Implementing a well-crafted social media/digital media policy and making sure all employees understand it will protect a company’s reputation online as well as reduce both security and legal issues. It also provides employees with an outline of what is shareable about your business in both their professional and personal accounts. 

Having this clear line will prevent an employee from inadvertently sharing information that isn’t ready to be publicly released or from sharing information that may be copyrighted somewhere else. 

Digital media goes beyond posting on social media or a digital marketing campaign. It also refers to recording telephone calls, using a picture or an image of someone, and using information from another source. All of these things, if done improperly, could pose legal hazards for a small business. 

Recording phone calls

Many people want to record telephone conversations to protect themselves. It could be you want to nail down specifics of a project as your client is stating them, or maybe you want to record an actual complaint to have it on record. However, recording telephone conversations or in-person meetings can be legally tricky because of both federal and state wiretapping laws that could prohibit it. 

That gets even more complicated when those in conversation are talking across state lines on a Zoom call or phone line. Each state has its laws which may be different and it would be a hard call which law would apply, or if federal law applies. 

Generally, there are two avenues that state laws fall into:

• That both parties must be aware of the recording. 
• That at least one party must be aware of the recording. 

Regarding federal law, the law permits recording face-to-face conversations, telephone calls, and other types of communication if at least one of those involved is aware of the recording. This “one-party consent law,” amended by the Electronic Communications Privacy Act in 1986, has been in place in many states for decades. The law also states that those who are not a part of the recorded conversation may still record it if one of those in the conversation consents and knows about the recording.

The U.S. Supreme Court heard a case in February of 2021 that addressed the issue of an internet user’s communication with a website. The question was whether an entity that redirects communications could be considered a “party to the communication” under the Wiretap Act. 

The case was Facebook Inc vs. Perrin Aikens Davis et al. The case involved secret tracking practices of Facebook did in 2010. The social media company had a hidden source code on non-Facebook sites to obtain subscribers’ information and communications with those sites, even though users had logged out of their Facebook accounts. There was no knowledge or consent given by the users. 

The practice continued until a news story revealed the practice in 2011. Congress amended the Electronic Communications Privacy Act of 1986 to include electronic communications but amended it again to forbid anyone from “intentionally intercepting any electronic communication.” 

Much like the law relating to phone and oral communications, the law allows interception if one of those involved in the communication gives consent. 

For businesses with websites, this is important because many ask that people sign up with their emails or other information. The law states that only the user and the company at the other end of the communication are entitled to the information unless one agrees for it to be taken by a third party. It could be the company or the user. 

Recording laws in different states

In addition to the federal law, each state develops its wiretapping law that stipulates when telephone conversations or face-to-face communications can be recorded. While states aren’t allowed to set laws below the federal standards of “one-party consent,” thereby contradicting federal law, they are allowed to set tougher standards to protect privacy.

Thirty-five states have one-party consent laws while 15 states have all-party consent laws. For the most part, each state’s laws are similar to federal law and others with either one-party consent laws or all-party consent laws. 

New York

Recording a conversation without the consent of at least one party of the communication is considered a felony in New York. New York created its eavesdropping law to state at least one of those involved must give consent to the recording.

New York includes the use of hidden cameras in its wiretapping law, prohibiting images from hidden cameras altogether in what is determined to be “private places,” such as dressing rooms, but allowing images to be taken from places determined as “public” where people shouldn’t expect privacy.

A more recent state appellate court decision ruled that those who talk loudly enough where another person may overhear the conversation should not expect privacy. This primarily affects reporters who may overhear conversations from potential sources in public.

The penalty in New York for illegally recording conversations in a felony conviction is up to four years in prison and a $5,000 fine. Misdemeanor convictions are subject to a maximum of 364 days in prison and a $1,000 fine according to N.Y. Penal Law 70.15, 80.05. 

New York doesn’t authorize any civil penalties for anyone suing under the eavesdropping law or hidden camera law.

There are some unique aspects to the New York law. One of those brought up by a state court is that the eavesdropping law only applies to communications in transit, not messages stored on a computer. This means emails could be shared after the fact, according to the ruling in People vs. Thompson.

California

California law is tougher regarding its wiretapping laws. It makes it a crime to record a confidential conversation without all parties consenting or without letting each party know of the recording by using an audible beep to start recording and continue recording within certain points of the conversation. 

The key point in the California law is to identify what the state means by “confidential conversation.” According to the California Supreme Court, a confidential conversation is one where both parties “have a reasonable expectation that no one is listening or eavesdropping.”

While the California law can include both a fine and imprisonment, the law also allows for civil damages for victims of illegal recordings.  Eavesdropping can be considered either a felony or a misdemeanor, depending on the facts of a specific case. A misdemeanor offense carries either or both a $2,500 fine and up to a year in jail. Felony offenses have a penalty of up to three years in jail.

Florida

Florida’s eavesdropping laws state you must have the consent of all parties to record conversations, whether on the phone, electronically, or in person. Illegal recordings are considered a misdemeanor or third-degree felony, depending on the offender’s conviction history and intent. Florida’s law also allows for civil damages. 

Florida’s law is specific in that it includes anyone who intentionally intercepts or tries to intercept a wire, oral or electronic communication. That would include computer communications like emails, text messages, and other forms of communication.

It also makes it a crime to disclose information from illegal recordings, even if you didn’t do the recording. It becomes a crime when you have reason to believe the recording was made illegally.

Conviction in Florida could net up to five years in prison and $5,000 in fines. The exception is if it is the first offense and didn’t have an illegal purpose or commercial gain attached to it according to Fla. Stat 934.03(4)(a).

Fair use + using the likeness of another

Fair use of material and using the likeness of another person fall under the federal Copyright Act. Generally, the act denotes fair use for any copyrighted work, including copes, recordings, or other transmissions, and applies for use of comment, criticism, news reporting, teaching, research, or other academic endeavors. 

Where it becomes illegal is for the purpose of using copyrighted work. Using copyrighted work to gain profit, marketing, or promoting is generally considered illegal, with some factors depending on the exact case. Some for-profit use is considered fair use.

There are several factors used to determine whether using a copyrighted work falls under “fair use.”

1. The intent as described previously whether it is for opinion, news, teaching, or academic purposes. 
2. A court will determine whether the work has been significantly changed to create a new message or meaning, calling it “transformative.” This would apply to creative works where the base storyline may be the same, but the characters and plotlines are different from the original.

It could also apply to things like advertising or marketing campaign elements that use a previous slogan or picture. 

3. The nature of the work will be considered. This means the court will look at whether it is factual work, such as compiled data, or creative and also whether it is published or unpublished. 

This would affect things like news articles and biographies. Those are still copyright protections, but the facts listed in these items are not so it could still, in certain circumstances be considered fair use. 

