply with all of the formalities of corporate law and can be expensive to maintain.
  • In most states, a corporation that only has a few shareholders, say 20 to 35, can start what is called a close corporation.
  • Close corporations were first started by states because they found a number of entrepreneurs and smaller types of entities being developed.
  • In a close corporation, you may not have to have a board of directors.
  • In order to have a close corporation, you must have a written close cooperation agreement.
  • Close corporation shareholders want to restrict the transfer of shares to make sure that they can maintain the governance of the corporation in a method that will enable them to fulfill the goals that they first started in forming a corporation.
  • Shareholders of C corporations are subject to what is called double taxation.
  • The shareholder has to pay tax on any dividends or any other disbursements made by the corporation.
  • So I mentioned earlier how many states recognized that smaller and smaller entities were be formed, smaller corporations with maybe 20, 35 shareholders.
  • Over the past 30 or 40 years, many, many small businesses with maybe 10 to 35 people, or even 50 shareholders, corporations with 50 shareholders started.
  • Subchapter S is a tax designation that allows corporations with 75 or fewer shareholders to make an election.
  • If that’s done, the corporation doesn’t have to pay corporate tax.
  • So it’s important to note that here in the USA, both governments, both the federal government and states’ governments, have recognized that you have a number of entrepreneurs, and smaller corporations are being formed.
  • Even the federal government, with the IRS, recognized that many of these corporations shouldn’t experience double taxation.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > LLC > Limited Liability Company

  • The last entity we’re going to discuss is the limited liability company, commonly called the LLC. And this has really become the preferred type of entity I found in the entertainment business.
  • If you go to any movie, at the very end credit of the movie, you’ll probably see that the company that produced the film is conducting their business under an LLC. So you might see United Artists or any name- Jean’s Movies LLC. And that provides one, them with the liability, the shield of liability that a corporation provides.
  • In order to start an LLC, you must first file what are called articles of organization.
  • In other words, all of the members of the LLC have to agree to the terms of them being members.
  • Only the LLC’s assets can be used to satisfy the company’s debts.
  • In regards to tax treatment, the members of an LLC are treated just like a sole proprietor or a partner.
  • In other words, there is no tax on the profits of an LLC. Any profits and losses of the LLC are attributable to and accounted for on each individual member’s personal tax return according to their ownership interest.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Trademark Basics

  • The trademark serves as a public record of who the producers of goods and services are.
  • So what’s the difference between a trademark and servicemark? Well, I liked to use an example of an entertainer who has both trademarks and servicemarks, and his name is Jay Z. Many of you know that Jay Z’s real name is Shawn Carter, but he goes under the name Jay Z, particularly for providing performances on recordings and live performances.
  • He had a partner named Damon Dash and they started a record company, Roc-A-Fella Records.
  • So while Jay Z owns, or has part ownership of at least two marks, he also has probably the complete ownership of his stage name, which is Jay Z. Anytime Jay Z goes out and performs, he performs under the named Jay Z, and you can believe that he has a servicemark for that name.
  • As a result of Jay Z having a servicemark for the name Jay Z, if anyone else goes out and tries to perform under the name Jay Z, he has the right to sue them for infringement on his servicemark.
  • Just like with a copyright, it’s important for you to register your service or trademark with the US Patent and Trademark Office, particularly if you’re doing business in more than one state.
  • They might just be content to protect their name and to protect their goods and services within only one state.
  • A trade or servicemark is any name, symbol, device or combination thereof that is one, either used by a person or company or two, that a company or person has a bonified intention of using in interstate commerce, in other words, in more than one state, to identify their goods and services and distinguish it from the goods and services provided by others.
  • Let’s talk about the process of filing a federal trademark with the US Patent and Trademark Office.
  • Well, the first thing you have to do is come up, if you’re trying to come up with a name, is to come up with an unusual name that you feel other people aren’t using.
  • The US Patent and Trademark Office has its own database of names and symbols and trademarks that have already been filed, so you certainly want to check their database.
  • If you’re an artist and you want to come up with a name that you want to protect in all of the states in the United States, then you could possibly go check other sources like iTunes, put in the name on the search link for iTunes and see if the name that you would like to use comes up, to see if another artist is using that name first.
  • Once again, remember, someone might have protected the name on a state basis.
  • They might have a state trademark, and that could prevent you from using that name in that particular state, so it’s very important to try to come up with an unusual name or mark or symbol to identify your goods or services.
  • Thirdly, you’re going to have to assert that you are the exclusive person or company that’s using this trademark or servicemark or name in interstate commerce.
  • As a matter of fact, they put your application, notice of your application, in an official paper called The US Official Gazette that runs for maybe a certain period of time, 30 days or so to notify the public that you have filed this application and that you’re claiming to use this mark or name exclusively within the United States.
  • So if anybody sees that notice in the Official Gazette and feels that they have a state trademark registration or that they have been using that mark for some time in interstate commerce, they can file an objection to your application.
  • You might want buy out the rights to their claim to the name.
  • To give you an example, in the music industry, Apple Recordings was a record company that was started by The Beatles years and years ago, and they registered a US Trademark to protect Apple Recordings.
  • Of course, you can probably imagine that it caused a little distress on the part of Apple Recordings when Apple Computers decided to develop iPads and the iTunes music store.
  • The Ohio Players’ attorney was basically saying you can’t use the name New York City Players because we have a mark, a registered mark, for the Ohio Players and someone might think that you are affiliated with us, or somehow we’ve changed our name.
  • So the story that I heard was that the head of the record company got together with Larry Blackman, the leader of the group, and they sat in a room and in just a matter of a few minutes, the head of the record company said we need to change our name.
  • Dick Clark, who had the American Bandstand and was a part of this company and kind of helped develop it, and the name of that company was Cameo Parkway Records.
  • Tell you what, Larry, let’s name a group Cameo.
  • You can believe they were concerned about changing their name and thinking that people won’t know that it’s us, that it’s the New York City Players.
  • Cameo Parkway Records might have had a trademark in the classification of manufacturing records, but Cameo, the group, was the only artist in the United States using that name for performing services.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Benefits of Trademark

