PUBLICATION: Digit http://www.digitmag.co.uk

Digit Magazine - Setting up a creative studio

This article will appear in Digit magazine in late September 2005.

Some of the legal issues that need to be considered when setting up a creative studio seem rather negative, as really what lawyers try to do is plan for the time that things go wrong. However it is vital that you bring your thoughts to bear on these issues if you want to ensure the success of your new enterprise.

Are you setting up the studio with someone else? If so you will need to consider the terms of your partnership. Unlike marriage, in which we fondly believe that we will live happily ever after, business partners should assume that sooner or later one or other of you will want to leave and take out the value of the business that you have built up. That could be you, or it could be your partner. How will the value of the business be assessed? Will that partner be able to take clients with him or her? Can he /she sell the interest to another party. You are going to need a partnership deed / share holders agreement to determine these issues.

If you are simply going it alone, and you don’t want to set up a limited company, make sure you register with the Inland Revenue as a self employed person. Establish a simple system of accounting that you understand and ideally, get the advice of an account right at the beginning. Remember, once your turnover hits a certain threshold you will need to register for VAT.

If you decide to employ someone, you need effective contracts of employment in place, which importantly will stop your new recruitment from running off with your hard-won clients.

If you propose to take on freelancers, beware. A Tribunal may think the freelancer is an employee, even if you and he think otherwise. For example, you engage a freelancer on a casual basis and s/he submits a monthly invoice. However, he provides a personal service, yours is the only studio he works for, you control what he does and when and you provide regular work which he’s obliged to carry out. He may well be entitled to all the normal rights enjoyed by employees (such as the right to four weeks paid holiday per annum, protection from unfair dismissal, maternity/paternity leave etc).

You will need effective terms of business before you start accepting commissions. What are your terms of payment? Who will own the copyright in your creative work? What happens if the client is not satisfied with what you produce? Clear terms of business will help save a lot of heart-ache (not to mention cash flow problems) if you establish them in advance. It may sound fairly obvious but a lot of problems can arise because right at the beginning there was no clear record in writing of what you’re going to do, to what standard, by when and at what cost. Remember, as Sam Goldwin said, a verbal agreement isn’t worth the paper its written on.

If you are entering into software or other agreements, make sure that you read their terms of business carefully, don’t just click the ‘I accept’ button. If you don’t understand what they’re saying, you wont look stupid if you ask. They may not know either.

This article is based on UK law, is for general guidance only and should not be relied upon without specific legal advice.

This information was written by Caroline Walker, head of the Employment Law Department at Sprecher Grier Halberstam LLP, Solicitors.

Caroline Walker Partner / Head of Employment Law 020 7544 5625 carolinew@sghlaw.com