4. The court will consider how much of the work was used. There isn’t a guide on this but some perimeters have been determined in cases involving both books and music. 
5. The court will look at how your use affects the sales and market of the copyrighted work. This is potentially one of the biggest factors and is largely aimed at things like books, television shows, and movies. It determines whether you stole a work, produced it, made money on it and that prevented the original creator from doing the same. 

More on fair use and the specific details of it can be found in Section 107 of the Copyright Act. 

Responding to a DMCA takedown notice targeting your content

This is a portion of digital media law that is constantly changing as social media platforms change policies regarding false or misleading information, publishing standards, and offensive material. 

DCMA refers to the Digital Millennium Copyright Act. The role is to protect copyrighted works online, but it has been used by social media in other ways to control online news and communications. 

Specifically, a DMCA takedown is when content is removed from a website. This can be at the request of either the copyright owner of the content or the known owner of the content. It is a known, established standard followed by internet service providers and website owners. 

Anyone who produces material has a right to process a DMCA takedown notice against an online service provider or website owner as long as their content is found online without permission. 

A DMCA Takedown Notice must be sent to the website owner when this happens on behalf of the content owner, distributor, or publishers. The internet service provider (ISP) or hosting website company is mandated by law to take down the information from a website when the website owner had not voluntarily complied with the notice.

An ISP is typically thought of as the big tech companies like Google, YouTube, Apple, Facebook, and Twitter, but it can be any company that hosts your website, any commercial wifi services, or any file-transferring services.

The ISP or hosting company can take the infringing website “offline” when the website owner fails to comply with a takedown notice. 

However, by law, the takedown notice simply had to go to the ISP or website hosting company. The hosting company may take down the material and then notify the website owner. 

This provides the ISP a “safe harbor” which means it is protected from copyright infringement.

Disputing the notice

Section 5129(f) was enacted by Congress to fight unjustified use of the takedown law. This provision allows internet publishers to bring claims against copyright owners who knowingly misrepresent their cases of infringement.

Cases, such as a 2008 case, insist the copyright owner must consider that fair use may be in play. This could affect things like parody songs, or videos meant for online jokes or other entertainment using images, songs, or other forms of copyrighted work. 

The website owner has the right to dispute any takedown for any reason, whether it is copyright or some other reason. It is determined that most video removals don’t involve copyright but are flagged for some other community standard violation. Most platforms have terms of service agreement that states they reserve the right to remove content and user submissions without prior notice. 

A DMCA takedown notice must meet requirements in that it must clearly and specifically identify the infringing material, stating they have a “good faith belief” that it violates the copyright. 

Many times, notices are improperly written. Takedowns are often automated focusing only on keywords and not on the material as a whole.

If your material is taken down, immediately ask the hosting company for notice if you haven’t received one. 

You will then have two options. You can either send a dispute or a counter-notice. 

Issuing a dispute

Disputes can be tricky because they are often auto-generated without the original creator notified. If you send a dispute, the original creator will be notified. It will also mean your material will then be personally reviewed and that can present a problem depending on who is reviewing it. 

Remember, these days some in the review process have certain political/social/personal perspectives that could affect how they interpret your content. 

• A simple way to initiate a dispute is to hit a dispute button found on your website host or within the takedown notice. It is sometimes in the “copyright notices” part of your website. 
• You may also file a written dispute. Be sure to include your name, website address, any reference numbers, and your address including the federal court district you reside in.
• After you’ve done this, the platform can agree with their original claim and reject your dispute or put the content back up. 

Be aware that some platforms have a limit to how many times you can dispute a specific case. For instance, those on YouTube can appeal a rejection dispute up to three times. 

In most cases, there are specific times the platform has to review a case and respond. Most allow a 30-day period to review and additional time to respond to an appeal in a rejected appeal case. 

Some providers, like YouTube, have features that allow website providers to schedule takedowns themselves. This helps them avoid copyright takedowns that lead to strikes and ultimately the banning of a website. 

Many podcasters are using this method of posting a video for a limited time and then taking it down to avoid strikes. 

Issuing a Counter-Notice

These are difficult to win because it disputes a contract claim and usually fails because of the platform’s user agreement. Those who win a counter-claim typically don’t have their content reinstated. 

The first thing to consider when deciding what to do is whether your content does violate copyright restrictions using the court guidelines. If it does not, then you perhaps should consider disputing the claim.

One thing to consider is whether the work is registered with the Copyright Office before the infringement claim was made.

A fear most have is whether they will be sued if they dispute a claim. While that is always a possibility, it isn’t a probability especially if the copyright relates to work from a large enterprise. Large companies tend to not want to bother with suing a small business for violating a copyright infringement.

Dealing with digital media laws can be complicated for a small business. Knowing the basics of them will keep you out of legal trouble and help you keep your website up and running. Learning how to deal with a DMCA takedown notice isn’t the easiest subject to deal with, but is something every business owner must contend with these days. 

The post Digital Media Laws for Small Businesses first appeared on Chamber of Commerce.

It sets out various standards and labor relations and regulations related to worker payments, minimum wage, overtime pay, child labor limitations, and interstate commerce employment.

Passed in 1938, the law has seen several changes and updates. As a business owner, this is one of the most important laws to understand, since it directly affects your employees. 

This guide will help you understand the FLSA and how the regulations apply to your business.  

What is the Fair Labor Standards Act?

The Fair Labor Standards Act (FLSA) is a federal law that sets rules and guidelines that govern employees like:

• Minimum wage standards
• Bookkeeping
• Child labor laws
• Overtime pay 
• And more 

The FLSA applies to enterprises that are engaged in interstate commerce, produce goods that are involved in interstate commerce, or sell, process, or work on goods that are produced or moved for interstate commerce. 

This is a pretty broad definition, as most types of businesses will fall under this umbrella. 

Who is covered under FLSA?

FLSA specifies when employees are on the clock and will be paid, as well as which times won’t be paid hours. 

FLSA applies to employees of businesses engaged in interstate commerce or are producing goods for commerce. 

Other covered employees, small businesses, and private sector businesses include:

• Domestic service workers
• Educational institutions, including preschools 
• Schools for the gifted, mentally or physically disabled

Employers that have an annual gross volume of sales or total business transactions over $500,000 also must adhere to FLSA. 

Employees who work for companies that don’t fall under the FLSA may still be protected with overtime pay, minimum wage, recordkeeping, and child labor laws. 

This includes workers who:

• Regularly use the mail
• Work in the communications or transportation field
• Keep records of interstate transactions
• Telegraph interstate transactions
• Ship or receive goods between states
• Cross state lines as part of your job
• Do any kind of work for companies engaged in interstate commerce

Even if employees are not engaged in interstate work, they can still be covered under FLSA if they’re working as housekeepers, cooks, full-time babysitters, and chauffeurs, if they meet the following requirements:

• Work more than 8 hours per week for an employer
• Cash wages from an employer are at least $1700 in a calendar year

However, FLSA does not apply to independent contractors, since they’re not employees of the company. 

