For the last 4 weeks, I’ve been sharing with you 4 ways to use the law to keep more money in your business. We started with the simplest of these strategies and now we’ve arrive at the most sophisticated: Own trademarks and copyrights in a separate business solely for that purpose.
If you’re a thought leader—if you are building a business on what you have to say and what you have to teach—this is a highly valuable strategy for you.
How you own your intellectual property matters, just like how you own your business matters. Ownership of each needs to fit your business’s strategy for growth.
Let’s take a step back a sec and be clear: ownership of your business and ownership of its trademarks and copyrights can be separate and independent of each other. Your business does not need to own trademarks and copyrights because it uses them. This is due to their nature.
Here, I’m advocating that no only can your business not own the trademarks and copyrights it uses but that it should not.
Here’s the deal: Trademarks and copyrights are assets. And you can choose to protect those assets not only from your personal liabilities but also from your business’s liabilities.
Sounds kind of crazy, doesn’t it? I just shared with you that trademarks and copyrights make up 75% or more of what your business is worth and that they are the only assets you own as a thought leader. Why, then, would you want to take what makes your business valuable OUT of your business?
Owning trademarks and copyrights in a separate business just for that purpose, called a holding company, gives you two distinct advantages—which over the life long journey of a business could save you from loosing (a lot of) money.
1. A Holding Company Gives You Protection
You’re in business for the long haul. You don’t know what’s going to happen over the course of a career. Your service business may need to declare bankruptcy. YOU may need to declare bankruptcy. Think this is impossible? Many highly successful entrepreneurs have gone through bankruptcy, some more than once. You can name some of these entrepreneurs, I bet. Why? Because we’re risk-takers. Sometimes things fail, and we have to start again.
If your business owns your intellectual property and it goes bankrupt, guess what? Your intellectual property goes with it. If it’s worth anything to anyone else, it’s used as a set of assets to pay off creditors.
2. A Holding Company Gives You Flexibility
If you own your intellectual property in a holding company, it does not go into the bankruptcy with your business. You can use it to start over.
I have a client who did exactly this. We’ll call her Kim. (Rest easy, I have changed all identifying information.) Kim is the foremost thought leader in her field. She pioneered it over a 30 year career in 7 books. And those books were the core of the consulting services that her business provided.
When Kim called me, her business was struggling under debt and had stagnated in revenue, for multiple reasons that kept Kim up at night. She was considering an investor, who wanted 51% ownership of her business and her intellectual property. This left Kim feeling like, in order to move her business forward, she needed to sign over majority ownership and control of her life’s work to someone else.
(Did your stomach sink? Mine did too.)
In talking with Kim, I found out that she’d been given excellent advice decades ago and owned all of her books in a separate business. This meant that an investor could own 51% of her consulting business without owning any of her intellectual property. I thought Kim was going to cry right there. Her voice cracked.
Kim did not take on that investor; instead, a year later, the consulting business declared bankruptcy. And Kim used her intellectual property, which was kept out of the bankruptcy, to create info products and an entirely new business model.
That, my dear thought leaders, is how you create the opportunity for new growth out of failure.
© 2014 Counsel to Creativity LLC