how to start your marketing agency legally

How To Set Up A Marketing Agency Legally

May 17, 2019

You need to know how to set up a marketing agency legally if you want to make your business legitimate. A few documents are all you need to set up your marketing agency legally, which will help protect your business and make things easier with the government, clients, and employees. These documents are a requirement to run a business in the United States, so it’s important to get them done.

If you’re just starting out, legal documents aren’t the first thing you need to worry about. I certainly didn’t worry too much about contracts in the early days of my business. However, you will need to get these documents completed as your business grows.

While these things might appear intimidating if you haven’t done them before, the importance of them can’t be overstated. Not only will having these documents help you on the off chance that your business runs into legal trouble, but they will also help prevent legal trouble. If you have everything sorted out early, you won’t have to worry about it later.

Additionally, tax documents are incredibly important. Failure to do their due diligence on taxes has brought many businesses to the ground, and you shouldn’t let your business be one of them. It’s incredibly simple to sort out, so there’s no reason to not do it.

Questions are inevitably going to come up for you while you’re in the process of getting these documents finished. As much as I’d love to answer all of them here, that’s just not possible. Luckily for you, though, I have a free Facebook group full of digital marketers who can teach you more about how to set up a marketing agency legally. If you’re interested, you can join my free Facebook group here.

How to Set Up a Marketing Agency Legally with the Government

In order for your business to be recognized by the government, you’re going to need to sign a few papers. There are 4 major documents you need to fill out, as well as a fifth that is optional. Many businesses skip this step for a long time, but it certainly makes everything else a bit easier. The exact processes here will vary a bit from state to state.

Certificate of Incorporation

A certificate of incorporation is a document that makes your business a legal entity, which is almost always filed with the state in which you’re headquartered. Occasionally, you’ll need to file locally (with your county) and the cost of doing this will vary depending on where you are. This is a very basic form and it can be filed online in most states.

The certificate of incorporation should include the name of your business, your registered headquarters, the name of a registered agent, and a statement of issuable stocks. These stocks in most marketing agency’s will be given 100% to you or split evenly between your partners. They are used to determine equity. A registered agent is a person who can receive legal documents. You will also need to announce your business goals, which is usually as simple as stating what type of business you are.

Business License

Your business license will also vary a lot from state to state, as well as what type of business you have. These are most notoriously liquor licenses and the like, as they’re more for businesses who might cause physical trouble. Most states do not require business licenses for marketing agencies, though you may need some general licenses and permits.

Operating Agreement

The operating agreement of an LLC outlines the ownership of a business. When you’re learning how to set up a marketing agency for the first time, this is often simple as you’re likely to be a sole proprietor. You might be able to skip this step, but it is required for businesses in California, Delaware, Maine, Missouri, Nebraska, and New York. Additionally, you will want this for protection if you are a sole proprietor, or to legally outline a partnership agreement.

Tax ID Number

Your Tax ID number or EIN (employee identification number) is a nine-digit number that is assigned to your company when you register with the IRS. You’ll use this number when filing an income tax return or payroll return, and help in handling business financials such as business loans and credit cards. The application process for an EIN is free, and can be done on the IRS’ website.image showing legal documents for businesses

Apostille

An Apostille is a document that you need to file when operating outside of the US and is the optional document I talked about above. This is a sort of “you’ll know when you need it” type document that I won’t get too much into, but it’s something to consider if you do work from a foreign country or frequently take on clients outside of the country.

How to Set Up a Marketing Agency Legally with Clients

In addition to setting up your business with the government, it’s important to have some legal steps with clients. I overlooked this for years as I worked month to month with no contract. However, I noticed that a lot of clients who weren’t contracted would quickly bounce with a lack of patience. While these can be reasons for clients to say no early on, you should bring in contracts once you’ve built a good portfolio.

Consulting Agreement

A consulting agreement is a contract between a client and a business. This will help set the terms of the agreement between the two and make them legally enforceable. While implied contracts are enough for some states, you need an actual contract to have a standing in most US courts. There are a few things that a contract needs to cover.

The first is the scope of work – this includes the full name of the people and businesses involved, the objective of the project, and the description of the project. The scope of work is exact sometimes – like “1 logo with 5 revisions” for a designer – and is sometimes more general. A contract also needs to include a term of work, as a contract cannot be legally binding for “an unreasonable amount of time.” Finally, the contract needs to lay out what will happen in the case that the contract is broken.

Terms of Use

Similar to a contract, some businesses will have a Terms of Use agreement. These are more common for businesses that create tools than for services businesses, as it lays out what a customer can use something for. Users must agree to the Terms of Use to use a service.

Privacy Policy

If you are requiring someone to give you personal information, you will also need to include a privacy policy. This outlines what you will do to protect that user’s information, and relieve some liability from you in the case of an information breach. It is important that you keep this sort of information secure, but you should still have a privacy policy outlined in case of a security issue.

How to Set Up a Marketing Agency Legally with Employees

When you are working with an employee or freelancer, there’s one important document type to know about. You might also include contracts with freelancers here, although that’s usually on them. You might also want a Notice of Acknowledgement which lays out how payment will be handled or an Alternative Dispute Resolution which has mediation or arbitration step in before litigation.image showing legal document examples for new hires

What’s most important, though, is that you file tax documents for your employees. An hourly or salaried employee will need a W-4 – Federal Taxes Withheld, which shows that you are paying taxes for that employee’s wage. Freelancers are most frequently on a 1099, a tax document that shows how much money is changing hands and gives liability for taxes to the freelancer.

How to Set Up a Marketing Agency Legally for Your Own Protection

Finally, another reason to file documents is to make sure that your business is protected. These documents can keep your information, intellectual property, and bank account safe from most issues. Documents for protection aren’t the most important, but there are plenty of times where you’ll want them.

Non-Disclosure Agreement

A Non-Disclosure Agreement, or NDA, encloses the information that you are giving to a client. This can protect your methodology and any issues that the business might not want to tell you about. NDAs can be unilateral – where one party agrees to the NDA – or mutual, where both parties agree not to trade information.

Business Insurance

There are two kinds of business insurance that you need to consider. The first is a professional liability, which protects you from a client saying that you were negligent. This is most relevant in advice based industries. General liability insurance protects you in the case that you are sued for bodily harm or damage to property. If you were to dent a client’s kitchen table, for example, this type of insurance would pay out for it. You can get business insurance by registering with a broker.

Trademark and Copyright

Trademarks protect intellectual property like your brand name, slogan, and logo. Whenever you create something important to your business, you should file a trademark. Copyright protects your original creations, giving you sole right to their reproduction. There are copyright rules for social media, but it mostly falls under “make sure you own it or know who does.” If you want to file a trademark or copyright claims, you should speak with a specialized lawyer.

And now you know how to set up a marketing agency legally! That’s one more thing that you can knock off your SMMA checklist. If you don’t have it already, make sure to check out my SMMA checklist here to make sure you’re taking the right steps at the right time.

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