Fair Labor Standards Act guidelines

The FLSA is detailed legislation, below you’ll learn about the main parts of the act and how they apply to your business.  

Minimum wage

The federal minimum wage provisions effective July 24, 2009, is $7.25 per hour. However, different states and local governments also have their own minimum wage laws. 

Some states offer greater minimum wage compensation and greater protections, so as an employer you’ll need to adhere to both state and federal requirements. 

Different exemptions will apply for youth and minors, students, disabled workers, and tipped employees.

Minimum wage and tipping

If such an employee retains all tips and regularly receives more than $30 per month in tips, the employer can’t pay less than $2.13 an hour in direct wages. If the employee’s direct wages, plus tips, don’t meet the federal minimum wage requirements, then the employer must make up the difference. 

There are also individual state laws regarding tipped employees. The employee is entitled to whichever law (state or federal) provides greater benefits. 

Check out our Employee Benefits Guide for Small Business

Youth employment

The child labor provisions in the FLSA are designed to protect minor’s health, well-being, and educational opportunities and prohibit the employment of minors in jobs that will negatively impact these. 

Some child labor provisions include:

• The hours of work for a minor under 16
• Prohibited occupations that are too dangerous for minors to perform
• Youths 18 and older may perform any job for unlimited hours
• Minors 16 and 17 may perform any non-hazardous job for unlimited hours

Minors who are 14 and 15 may work outside of school hours in non-mining, non-manufacturing, and non-hazardous jobs, for no more than 18 hours in a school week, 8 hours on a non-school day, or 40 hours in a non-school week

Some special child labor provisions do allow minors age 14 and 15, who are enrolled in approved Word Experience and Career Exploration Programs to work up to 23 hours per week during the school week, and three hours per day on school days. 

The minimum working age for most non-farm work is 14. However, minors can begin work at any age doing the following:

• Delivering newspapers
• Performing in radio, theater, television, or movie productions
• Working for parents in non-farming businesses
• Gather evergreens and make evergreen wreaths

Overtime pay

The hourly overtime pay rate must be at least one and one-half times the regular hourly pay of the employee after the employee has exceeded the maximum number of allowable hours worked. Overtime pay begins once an employee has worked over 40 hours in a week. Employers are welcome to be generous, however, they must meet the minimum requirement. 

Here are a few examples to illustrate how overtime pay is applied:

Hourly rate

Hourly rate is the regular rate of pay an employee receives for an hour of work. If the employee works overtime, then they’ll be paid at a rate of 1.5 times as much as the standard hourly wage for all overtime hours.

So, if that employee is regularly paid $10.00 per hour, their overtime pay will be $15 per hour, for every hour that’s worked over 40 hours. 

Piece rate

Piece rate is when employees are paid based on the unit performed or pieces they complete, instead of an hourly rate. The piece work overtime rate is the same rate as the hourly rate, so one and a half times what the worker would typically get.

For example, if an employee typically gets $600 per week, and works 40 hours per week, the regular hourly rate would be $15 per hour. If they work an additional 5 hours of overtime, then they would receive an additional $7.50 an hour, so the total pay for a 45-hour workweek would be $722.50.

Another way to compensate workers getting paid on piece rate is by agreeing on an overtime rate before work is performed. 

Salary

Salary is the monetary amount paid for a regular or specified number of hours. The overtime for a salaried role is the same rate of 1.5 times the regular hourly rate for any hours worked over 40. 

The regular rate is found by dividing the total weekly salary by the number of hours worked. For example, if a person’s weekly salary is $1000 per week, at 40 hours per week the hourly rate would be $25. So, if the salaried employee works an additional 10 hours they would earn an additional $12.50 per hour, on top of the standard rate, bringing the standard and overtime rate to $1375 for the week. 

Regarding salary, the hourly breakdown can’t be less than the minimum wage rate required by FLSA. 

Equal pay

The equal pay guidelines of FLSA prohibit gender-based wage differences between men and women who perform the following: 

• Employed by the same company
• Perform job that requires the same skill, responsibility, and effort
• Jobs are performed in similar working conditions

Joint employment

A new rule regarding joint employment was added to the FLSA in March 2020. This new rule covers employees who are the joint employees of two different companies. 

Both companies can be liable for FLSA requirements, so the new policy lays out what constitutes a second company and the liability this company has.

FLSA exemptions

In some circumstances, employees will be exempt from overtime pay provisions or minimum hourly wage provisions. 

Exemptions are clearly defined in the FLSA based on specific business-types and employee occupations. So, employers should read the guidelines carefully before determining whether or not workers are exempt. 

Typically, bona fide professionals, such as those in managerial, sales, or supervisor roles are exempt due to the job role, but it’s not always the case. 

Here are some examples that illustrate these exemptions, however, it’s not an exhaustive list.

Minimum wage and overtime pay exemptions

The following types of employees are exempt from overtime and minimum wage restrictions:

• Certain employees of seasonal establishments like, recreation, newspapers, a seaman on overseas vessels, fisherman, and newspaper delivery
• Outside sales employees and certain computer-related occupations
• Executive and administrative employees, including academic employees
• Farmworkers employed on farms who use less than 500 man-days per calendar year
• Those employed as companions to the elderly, or babysitters

Overtime pay exemptions

The following employees are exempt from overtime pay in certain circumstances:

• People employed by retail and other service businesses
• People employed by railroads, air carriers, taxi drivers, and American seamen occupying certain vessels 
• Local delivery employees who are paid on a trip rate
• Workers in auto, trailer, truck, farm, boat, or aircraft sales
• Auto mechanics and clerks selling auto parts who are employed by non-manufacturing businesses 
• Workers of certain broadcast stations, including, news editors, announcers, and chief engineers
• Service workers who are living in their employer’s residence
• Farmworkers
• Movie theater employees

Partial overtime pay exemptions can apply to employees working in certain bulk agricultural operations or for bulk petroleum distributors can be exempt

Recordkeeping

The FLSA requires employers to keep records on employee hours spent working, wages, and more. 

Here’s a quick look at the information you’ll need to keep in your records or have human resources handle:

• Personal information of employees under 19 including, name, address, birth date, and gender
• The hour and date when the workweek beings
• The total number of hours worked each workday and workweek
• The weekly or daily earnings at the standard pa rate
• The regular hourly rate of pay and overtime pay rate
• The total overtime pay for the workweek
• Deductions or additions that have been made to wages
• The total wages paid during each pay period
• The date of the payment and the dates of the pay period

Note that if there are any non-exempt employees, then these records will differ from those who are nonexempt. For example, if you have employees who meet the following criteria you’ll need to keep different records:

• Employees who work from home or remote
• Employees who have nonstandard pay agreements
• Employees who have facilities or lodging furnished by the company
• Employees who are currently receiving remedial education

Nursing mothers

The Patient Protection and Affordable Care Act (PPACA), specifies that employers must provide breaks for nursing mothers.

