As the author of a creative work, you are the one who owns copyright to it in the first instance. There are two exceptions to this rule. The first is if you are an employee and you created the work as part of your job. In that case, your employer is who owns copyright to the work. The second exception is if you created the work as a work for hire. In that case, the individual or company who hired you to create the work owns the copyright to it.
What about when you own the company? Who owns the copyright then?
You are Not Your Company
Many creative professionals operate their businesses through a company, usually an LLC or an S Corp. Individuals who own their own companies are not necessarily employees of that company. If you own a single member LLC, you are a member of the LLC, not an employee. If you own all the shares of an S Corp. you are a shareholder of that company and may not be an employee. In either case, you own the copyright to any work you create and not your company. (NOTE: This may be different in a multimember LLC or an S Corp. with more than one shareholder. It depends on the language in the corporate governing documents.)
In the case of a single member LLC or a wholly-owned S Corp., the bigger question is not who owns copyright to the creative work, but rather who should own it? Does it make more sense to hold the copyrights as an individual or to transfer copyright ownership to your company? This is a strategic decision. You need to look at why you set up your company in the first place and what you plan to do with your copyrights in order to decide how copyright ownership should be held.
Creating Multiple Revenue Streams
Your copyrights have the potential to be income producing assets generating multiple revenue streams. A writer can license print book rights, audio book rights, foreign language rights, English language in foreign territory rights, and option the work for performance or a screenplay—each to a different entity, for example. Visual artists can license their work to fabric manufacturers, or for wallpaper, for calendars, coffee mugs, any number of consumer products for sale by retail chains, or as backdrops to ad campaigns or video productions.
When deciding who owns copyright—whether to keep ownership of your copyrights in your own name or to transfer copyright ownership to your company—you need to assess which option offers greater protection for those income streams.
Assessing the Risk to Decide Who Owns Copyright
When making the decision about whether you or your company should own your copyrights, you need to consider the risks to which you and your company are exposed. In other words, how could you or your company get sued?
Almost all creative professionals—writers (fiction, non-fiction, and memoir), visual artists, filmmakers, musicians, graphic designers—have exposure to claims of infringement by a third party. If you infringe someone else’s creative work, that person is probably going to sue you personally, not your LLC. They may not even know about your LLC and in any event, they think you did the infringing, not your company. Creative professionals can also be sued for defamation, invasion of privacy, or violation of someone's right of publicity. If you signed a contract, you could be liable for breach of contract. Simply put, operating through an LLC will not save you from being sued personally.
Your company could get sued for exactly the same things.
Protect Your Income by Protecting Your Assets
The primary purpose of operating through a business entity is to protect yourself and your personal assets from liability. After all, LLC means limited liability company. If there is a judgment against the LLC (or an S Corp.), the creditor has recourse against the assets of the company. But the creditor can’t get to your personal assets. Copyrights owned by the company could be exposed to claims by the company’s creditors.
On the other hand, if you hold your copyrights as a personal asset, they could be exposed to your personal creditors. For instance, Toni Braxton filed for personal bankruptcy and lost the copyrights to her portfolio of songs.
Your membership interest in the LLC (or your shares in an S Corp.) is a personal asset. But it is a personal asset that comes with another layer of protection. In most states, creditors cannot directly attach the assets of the LLC or an S Corp. to enforce a personal debt. Instead, the creditor can get a charging order which entitles them to the member's distributions from the LLC. This is a state law issue. Some states are more debtor friendly than others; plus, the answer may be different for single member LLCs.
Because in most states creditors cannot directly attach the assets of the LLC or an S Corp. to enforce a personal debt, it is easier to protect the revenue streams generated by your creative work if your copyrights are held by your company. Your personal creditor may get to the revenue itself, but not to the creative work that generates the revenue. Once the debt or judgment is paid, you still own the income generating asset—the copyright.
Tax and Estate Planning Considerations
Recent discussions in the Creative Law Center monthly membership workshops uncovered two reasons why holding your copyrights in an LLC offers greater benefit than holding them individually or in an S Corp.
In this excerpt from the Business Structures for Creatives workshop, Maryland Attorney Dan Gartrell explains the negative tax ramifications of holding your intellectual property assets in an S Corp.
In this excerpt from the Estate Planning for Creatives workshop, Maryland Attorney Cheri Dorsey explains why holding your copyrights in an LLC is beneficial from an estate planning perspective.
How to Assign Copyright to Your Company
Apply for copyright registration on your work and identify yourself as the author and initial claimant. Then make an assignment of copyright to your company in which you "sell, assign, transfer, and set over to [your company] the entire United States, foreign and international right, title, and interest in and to copyrights, copyright registrations or applications pertaining to [the work]." The transfer or assignment document can be filed with the Copyright Office. The transfer is effective even if the document is not filed with the Copyright Office.
You can name your company in the rights and permissions section of the application. You can do this even if you decide not to transfer your copyrights. This manages the expectations of potential licensees—that they are dealing with a company and not an individual.
Copyright Practice Tip
Listing your company as the rights and permissions manager of your copyright helps to manage expectations of potential licensees—that they are dealing with a company and not an individual.
The current term of copyright is the life of the author plus 70 years. If the author is a company, the duration of the copyright is 95 years from publication. With the approach suggested here, the math favors a creator who lives 25 years or more from publication. Depending on your age, your estate will have a longer period of time for controlling and licensing your copyrights with you as the author.
There are a number of considerations that go into deciding who owns copyright to your creative work. This post outlines one way of handling the issue. Add salt and pepper to taste.
Updated: August 25, 2021
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