Comic Books in Texas: Business Entity

Now, please note: The topics discussed here are focused on Texas for the law, as that is where I currently practice. Nothing discussed is intended as advice or conveys any privilege or attorney-client relationship, but is merely informational and intended to explore the legal concepts of running a comic book publishing business.

Comics are the modern source of mythology in America. They are something original to the American way of life and something original to human perceptions of who we are and where we fit in the world. But they are not without their ups and downs.

When William Gaines’s father invented comics with the first book titled “Funny Book”, there was probably no indication that in the years to come heroes, villains, monsters and fantastic realms would come to shape the literary landscape derived from this creation.

Little did his father know that Gaines would go on to establish Entertaining Comics (EC), the family’s comic book publishing business, as the premier forum for an entirely new genre of books: horror. No one had made horror a mainstream or effective genre yet, but Gaines did as he established the world-renowned “Tales from the Crypt” franchise.

Little did Gaines know that he would find himself ill-equipped to deal with the attacks of the McCarthy-style Senate hearings of the 1950s. Led by psychologist Dr. Frederic Wertham, guided by communist and socialist fears, and marched in the name of of innocence, these hearings would be Gaines’s undoing.

With the comics industry facing censorship since the conclusion of the hearings, they pre-emptively battened down their own hatches. In this, they established the Comics Code Authority, a self-censorship group, and basically commercially blocked all books similar and exact to Gaines.

Fortunately, Gaines had other alternatives to publishing and he did, but the moral of the story is change and its effects on the comics industry are unpredictable and unreliable. There are storms publishers should prepare for and they never seem to. Marvel, DC, everyone in the industry has their ups and downs, and small publishers even more so.

Gaining a foothold in the market is a kind of quagmire that adds even more unpredictability and unreliability to the publication. Many publishers simply can’t get ahead of the bigger companies, can’t find a niche, or are forced to leave for other reasons.

Legal matters are also a serious concern. Now, please note: The topics discussed here are focused on Texas for the law, as that is where I currently practice. Nothing discussed is intended as advice or conveys any privilege or attorney-client relationship, but is merely informational and intended to explore the legal concepts of running a comic book publishing business.

The first of an ongoing set of legal issues to deal with is the creation of your comics creation entity. Most creators, independent souls that they were, are technically sole proprietors. They make and sell their own creations and as such are subject to only a few rules, namely: filing a Doing Business As (DBA) notice in the county in which they reside, filing a sales tax certificate and the use if they are providing tangible services or products, any required business license or tax permission for your local area, and of course, copyright and trademark for your content.

That sounds like a lot for a sole proprietorship. But honestly, if you’re self-employed, it’s a huge commercial entity that brings minimal state interference to your comics. Also, it provides the simplest way to tax yourself.

However, one must remember that there is always a double edge to the swords we wield. Sole proprietorships subject the individual to all the responsibility that the day-to-day operations of making comics may entail. You are personally responsible for all claims and debts faced by the sole proprietorship.

Now, let’s skip general partnerships and limited partnerships, these forms of business are outdated, outdated, and surely standing in the way of their lack of a liability cushion. Besides, you want the good stuff. You want to know what is supposed to get you up and running with the best potential so you can keep producing quality content our only concern.

So let’s start with the limited liability company (LLC) and start by saying that this is a newer form of business, meaning it’s between thirty and forty years old. This business entity is recognized in most jurisdictions. Also, this business entity is now often an option for establishing most forms of business.

Setting up an LLC is easy, requiring a certificate of formation, your contract on how you will run the business, filing with the state and paying a fee, and having someone available for service in the state.

The benefits to this business entity are: pass taxes, each individual owner pays taxes, not the entity, liability is severely limited, so individual owners are well protected, it takes longer to have insurance in Texas to support this entity as in other jurisdictions, and the LLC provides a contracted means of dealing with its partners in the business.

The disadvantages of an LLC are as follows: nothing is bulletproof, if you mess up and put the business in a situation where it is liable, it could be an instance where the LLC can be traded and you, the individual, you are held personally responsible. In addition, there is a movement in the eastern states to eliminate single member LLCs (LLCs with a sole proprietorship), as they are not actually corporations, but rather sole proprietors looking to hide from personal liability.

Now, corporations, these bad boys are good because they provide a lot of protection, as it’s hard to pierce the corporate veil and catch somebody personally, that’s true. But, corporations do not go through taxes: the corporation pays taxes and then the shareholders (owners) pay taxes personally. It takes a lot to protect your time and money.

Now, there is the s corporation, a business entity that goes through taxes and allows you the benefits of having no liability. But that’s for another discussion since it’s complicated.

There you have it. Dealing with the first steps of becoming a comic book publisher is daunting when choosing how to operate. Not everyone is going to have the same needs. But, this gives those creators or want to be publishers a picture of where they are starting from. And also, these are not the only business entities available. They are simply the most popular and/or used entities in the state of Texas.

Which business entity you choose to become is also not necessarily the first step. You may need copyrights, trademarks or patents depending on the aspects of the business you are working in before you risk showing your work to others. It’s all a matter of self-adjusting timing and understanding how you’re going to enter the business.

I look forward to writing more articles on the subject and I hope you enjoyed it. Any questions, the link is provided. One last time, please note: The topics discussed here are focused on Texas for the law, as that is where I currently practice. Nothing discussed is intended as advice or conveys any privilege or attorney-client relationship, but is merely informational and intended to explore the legal concepts of running a comic book publishing business.