Employers must provide a reasonable break of time for an employee to express breast milk for one year after the child’s birth. The employer must also provide a place other than a bathroom, that is free from coworker intrusions and public view. The space can be temporary, provided that it’s private and made available when needed by the nursing mother. 

The frequency and time of the breaks are flexible, depending on the needs of the mother. 

Required posters

Under the FLSA it’s a requirement to display posters of employee FLSA rights on a poster in the workplace. Even if the number of employees is small posters must be displayed in a prominent area. If you have current employees that work online or fully remote, you can send them electronic versions of the posters. 

Enforcement

There are a variety of different methods for enforcing the FLSA act. Complaints can also be submitted via The Department of Labor website at dol.gov.

Investigation enforcement

Enforcement of the FLSA is done via investigators across the country. The Wage and Hour Division (WHD) of the U.S. Department of Labor conducts the investigations into hours worked, wages, and other conditions to determine if the company is compliant with the law.

These investigations can be conducted regardless of the immigration status of the employees and workers.

If there are any first-time violations found, then changes will be recommended to bring the business back into compliance. 

Legal & law enforcement

The FLSA allows employees, or the Department of Labor, to recover back wages where overtime or minimum wage violations exist. Generally, there is a two-year statute of limitations to the recovery back liquidated damages or back wages.

However, there is a three-year statute of limitations that applies to cases that involve willful violations of the FLSA. There are a variety of ways to recover wages including litigation, criminal prosecution, or administrative work. 

Litigation procedures

Here are some of the litigation procedures the DOL can act out to recover back wages:

• The Department of Labor may file a suit on an employees behalf for back wages, liquidated damages, and civil penalties
• The Department of Labor can seek a U.S. District Court injunction when violations of the law occur, including the withholding of minimum wage and overtime, failure to keep records, or if a business retaliates against employees who file complaints
• The DOL can seek payment for civil money penalties from a DOL Law Judge
• Employees can also file private suits to recover back wages, plus attorney, and court fees. If an employee files a private suit, then the DOL won’t pursue the recovery of back wages on the employee’s behalf

Administrative procedures

There are a variety of administrative procedures the DOL can act out to recover back wages:

• The Department of Labor can supervise the payment of unpaid overtime work or minimum wages that are owed to employees
• The Department of Labor can seek out settlements for back wages and liquidated damages
• Repeat violations of overtime compensation and minimum wage requirements, or child labor violations can lead to civil money penalties 
• If the violation is found to be willful, or the offenses are repeated, then civil money penalties will occur on top of back wages

The post Fair Labor Standards Guide first appeared on Chamber of Commerce.

Majority shareholders have more power in deals, but tag along rights can help even the playing field for minority shareholders. This shareholders agreement gives a minority shareholder the right to join the transaction and sell his or her minority stake. This is provided that the majority shareholder sell his or her stake and this post will go into detail regarding this concept.

What are tag-along rights?

Tag along rights are also nicknamed “co-sale” rights and are used to protect a minority shareholder during venture capital deals. It allows them to join the transaction and sell their shares if the majority of shareholders do. This clause is usually pre-negotiated prior to the venture capital deal and is very common in the startup/tech industry. It’s also common in any industry that has a substantial risk, but high upside potential.

Tag-along rights basically give minority shareholders more liquidity and flexibility when investing. Liquidity either refers to how easily an asset can be converted to cash or sold without losing its value. Some investments like publically traded ETFs are very liquid because they can be easily bought or sold quickly without losing much value. On the other hand, assets like real estate as well as shares of private companies are illiquid because it’s harder to find buyers and each investment can’t be sold in a day.

The majority of shareholders own a larger percentage of the company with venture capital firms being a common example. Venture capital firms have greater abilities to attract buyers, negotiate payment terms and even sell private shares on secondary markets. Another common example of a majority shareholder is a person called an angel investor. Angel investors are well-connected businesspeople with high net worths that invest in startups for significant upside. Angel investors usually fund a startup in exchange for significant equity or ownership in the company to compensate for the risk. Mark Cuban is a famous angel investor and is part of the famous show Shark Tank, which involves entrepreneurs pitching investors for funding.

Important tag-along rights definitions

There are many subsets of finance, with private equity having the most unique language. It can be tough to understand this industry without understanding some basic terms like:

Venture Capital

Refers to investor groups, investment banks or financial institutions providing financing to high growth potential start-ups. These investments can be very risky and some investors require equity in the company. This financing method can be great for companies that have been around for less than 2 years and don’t have the means to sell public shares. Venture Capital can be seen as a subset of private equity.

Private Equity

An encompassing term that includes venture capital and other non-public investments. Private equity firms can directly invest in private startups like venture capital, but they can also make public companies private. This practice is called a leveraged buyout as private equity firms use debt (i.e leverage) to buy a public company that is usually struggling, which delists their shares. Once the firm is private, private equity firms work to improve the company’s financials and have the goal to either sell their interests to a buyer at a profit or have another IPO.

Drag-Along Rights

These are usually triggered during a company’s merger or acquisition and mainly benefit the majority shareholder. The majority shareholder can use these rights to force minority shareholders to sell their interests at the same rate and terms as the majority shareholders. Drag along rights eliminate any minority owner and allow 100% of the company to be sold to the new buyer.

Check out our guide on the Drag Along Rights

Angel Investors

These are usually affluent individuals that are accredited investors. Like venture capital, they invest in smaller companies in exchange for equity and other compensation. However, they don’t invest large amounts in each company as they don’t have the resources larger firms do. In fact, one company would typically be 10% or less of an angel investor’s portfolio. Angel investors also invest in companies during the early stages and can act in an advisory role.

Preemptive Right

This is also referred to as a subscription right and it gives an investor the right to maintain his or her equity percentage by buying a proportionate number of shares in the future. It also helps investors find deals that outside parties can’t since they can buy shares before anyone else. This preemptive right can be found when buying options, investment securities, and during mergers. It also prevents dilution, which occurs when equity owners have a diminishing equity percentage.

For example, investor A has 30 shares in company A, which has 100 total outstanding shares. Investor A has a 30% stake in the company and would have a lower percentage if company A issued an additional 20 shares. Therefore, investor A could have a preemptive right that would allow him or her to purchase 10 more shares to maintain the 30% equity stake.

A hypothetical example of tag-along rights

Two co-founders launch a tech startup which is going well and they seek outside investments via a seed round. They work to attract outside investors like venture capital, private equity firms and angel investors. Eventually, the co-founders find a venture capital firm who is pleased by their firm’s growth and wants to invest hundreds of thousands of dollars with them in exchange for a 70% equity position. This equity position might seem large, but it’s common in the startup world as it compensates for high risk. Per small business trends, 90% of new startups fail.