  • Some of the benefits you’ll receive from filing a Federal Trade or a service mark are similar to the same benefits that you have by filing a copyright registration.
  • You have a situation like that recently with the group the Stone Temple Pilots, who had a lead singer that got kicked out of the group, and then started to use the group’s name to promote a 20th anniversary tour.
  • They’re fake goods and they try to import them in the United States.
  • If you have a federal trademark, then you have the right to go to court and have the judge order those goods seized by customs as they’re coming into the country.
  • If you become aware of the goods being here in the United States already, you could also approach the courts and have the US Marshals go seize those goods.
  • As I mentioned earlier, in order to receive a registered trade or service mark in the United States, you have to do business in interstate commerce.
  • So to receive a federal mark, you have to do business in more than one state.
  • Let’s say you’re a record company and you’re manufacturing recordings.
  • Well, how can you prove that? Well, you might want to come up with evidence that you possibly had your CDs manufactured in a different state.
  • You could come up with evidence that you sought distribution with a company in another state.
  • Well, you could possibly use evidence of the fact that you sold recordings, that the recordings were in fact downloaded, in different states in the United States.
  • What about a performing group? Suppose you’re trying to register a service mark for a performing group.
  • I encourage any of my clients that really want to file a federal trademark to start performing in other states.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Trademark > Trademark and Servicemark Registration

  • OK, to wrap up this section on Trade and Service Marks, let’s talk about the elements of the application.
  • One, the company or person that’s using this mark has to indicate that they are using the mark, or have a bona fide intent to use the mark within a certain period of time.
  • Marks are becoming more and more important in today’s entertainment industry, and particularly the music industry.
  • The whole point of the mark is to identify the producer of the goods or services.
  • The best form of protection, of course, just like in copyright, is to file and register your mark with the US Patent and Trademark Office.
  • I’ve done deals for artists with major labels and at that point, the major label in the contract will state that if the artist doesn’t have a registered mark for their name, the record label will even advance funds to have an attorney register the mark in the artist’s name.
  • It was a vocal group, going back to the ’70s. The Dramatics was a name of a group that consisted of five singers from Detroit.
  • Now, they had their first big record in the early ’70s, but five or six years earlier than that, there was another group of five male singers from Detroit that really went on to become big stars not only on the R&B charts but on the pop charts as well.
  • They were born out of the gospel vocal group tradition of having a bass singer, a tenor singer, a falsetto singer, a baritone singer- great vocal blend.
  • Well, The Dramatics- once again, was another group from Detroit- followed the same model.
  • I was aware of their hit record, but I’d never seen the group perform.
  • The great vocal blend, great choreography, great outfits, and when I left the concert I said, that’s a great group I really like, The Dramatics.
  • When the music started and the group came out, there were only four people.
  • I found out later, that that in fact was one lead singer from the group I had seen a year prior, who went out and started his own group of Dramatics.
  • I also found out that the original group had to sue him, and did sue him, for infringing on their name.
  • His group doesn’t live up to the quality of the brand that we’ve built, The Dramatics.
  • There’s many other examples of groups, even the Stone Temple Pilots, where that situation happens.
  • It really reiterates the fact that the brand, the quality of the brand that you’re trying to build, is so important in protecting that powerful product, be it a recording or personal services- the actual entertainment services that are provided by groups when they perform live.

Lesson 5: Band and Brand Organization, Protection, and Exploitation > Recap > Lesson 5: Recap

  • Registering a trade or a service mark, whether you’re providing an actual recording, whether you’re creating an app, whether you’re performing as a group, it’s important to protect the name that represents your brand.
  • Because in today’s music and entertainment industry, it’s the brand.
  • The brand, that just like the copyright, is a very valuable asset to your business, because you want to build the quality of the brand so that you can associate it with other brands or sponsorships and endorsements that generate a completely different revenue stream for your business.

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