Friday, August 16, 2013

LLCs to Protect Yourself - from what?

Things are moving slow regarding the house fire.  No real news to report.

So I'm going back to blogging about the publishing schemers.  Should you form a Limited Liability Corporation (LLC) as an author? 

Before I jump into the scheme, I will say that anyone can sue anyone in the United States for any reason.  So if based on that, I guess it wouldn't hurt except that LLCs aren't free.  I'm not overly concerned that someone will sue based on my fiction writing since I'm definitely sure I wrote it, have backup files, posted info about it during National Novel Writing months, went to writing groups, and from there it'll be a tough case to prove otherwise.  And what would they hope to gain, my royalties?  Plus their court costs?   Not a good get-rich-quick scheme.   Damages?  How does a fictional novel damage someone?  I even googled Vanna's name to make sure there weren't a bunch of Vanna Ames around.  There wasn't even a historic figure named Neferseshotep.

However, the real scheme (according to the schemers) is to use other work that you wouldn't legally be able to use and hide behind the LLC when it's found out.   That doesn't sound pleasant, but they were using as an example Broken Piano for President by Patrick Wensink.  I've actually blogged about Wensink's blog on Salon so when this scheme was floated at a dubious writing group, I knew exactly the book and author.   I don't think Wensink or his publisher started out with the intention of receiving an extremely polite cease-and-desist letter from Jack Daniels that they publicized because it was one of the nicest cease-and-desists ever.  Wensink admitted he made $12,000 in that six month royalty period because his book then became a bestseller so in Sharon terms this is also not a good get-rich-quick scheme.  I have imagination and like to think in terms of Powerball jackpot figures, rather than being able to cover a tuition bill.

But to the scheme -
(1) Set up a LLC. 
(2) Obtain a novel, search and replace names and insert products from chosen title.  The idea floated was similar to Marlboros and Budweisers. 
(3) The LLC publishes the novel.
(4) The LLC collects the royalties.
(5) The LLC pays every cent it receives to the schemer.
(6) Repeat steps 2-5.
(7) The LLC has no money when it is sued by the authors or trademark holders.

First off, I don't think this is very good for someone who claims to be an author.  Ideas should be popping up in your brain all the time so you don't have to manipulate someone else's text and slap your name on it.

Secondly and probably more importantly in legal terms, a LLC cannot be used to avoid personal liability.  Since I'm not a lawyer, I'll point you to Maxwell S. Kennerly, Esquire's post.

Basically, you can't set up a LLC to avoid taking responsibility for your wrongdoing.  Let's say I have my LLC and a teenager.  I register her car to the LLC.  When she drives through a red light, and a camera takes a picture, the ticket will be issued to the owner of the car - LLC.   Do you think I can say LLC has no money, and write ROTFLMAO across the summons? 

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