Fortunately, the co-founders’ business thrives and the venture capital firm is satisfied with its investment. The venture capital firm has seen a significant return on investment but wants to sell in order to invest in other businesses. This firm finds a buyer for its 70% equity share and sells it for $40 per share. The co-founders’ pre-negotiated tag along rights with the venture capital firm which allows them to sell their ownership at $40 each.

When to use

Tag along rights can be a great way to protect smaller investors and employees. In the past, it wasn’t as common for employees to become shareholders in the company. This has changed since many companies are recognizing the power of equity awards. This clause gives employees the ability to get a deal as good as larger investors like private equity firms and ensures that they won’t be shortchanged. These rights are generally used with private firms that are growing rapidly and whose shares are illiquid.

Therefore, tag along rights make it easier for smaller investors to buy undervalued shares during a company’s liquidation.

When not to use

These rights aren’t ideal for the company’s management team along with other majority shareholders. Also, these deals can make it harder to negotiate for better prices during liquidation events. Investors might offer different terms if they are forced to purchase minority shares in addition to their desired investment.

Tag along rights could help majority shareholders control a substantial part of the firm if they purchase the minority shareholders‘ stock. This action could cause strife among the management team and increase the shareholders’ uncertainty.

A good alternative to tag along rights is preemptive rights, which allow investors to buy shares before other outside parties can. These rights also help investors maintain the same equity position in the company by buying shares on a pro-rata basis.

Common mistakes

Tag along rights can add complexity to an area of finance that is already tricky enough. Some common mistakes to avoid with tag-along rights include:

Not precisely defining the terms

Companies need to precisely decide what a majority shareholder is. Generally, the majority of shareholders own at least 50% of the company, but that is open to negotiation. They also need to define which types of shares are subject to tag along rights. There are many different types of stock, but the main two are class A and class B shares.

Class A shares have significantly higher voting rights than class B shares and are valued accordingly. For example, famous investor Warren Buffett offers Class A and Class B shares in his company, Berkshire Hathway. However, each Class A share trades for roughly $300,000 while a class B share trades for around $200.

This extreme example demonstrates how concentrated voting power can really influence stock price. Despite the difference in voting power, each shareholder has the same equal right to equity in the company. It’s also important to realize those common shareholders would be paid last after creditors, bondholders, and preferred stock investors.

Not considering the company’s structure and impact on dilution

Each company can have a different structure which could be an LP, LLP, LLC, S corporation, or C corporation. LLCs and LLPs are two examples of structures that provide limited liability, which means that the business owners’ personal assets are protected from creditors. If the company fails, creditors can’t seize a business owner’s asset like his or her home to pay off debts. Limited liability also protects shareholders as the maximum loss they could have is their initial investment.  

Limited liability companies can have complex ownership schedules making it smart to determine crossclass tag along rights as well. These increase shareholder dependency and will mitigate the risk of one sale disadvantage to the remaining investors.

Not factoring right of first refusal

As these rights are subject to negotiation, majority shareholders can restrict the minority shareholders’ ability to object to a sale or agreement. Related to this, tag along rights can trigger a right of first refusal or ROFR. This provision allows a person or company the option to start a business transaction before anyone else. For example, a ROFR could prompt the first opportunity to buy stocks or other assets at the same price and terms as a different offer. If the investor that has the ROFR declines, the owner can sell it to anyone they desire.

ROFRs can be used by venture capitalists to get the best price on investments as it can help them time the market. Outside of investing, ROFRs exist in child custody agreements. One common use is that a ROFR demands that one parent offer the other parent the opportunity to watch the kids before using an outside third party or relative.

Frequently asked questions regarding tag-along rights (FAQ)

Tag along rights are becoming more common and can be tricky. Therefore, this section will serve as a FAQ section to clarify common misconceptions.

Are drag along rights and tag-along rights one and the same?

No. Tag along rights protect minority shareholders and gives them rights to participate in major deals like majority investors. Conversely, drag along rights benefit the majority stakeholder’s investment by preventing the liquidation of their shares and these terms enable majority shareholders to coerce minority shareholders to sell their stock on the same terms as the majority shareholders.

Are tag along rights always included in all shareholder agreements?

No, they aren’t as this clause is subject to negotiation. Some agreements have it and others don’t.

Who sees the most gain out of using tag along rights?

Usually, minority shareholders see the largest benefit from these provisions since they can sell their shares at the same price as the majority shareholders. These rights give the minority stakeholders liquidity and can help them realize significant gains.

Do tag along rights make it easier to sell company shares?

Sometimes they do and other times they don’t. If buyers know that the shareholder agreement contains tag along rights clauses, they could be prompted to buy more shares than desired in the company.

Bottom line

• Tag along rights are really influencing the financial markets and are helping grow the venture capital industry. This situation has sparked many new transactions, which fall under the mergers and acquisition, M&A category.
• Majority shareholders own a higher percentage of the company than minority shareholders and have greater power of the transaction.
• Tag along rights give minority shareholders more power when and if a majority shareholder sells his or her stock.
• Tag along rights are used in a variety of cases, have been relevant to many industries, but it’s imperative to avoid common mistakes like not clarifying the specific terms per contract.

The post Comprehensive Guide to Tag Along Rights first appeared on Chamber of Commerce.

	Incfile.com	Wide range of services Technical support	Visit Incfile.com
	RocketLawyer	Straight-forward plans Transparent pricing Personal and small business services	Visit RocketLawyer
	LegalZoom	High-end legal services Start an LLC Good track record	Visit LegalZoom

No longer must business owners consult with an attorney in-the-flesh to receive legal advice. As with most things these days, companies can get help with their legal issues over the web, rather than employ the services of expensive local lawyers.

In contrast to a business law firm, online legal services help small business owners get legal assistance quickly and cheaply. Here’s our full review of online legal services for small businesses.

Best online legal services for small businesses

1. Incfile.com

While Incfile.com provides a range of services for established small businesses, their real focus is on business formation. More expensive than average.

2. RocketLawyer

A membership-based legal service giving access to features like business formation and trademark services. You can buy standalone legal services, but membership is more affordable. RocketLawyer gives discounted access to extra legal help.

3. LegalZoom

The classic online legal service, LegalZoom, has established itself as the go-to provider with a great track record and reasonable pricing. For particular services, other providers may be cheaper.

4. LegalShield

Comprehensive coverage from an easy-to-reach team with a custom legal plan and discounted extra legal assistance, with a sensible price structure reflecting the size of your business.

5. UpCounsel

The most distinctive of our five online legal services, more of a marketplace than a service provider. You post legal work and get affordable bids from pre-screened lawyers.

How we ranked online legal services

We ranked the online legal services we reviewed based on the following 4 key criteria:

• Features – What benefits do users or members get? The more useful features an online legal service provided, the higher we scored them.
• Price – To get a high score from us, an online legal service had to offer their features at a great price.
• Customer support/accessibility – Online legal services are supposed to be convenient. We gave extra points to online legal services that made accessing their services quick and easy.
• User experience – Law can be confusing enough. Online legal services should make getting your legal work done simpler, not harder. We ranked companies higher for delivering a great user experience.

