Knowing When to Represent Yourself vs. Your Company in Intellectual Property Matters
Introduction
Intellectual property (IP) is one of the most valuable assets an author can possess. Whether you are a novelist, a journalist, or a content creator, understanding when to represent yourself as an individual and when to act on behalf of your company is crucial in protecting your rights, managing financial obligations, and minimizing legal exposure.
Whether you are an author operating as a sole proprietor, or you've established your own imprint as a limited liability company (LLC) you need to manage your intellectual property. Each arrangement carries distinct legal, financial, and practical considerations that impact contracts, payments, and liability exposure. This article explores these issues in depth, providing guidance on signing binding legal documents, managing expenses, and properly marking transactions to maintain clear distinctions between personal and corporate responsibilities.
Legal Exposure: Individual vs. Corporate Liability
Legal exposure is a critical factor in determining whether an author should act personally or as a representative of a company. If an author publishes under their own name without a business entity, they are personally liable for any legal claims, including defamation, copyright infringement, and breach of contract. This means that if a lawsuit arises, personal assets such as a home or savings account could be at risk.
On the other hand, forming a company—such as an LLC or a corporation—creates a separate legal entity that can hold and license intellectual property. This separation limits personal liability. For example, if a publishing company under an LLC is sued for an alleged copyright violation, only the company’s assets are at risk, not the personal assets of the author. However, this protection only applies if the business is properly maintained and treated as a distinct entity.
Many people argue that an LLC with only one owner/author has little distinction from one operating as a sole proprietorship. However, if you were to ask a lawyer which one they would rather defend, the LLC wins every time. Short version: having an LLC gives you options, a Sole Proprietorship offers zero. The person who is suing has to first breach the corporate wall that separates your personal assets from your business assets, and if the owner/author has taken every step to maintain that wall, their mission becomes that much harder.
Example:
An author who writes under their own name without an LLC signs a book contract with a publisher. If a dispute arises, the author can be personally sued. Conversely, if the same author has an LLC that enters into the contract, the LLC is the legal entity responsible, shielding the author’s personal finances.
Signing Binding Legal Documents: Who Should Sign?
Authors frequently sign agreements such as publishing contracts, agent agreements, and licensing deals. Understanding who should sign these documents—whether the author personally or their company—affects liability and financial responsibility.
If the contract relates to rights that the author personally owns, such as a memoir written before forming a company, the author should sign in their own name. However, if the company owns the rights or the contract involves business activities conducted under the company’s name, the company should sign the agreement, typically through an authorized representative (which could be the author acting as the company’s owner or officer).
Example:
An author who self-publishes a book through their LLC should sign distribution agreements with retailers under the company name, ensuring that royalties and liabilities flow through the business. If the author mistakenly signs as an individual, they may become personally liable for obligations that should belong to the company.
What to Pay for Yourself vs. What the Company Should Pay For
One of the most common issues authors face when operating through a company is determining which expenses should be paid personally and which should be handled by the business. Maintaining a clear financial boundary helps preserve legal protections and simplifies tax reporting.
Personal Expenses:
Personal living expenses, such as rent and groceries, should always be paid personally, even if an author works from home.
Travel and meals not directly related to business activities.
Subscriptions and memberships that are primarily for personal enjoyment rather than business use.
Business Expenses:
Editing, cover design, and formatting costs for books published under the company’s name.
Marketing and advertising expenses related to book promotions.
Travel expenses for book tours, signings, and industry conferences.
Legal and professional fees, such as attorney costs for contract reviews.
Failure to maintain these distinctions can lead to legal problems, including the loss of liability protection. If an author routinely mixes personal and business expenses, a court may determine that the company is merely an extension of the individual, rendering the author personally liable for business debts and obligations.
Example:
An author who takes a vacation and charges meals to their business credit card under the guise of “research” risks invalidating their business structure. Conversely, if they travel to a writing conference and keep receipts, those costs can be a legitimate business expense.
How to Mark Transactions to Maintain Clarity
To maintain the separation between personal and business finances, authors should adopt a systematic approach to recording transactions. This includes:
Using separate bank accounts: A dedicated business checking account ensures that all revenue and expenses related to intellectual property flow through the company rather than mixing with personal finances.
Tracking reimbursements: If an author pays for a business expense personally, they should document it and have the company reimburse them to maintain a proper financial record.
Properly labeling contracts and invoices: Contracts should clearly state whether they are with the author as an individual or with their business entity.
Keeping detailed records: Using accounting software or a bookkeeping service to track income and expenses ensures compliance with tax and legal requirements.
Example:
An author who earns royalties from book sales should ensure payments are made to their business account if the books are published under their company’s name. If the royalties go into a personal account, it can blur the distinction between personal and business income, potentially jeopardizing legal protections.
Conclusion
Understanding when to represent yourself and when to act on behalf of your company in intellectual property matters is crucial for authors. Legal exposure, contract signings, financial management, and transaction tracking all play a role in maintaining a clear distinction between personal and corporate responsibilities.
By structuring agreements properly, keeping business and personal expenses separate, and maintaining clear records, authors can protect their assets, limit liability, and ensure that their intellectual property remains secure. Whether an author chooses to operate as an individual or through a corporate entity, diligence and informed decision-making will help them navigate the complexities of intellectual property ownership and financial responsibility effectively.
