Top 10 Legal Mistakes to Avoid as an Entertainment Startup
- Lindsay Spiller
- Jul 9, 2023
- 3 min read
Updated: 5 days ago
Startups are unpredictable generally. Entertainment startups are unpredictable exponentially. It's an exhilarating thing to take a creative idea and turn it into a thriving business. Filmmakers, music producers, game developers, digital content creators and many more get to dream for a living. But as an entertainment lawyer with years of experience working with hopeful entertainment startups, I can assure you that the road to success is paved with potential legal landmines.
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Here's a list of the top 10 legal mistakes that entertainment startups often make and how to avoid them.
1. Overlooking Intellectual Property (IP) Protection
Imagine you've just created a game-changing virtual reality experience. The market is buzzing, your demo's going viral, but suddenly, you find another startup business using your design. Why? Because you didn't secure the appropriate IP protections.
Engage an entertainment law firm early to help you register trademarks, patents, and copyrights, ensuring your brilliant ideas remain yours.
2. Not Understanding Contract Law
Mick Jagger once famously sang, "I can't get no satisfaction." He may have been talking about a bad record deal. Contractual misunderstandings are a common issue in the entertainment industry.
All contracts should be reviewed by an entertainment attorney to ensure you understand the obligations, limitations and legal implications of any and every contract before signing.
3. Ignoring Regulatory Compliance
The unfortunate fate of many startups, even outside the entertainment industry, is running afoul of regulatory bodies due to a lack of compliance.
Staying abreast of the regulations impacting your industry and business operations is essential. Ensure you comply with all relevant laws or risk fines, delays, hassle or all of the above.
4. Failing to Define Business Structure
Without a clearly defined business structure, you risk facing liability issues, tax complications, and operational chaos.
Determine the best structure for your business (e.g., LLC, S-Corp, etc.), considering your long-term goals and potential risks.
5. Not Securing Proper Licensing
Remember when Napster crumbled under the weight of massive copyright lawsuits? That's what happens when licensing is ignored.
Identify licenses, clearances and permissions you'll need to use third-party content lawfully.
6. Inadequate Employment Agreements
Many entertainment startup businesses have been rocked by job roles, compensation and termination disputes. The absence of a well-structured employment agreement can lead to chaos and legal trouble.
Draft clear, comprehensive employment agreements.
7. Overlooking Privacy and Data Security
Ever heard of the Sony Pictures hack in 2014? It led to bad press, hefty fines and even executive resignations.
Establish robust data protection policies and procedures, ensuring you adhere to privacy laws and best practices.
8. Not Having a Good Exit Strategy
Every startup needs an exit strategy, whether a sale, merger or IPO. Ignoring this from the outset could lead to complicated and costly issues down the line.
Plan your exit strategy early on, keeping in mind your business's potential growth trajectory and market conditions.
9. Misclassifying Workers
Misclassifying employees as independent contractors is a common mistake that can result in hefty fines and back taxes.
Seek qualified legal advice to adequately classify your workers and avoid potential legal issues.
10. Not Using Non-Disclosure Agreements (NDAs)
Ever had a brilliant idea mysteriously appear elsewhere after a pitch? Chances are, you didn't use an NDA.
NDAs are crucial for protecting your ideas and proprietary information. They're not right for every scenario. But make sure you know when you need an NDA and when you don't.
Startup Legal Mistakes - Conclusion
Entertainment startups are as unpredictable as it gets. Managing that unpredicability means avoiding avoidable mistakes. These mistakes cost time, money and reputation and threaten everything you've built and intend to build. The stakes are too high to go it alone. Our suggestion is to reach out to a reputable entertainment law firm that understands your vision and will help you maintain that vision while steering clear of these common legal mistakes. Only then will the only drama you encounter be the kind you produce. Break a leg!
Spiller Law is an advisor to startup businesses, entertainment and media companies, and artists. Feel free to schedule a free consultation.
Spiller Law is a San Francisco business, entertainment, and estate planning law firm. We serve clients in the San Francisco Bay Area, Silicon Valley, Los Angeles, and California. Feel free to arrange a free consultation using the Schedule Appointment link on our website. For other questions, call our offices at 415-991-7298.
The information provided in this article is for general informational purposes only and should not be construed as legal advice or opinion. Readers are advised to consult with their legal counsel for specific advice.
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