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Incfile.com: Great for starting out

Incfile offers a range of online legal services to small businesses but focuses on people looking for business formation. However, while you could call LegalZoom an online legal service offering business formation, you can think of Incfile as a business formation service that also happens to offer other online legal services.

Price-wise, they’re on the slightly more expensive end of the spectrum.

Incfile.com features

Every incfile.com package includes these services:

• Checking company name availability
• Preparation and filing of articles of incorporation and similar documentation
• Next business day processing
• A registered agent service (free for the first year)
• Lifetime company alerts
• Online order status tracking
• Free business tax consultation
• Lifetime customer support
• Online access to your incorporation documents

Incfile offers a simple drop-down menu to select the legal service you need (like ‘create an LLC’) and your state. From there, incfile.com can provide you with one of three levels of packages (Silver, Gold, and Platinum) to choose between.

The features you get with each package differ by price. You can use this chart to decide which is right for you:

Using incfile.com is straightforward. However, compared to LegalShield, LegalZoom, and RocketLawyer, the interface is bare and doesn’t feel as modern or streamlined. Quality technical support is available, however.

Incfile pricing

The Silver plan – incfile.com’s lowest – sells for a monthly fee of $49. However, once you include state filing fees that number goes up to $99 if you’re in Colorado, for example. State fees naturally vary by state. Their top plan, Platinum, costs $299 excluding state fees.

You can use incfile.com to file your business tax return. However, it’s costly compared to online filing software such as TurboTax or H&R Block.

Incfile: What’s not included?

Online legal services regularly update their features. Always check their website before deciding on one. If you want to start a small business then incfile.com is excellent. However, for other legal services you’d be wise to also consider other providers, who may have more well-rounded legal services to offer.

See the full review of Incfile.com here.

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RocketLawyer: Powerful legal assistance online

If you’re weighing up your options, one of the strongest online legal services available is RocketLawyer. RocketLawyer is a fast and comprehensive online legal service that offers small businesses two main kinds of assistance.

First, RocketLawyer can provide many of the more common types of legal work on your behalf directly. Second, RocketLawyer offers discounted access to legal assistance to their members from their own lawyers.

RocketLawyer features

While RocketLawyer also offers personal services, we’re focusing on their legal assistance for small businesses. These fall into four areas:

• Starting a business
• Renting a property
• Creating contracts
• Protecting your intellectual property

RocketLawyer’s package options are straightforward, with most of its services accessible to Premium members at little or no extra cost. These specific services cover:

• Business formation
• LLCs
• Non-Profit Organizations
• Freelance/Independent contractors
• Contracts and service agreements
• Running a business/compliance
• Labor and employment
• Intellectual property (IP) and licensing
• Trademarks
• Copyright
• Patents

RocketLawyer can help by filling out documentation, guiding you through the process, and taking much of the drudgery off your plate. They offer solid customer support by phone, email, and online chat.

RocketLawyer pricing

RocketLawyer’s prices are easy to understand. While you can access many of their services as a non-member, it’s always more expensive than the Premium membership monthly fee of $39.99. At the time of writing, RocketLawyer is currently offering a free 7-day trial.

RocketLawyers prices are comparable to those of LegalZoom, their best-known competitor.

The value of Premium membership to RocketLawyer is improved by access to pre-screened lawyers at lower rates than you’ll usually find on the open market.

RocketLawyer: What’s not included?

RocketLawyer’s plans vary but are all comprehensive. Services not included with Premium membership are rare. However, their initial offering is less generous in terms of features than those LegalShield will provide. Their app is also missing some forms you’ll find on the RocketLawyer desktop site.

See the full review of RocketLawyer here.

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LegalZoom: Fast and effective online legal assistance

LegalZoom, a well-known online legal service catering both to small businesses and individuals interested in starting one. LegalZoom’s services cover wills and trusts, legal plans, intellectual property, and business formation. They can also help you get an attorney at a reasonable rate.

LegalZoom features

LegalZoom is an online legal service, not a law firm. Although they can provide guidance and support with common legal matters affecting small businesses while helping you through legal processes, LegalZoom won’t represent you in court. However, if you need courtroom representation, LegalZoom can call attorneys on your behalf.

LegalZoom has so far helped start over one million LLC’s, completed 175,000+ DBA’s, and had their clients’ filings accepted in all 50 states. When deciding between different online legal services, LegalZoom’s track record is something to consider.

Like LegalShield, RocketLawyer, and UpCounsel, LegalZoom provides access to a network of attorneys at relatively low-cost. With a paid monthly plan, you get unlimited thirty-minute legal consultations.

LegalZoom pricing

LegalZoom’s prices and packages vary. Consider their Trademark Registration service; LegalZoom offers a ‘basic’ plan at $199 and a ‘complete’ plan for $219.

Other services may be cheaper depending on the area; LLC filing starts at $79 plus filing fees. Remember that as business expenses, you’ll be able to write these off on your tax return.

Overall, LegalZoom is in the middle of the pack when it comes to cost but offers high-end service.

LegalZoom: What’s not included?

LegalZoom’s services are comparable to RocketLawyer’s for their comprehensiveness, and if you’re in doubt about what they can provide be sure to check their website.

See the full review of LegalZoom here.

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LegalShield: Great online legal service for small business

Small businesses want online legal services that offer the legal assistance they need, whether planned or unplanned, without fuss, at a fair price. That’s what LegalShield does. LegalShield delivers an extraordinary range of features to its members at an excellent value, with innovative and easy-to-reach support, as well as a beautifully designed app and website.

LegalShield features

LegalShield offers the most comprehensive range of features across all their price plans. From free tools to help you answer your questions, though to a custom legal plan and even significantly discounted access to extra legal support not included in your initial coverage (although the vast majority of your needs likely will be), LegalShield seems to have designed their online legal service with the end-user in mind.

LegalShield membership comes with legal support in the following areas:

• General consultations
• Designated consultations
• Contract and document review
• Debt collection assistance
• Carrying out phone calls and sending letters
• Trial defense support
• Business formation
• Taxes
• Trademarks
• Immigration
• Antitrust
• Imports/Exports
• Intellectual Property
• Legal agreements
• And more.

LegalShield seemed to provide the most at no extra cost of the different online legal services we reviewed. Combined with the 24/7 support available by phone, email, or mobile app, we believe that LegalShield offers businesses real peace of mind and solid service.

LegalShield pricing

LegalShield’s legal assistance for small businesses is available in three versions:

Name of Package	Price Per Month	Company Size
Small Biz 10	$39	Small businesses with up to 10 employees
Small Biz 50	$89	Companies with up to 50 employees
Small Biz 100	$149	Businesses with up to 100 employees

Considering the challenge of offering legal support to a business of up to a hundred people, these prices offer excellent value to small businesses. If you need extra legal assistance, LegalShield also provides discounted access to members of up to 25% off.

LegalShield: What’s not included?

This will depend on the specific custom legal plan that you receive from LegalShield when engaging their services. However, their membership benefits are comprehensive and should comfortably suit the legal needs of most small businesses.

See the full review of LegalShield here.

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UpCounsel: An alternative online legal service

UpCounsel is different from other online legal services because it’s a marketplace rather than a legal assistance provider. Rather than paying for a monthly subscription in exchange for fixed services, you place a job on their site and pre-screened lawyers send you bids, which you can decide between based on cost and what they promise to deliver.

UpCounsel features

The UpCounsel marketplace gives your small business access to lawyers who can perform different kinds of legal work at highly competitive rates.

On UpCounsel you will find lawyers suited to a range of specific needs commonly faced by small businesses. You’ll give UpCounsel information in a quick and easy form to help them filter your results.

UpCounsel can connect you with legal assistance in the following areas:

• Startup specific legal support
• Selecting and forming the right business structure
• Contracts and agreements
• Intellectual property
• General counsel
• Immigration
• Real estate
• Employment
• Tax
• Lawsuits and disputes
• Raising capital and funding

Once you’ve got your lawyer, they’ll help you further by offering the following online collaboration tools:

• Workflow management
• 24/7 support
• Legal documents created by professionals
• Document management and storage
• An E-signature tool

UpCounsel pricing

Due to their bidding system, UpCounsel can’t guarantee specific prices for particular services. However, you can be confident that you’ll get legal assistance at a lower price than on the open market due to the elimination of many overheads.

UpCounsel does offer sample hourly rates and fixed fee packages to give you an idea of how much you might end up paying for legal assistance.

UpCounsel: What’s not included?

Almost every feature you’d expect from an online legal service, except for access to lawyers at competitive rates.

See the full review of UpCounsel here.

The post Best Online Legal Services for Small Business (2023) first appeared on Chamber of Commerce.

What is intellectual property?

Under Intellectual Property law, we find the following categories:

• Copyright: Copyright protects creative content you have created. Think of written work,
• music, photos, designs, or software. Copyright is automatically granted.
• Patent: Patents protect inventions. Obtaining a patent can be a complex and costly process. It involves having to hire an attorney.
• Trademark: Trademark covers your brand and everything associated with that. It is, however, not designed to protect businesses but to protect consumers from confusion. Trademark is not automatically granted.
• Trade secret: Trade secret is simply applied to secret business information. All the information you don’t want to get out: client lists, strategies, recipes etc. Trade secret applies only when you actively keep your secret e.g. through NDAs.

While copyright might be the most common and well-known type of intellectual property law, the other three are of no lesser importance.

When it comes to copyright, it’s important to note that it does not apply to ideas nor to your name or slogan. This is why it might be wise to choose a combination of different types of intellectual property law for different elements of your business.

What is copyright law?

For many entrepreneurs, copyright law sufficiently protects their creations. Unless there is infringement, copyright can be hassle-free and investment-free.

To hold the copyright of certain work means that you have the exclusive right to spread, copy or sell the work. You can also publish, display or export the work to your heart’s desire. The holder and only the holder of the copyright is entitled to do so.

These are the most important characteristics of copyright:

• It is automatically granted.
• In some cases, it is advisable to also register your copyright. Registered copyright carries more weight in a court of law.
• In straightforward cases, one can register their work online on the website of The Copyright Office. In more complex situations, an attorney can be hired to help register your work.
• It applies to creative content, not to ideas or brands.
• It is almost impossible for the creator to outlive the copyright.
• Work does not have to published to bear copyright.

So if you’re a photographer, all your photos are automatically copyright protected. The ones that you have published on your website, the ones that you have sold, and the ones that no-one has seen yet. If you feel there are some real masterpieces in your portfolio, it might be worth registering.

What does copyright protect?

Copyright protects “creative content”. Most creations from your hands fall under this umbrella. It does not actually need to have any value or artistic substance. As long as you have made it, it’s yours.

Examples of copyright-protected work are:

• Books
• Manuals
• Audiovisual material
• Designs
• Photography
• Visual art
• Software

It’s all about how you have put something together that counts. How you have put together the words and sentences to write that book or to design that building. That is protected.

What is not protected under copyright?

There are creations that might seem like they should fall under copyright law but actually don’t. Some of these can be protected under one or several of the other three types of intellectual property law.

Examples of what is not copyright-protected:

• Fashion
• Computer code
• Brands and brand-related elements
• Ideas
• News
• Jokes

You might have written a manual on how to build a yurt. The writing in this manual is your copyright.  However, others are free to use the information itself however they see fit. They can completely rewrite your manual using the exact same information with different wording, structure, and design and not infringe on your copyright.

Any methods of operation, policies, or processes that you might have in place in your company do not fall under copyright either. If the formula for your company’s success is your specific meeting structure, you might want to protect these under Trade Secret law.

How long does copyright last?

When you are the sole creator of your autonomous work, your copyright will outlive you by 70 years. Your heirs will be able to profit from your book’s royalties for 70 years after you’ve passed away.

After your passing plus 70 years, your work will become part of the public domain, meaning there is no longer any protection of your work under copyright law. Everyone will now be able to use, publish and duplicate it.

Find more information about copyright on the website of the U.S. Copyright Office.

What is a trademark?

Where copyright does not suffice, a trademark might do the job. As we established earlier, a copyright is not granted on anything to do with your brand. Still, you might want to protect it.

This is what you need to know about trademarks:

• Trademark is designed to protect consumers, not businesses.
• It applies to names, slogans, and brand expressions such as colors, costumes, and designs.
• Because it is meant to protect consumers from confusion, it only applies when a brand is marketed to consumers.
• It does not automatically apply. You can register at the US Patent and Trademark Office.
• It requires financial investment and time to register a trademark.
• Trademarks are not required, your business can perfectly well operate without any.

Let’s say you want to open a bakery called Suzy’s Buns and Rolls, with blue and gold company colors and specific staff uniforms, you could apply for a trademark to prevent Suzan from opening Suzan’s Buns and Rolls two blocks down.

Downsides of registering a trademark

• The process of getting your brand trademarked can be long and expensive. It will most likely also require you to hire an attorney. Before registering, you will need to make sure that your brand expressions are not already claimed. Your lawyer can help you with this research. He/she will likely save you time and money down the road.
• You will need to renew your registered trademark every 10 years. For it to be valid, you will also need to keep using your trademark.
• Others can challenge your trademark. If someone feels your trademark infringes on theirs, they may challenge your trademark.
• Trademarks are very specific. They only apply to your specific name, slogan or other brand expressions in your particular field. It is very possible that another business in another field may still carry the same name, slogan, or colors.

Find more information about Trademark law on the website of the United States Patent and Trademark Office.

What are patents?

Patents are a lot less visible than copyright and trademarks. There is no little symbol we regularly come across to remind us of all the things around us that are patented. They are in fact much more complex types of Intellectual Property law. Nonetheless, you might one day feel you want to register a patent.

These are the basics of what you need to know about patents:

• They cost a lot of time and money to register.
• They need to be registered by an experienced lawyer.
• Patents apply to inventions.
• You can make money off of patents.
• Before the patent is approved, the invention should be kept secret.
• Apart from new, your invention must also be useful and non-obvious.

What can be patented?

When speaking of patents, we speak of inventions but this does not always refer to the narrow meaning of the word. Yes, patents can be registered for physical, technical inventions but also for e.g. business processes, methods of manufacturing, and chemical compositions. Ideas cannot be patented, neither can certain physical discoveries.

Farmers and plant breeders can register a patent for specific mutations of their crop. If you have managed to breed a new kind of cucumber that can be cloned and reproduced, you might very well be eligible for a patent.

Patents and time pressure

Under U.S. law it is decided that whoever registers a patent first, gets it. Regardless of who actually invented the subject at hand. This means that time is of the essence when it comes to registering your patent. You do not want to run the risk that the new piece of software you have spent years on, will be registered under someone else’s name because they were first to arrive at the U.S. Patent and Trademark Office.

In the United States, you only have a one year window after publicly disclosing your invention to register your patent, another good reason to register as soon as possible. Many inventors never actually get to patent their invention due to a lack of time and money.

If you do get your patent granted, it will be valid for 20 years after which you can apply for an extension.

When to lawyer up

Unfortunately, registering a patent is not something you can easily undertake yourself. You will need to hire an attorney to complete the process for you. This is one of the main reasons it is a costly endeavor. However, once you have officially claimed your invention, your investments can really pay off. Patents can potentially provide the owner with passive income off the royalties for a long time.

What are trade secrets?

The final type of Intellectual Property law is Trade Secret law. As the name suggests, this law protects everything within your business you want to keep secret from the outside world, your competition in particular.

The basics of trade secrets:

• It only protects secrets. Once you make the information public, it’s no longer protected.
• It protects you from people creating knockoffs of your product/service.
• Strategies, recipes, procedures, client list, and processes can all be part of trade secrets.
• You do not have to register trade secrets.
• You keep them safe through Non-Disclosure Agreements (NDA) and company policies.

What you need to do

Creating clear company policies is vital for protecting trade secrets. This does not only mean having employees, partners and contractors sign NDAs, it also means having rules and regulation in place for the protection of your classified information. While you don’t need a lawyer to register any trade secrets, they can be very helpful in setting up the right policies to ensure your secrets are safe.

Trade secret law vs. patent law

It’s important to note the difference between Trade Secret law and Patent law. It does not prevent your competitors from creating a similar product with the same exact formula. As long as they came up with it themselves, they are free to use it. This is different in the case of a patent.

Trade secret law prevents people from sharing your secrets, it does not protect the information itself.

Intellectual property exceptions

Joint projects, employee work, and commissioned work could be examples of this. We should also keep in mind fair use policy because in some cases people will be allowed to use your content.

Joint projects

Many entrepreneurs and small business owners work with different partners for different projects. This is especially true in the creative industry. How do you establish copyright for collaborations?

• When nothing is put in writing, each contributor is granted full copyright regardless of the size of their respective contributions.
• Each owner is free to use the work to the full extent of their copyright, without any permission from the other owners.
• Copyright is passed on to the heirs of a contributor in case of death, not to the other contributors.
• Collective work is where there are several contributors but only one publisher of the work. The main publisher owns the copyright of the whole while each contributor owns their own contribution.
• When working together on a piece of creative content, it is advisable to set up a contract outlining who owns what and what each contributor is allowed to do with the result.

Commissioned work

As an entrepreneur, you might be commissioned to create work for someone else, who pays for it, or the other way around. Who can claim copyright for this content? How about employees who create work while being paid by you?

1. Work for hire is content that is created by an employee for an employer. This work is automatically owned by the employer. Standard employee contracts will also state this.
2. This is different when the creator of the work is an independent contractor. Generally, when the work is made in their own space with their own tools, the creator will be granted the copyright.

The United States Copyright Office has defined exceptions to copyright in the case of an independent contractor.

Where one or more of these apply, the work will be treated as work for hire:

• a work specially ordered or commissioned for use
• as a contribution to a collective work
• as a part of a motion picture or other audiovisual work
• as a translation
• as a supplementary work
• as a compilation
• as an instructional text
• as a test
• as answer material for a test
• as an atlas

Fair use

In some instances, the work you created can still be used by others under fair use policy. Your work can be published or duplicated for the purpose of news, research, education, criticism, commenting or parody.

A judge will look at different parameters when determining if a practice is protected under fair use:

1. Was the material used for commercial purposes?
2. Was the work created for entertainment purposes?
3. Was a large part or even all of the work used?
4. Was the value of the work jeopardized by the use?

When the answer to any or all of these questions is yes, a claim of fair use will most likely be overturned.

In fair use cases, judges favor education over profit, science over entertainment, snippets, and quotes over entire works, and the protection of the original copyrighted work’s position in the market.

Intellectual property and the internet

In the digital age, intellectual property has become increasingly complicated. Many entrepreneurs wonder what they can take off the internet for promotional purposes and what others might use from their social media accounts. Is Facebook really the lawless country it sometimes seems to be or do you still own the sketches you posted as promotional material?

Social media

Your posting content on social media does not alter your copyright. You can happily post away and the copyright will remain with you and only you.

Images, video, audio

It might be tempting to scour the web for just the right image to accompany your blog or social media post. Don’t fall for it! No matter how easily accessible, the copyright of the material you find online will remain with the author.

Often, images are protected with watermarks to prevent unauthorized use. You might want to consider doing the same for images you post online.

Avoid getting in trouble:

• Download images, videos, and audio from free or paid stock websites.
• Properly cite and source your content.
• Use a plagiarism checker to be sure you’re following the rules.

Check out our guide on How to Start a Blog

Key takeaways of intellectual property

Follow the rules, invest some time in protecting what is rightfully yours and keep away from unauthorized use of other people’s creations and you will have the basics covered.

To sum it up, as a creator, you remain the sole owner of your work when it is commissioned by another or posted on social media. Employers are the owner of work created by their employees.

You should now be aware of the four different types of intellectual property law:

1. Copyright – applies to creative content; applies automatically but can be strengthened by registering your work
2. Trademark – applies to brand expressions; needs to be registered but many companies choose to leave their brand unregistered
3. Patents – apply to inventions; registration is a long and expensive process that requires an experienced attorney
4. Trade secret – applies to classified business information; does not get registered but protected through contracts and policies

The post Intellectual Property for Small Businesses first appeared on Chamber of Commerce.