Should I register my business?

[Nella Drillon]

I have been a member of SL life for many years now.  I come and I go.  I'm a fashion designer as a hobby here.  I am now back and I'm looking at doing more designs.

I recently came across something that has happened to a store I've known since I first created my AVI.  I remembered getting my first skins in this store.

http://curioonline.org/2012/07/05/curio-news-release/  Here is the information on it.

This has actually scared me, I know content stealing has been around for years now.  I myself have never had to deal with it because I'm not big, I'm really small compared to so many others.

My issue is now this.. and I'd like to ask the professionals here on SL what they think.  Should I register my business on SL in my state?  And if I do, what protections will I have?  If someone throws me a lawsuit like this, I can't afford to fight it, I'd just end up shutting down my store.  If I register my business, will I have to pay taxes?  I live in the state of texas and my proceeds from SL do not reach over 100.00usd per month.

[Nella Drillon]

Wow, yes, I figured as much. Thank you for your through response to my question. I would like to make a profit yes.. so I have to decide if I really want my hobby to become like that, then I do need to take the steps to protect it and myself.

The SE Tax, that I would have to pay out at the end of the year.  That is based off my actual earnings correct?

[Thinkerer Melville]

The position of the IRS has been that if you leave earnings in SL, they dont could.  If you convert them to dollars, you will owe fed taxes.  In principle, Texas could  demand that you pay sales taxes on such money.  I have not heard of that happening.  It is not clear where the transaction took place, so the situation is ambiguous.  I think at most you would have to pay the sales taxes and perhaps a penalty for lateness.  

You may want to seek legal advice re state of Texas laws.  What you are doing may not amount to a business.  It may amout to private transactions.  

TKR

[Bree Giffen]

I would think you are operating at a loss considering all your expenses and hourly wages. You could easily deduct your way to zero taxes owed. Considering the IRS has never ruled yes or no that virtual world businesses are taxable over the entire run of SL why bother with the whole thing?

[Jennifer Boyle]

I'm not a professional in SL, but I think I can contribute some useful information.

First, registering your business in your state will do absolutely nothing to help you with copyright, establishing that you are the rightful owner of the rights to your IP, or protecting you from allegations of infringement.  There may be some reason, though I can't think of one, to to register a SL business with a state, but this isn't it.  If anything, it makes it easier to sue you because you have to make public the RL contact information for someone to accept service of legal process.  You could consider forming a Limited Liability Company, which is easier than incorporating, to shield yourself from personal liability, but it's doubtful it would be effective because you, as an individual, would still be the alleged copyright infringer.  Also, doesn't the TOS require that the owner of the account be a person?  Of course, according to Romney, corporations are people, so I guess LLCs must be, too.

I didn't take the time to do extensive research now, but very seriously doubt that DMCA requires content to be taken down when a suit is filed alleging that it is infringing.  Filing suit does not establish a thing.  It's just someone making an accusation, which may be baseless.  I could file suit against a theater for infringing my rights to Shakepeare's plays.  I think that what required it to be taken down was LL's own policy, which I think goes further than the legal requirements.  LL has gone further than the law requires in other instances, probably because their number one priority is avoiding liability and litigation expense for themselves.

Theoretically, you could register your work with the US Copyright Office, but that would be prohibitively expensive in your context; you can see the fees here.  Registration doesn't give you any rights that you don't already have, but it can make it easier to establish that you are the owner.  It also doesn't keep anyone from suing you; it just makes it easier to defend.

FWIW, I think in the instance described on the page you linked to that the suit was a bluff because it would have been no more economically feasible for the plaintiff to litigate it than the defendant.   It seems very likely that the plaintiff's intent was to get a default judgment or, if a response was filed, drop the suit.  It seems to me that the smartest countermove would have been to turn the tables by filing an infringement suit against her in a US court.  And send a copy of the suit to LL, of course, LOL.

You probably are supposed to be paying income tax on you SL income anyway.  However, since dollars you take out of SL are not reported to a government agency by LL, I doubt many do, and it's unlikely that you'll get caught if you don't.  If your tax return was thoroughly audited, it might be caught, but it's not likely it will be, especially if you have no red flags and do not have a high income.  

Let me ask you a question that I, not being a designer, have wondered about.  How does a designer know a skin or a clothing item is copied without having access to the textures themselves, which one normally can't have with doing something illegal?  I can understand how one could be sure if one had the textures to compare, but I would think it would seldom be possible to be sure just by looking in a viewer.

Finally, considering that your SL business is a hobby, you could just not worry about these issues and enjoy SL.  If a DMCA takedown notice is ever filed against you, you are almost certain to avoid litigation by just rolling over and not filing a counter-notification.  In addition, if it's a hobby and not a business, personal liability insurance should protect you.  You could take steps to make it look more like a hobby and less like a business.  If you do decide to pay income tax, you could, perhaps, minimze the amount owed by withdrawing the dollars during a year when you other incomes was lower.

[Phil Deakins]

If I were you, I wouldn't concern myself with it. I'd just go ahead. It's only a hobby after all.

I was trading as Prim Savers for years when a guy decided to use the same name in the same field - low prim furniture. He was only a couple of months into his business, and didn't have many products, when I told him that he's using my business name. He said he'd found out a week or two earlier but it was too much work to change now.

To cut a long story short, he registered the name in RL (it cost him $300) and eventually I had to stop using it. LL told me he was trying to get a trademark for the name so I knew about it, and I could have prevented him getting the name, but it would have cost $300 so I decided not to bother.

To my of thinking, he's a thief, but so what? There are thieves in SL but unless it *really* matters to you, so what? You said that you weren't previously big enough to be ripped. You also said that it's just a hobby. So, imo, the chances of it happening to you are small and, if it does, it's no big deal. I'd just go ahead with the hobby and enjoy it.

Interestingly, the guy who stole my name failed. He had an inworld store when he started, and he grew his land ownership for it, but now he only trades in the marketplace so his business wasn't worth the effort.

[Ziggy21 Slade]

---

Jennifer Boyle wrote:

I didn't take the time to do extensive research now, but very seriously doubt that DMCA requires content to be taken down when a suit is filed alleging that it is infringing.  Filing suit does not establish a thing.  It's just someone making an accusation, which may be baseless.  I could file suit against a theater for infringing my rights to Shakepeare's plays.  I think that what required it to be taken down was LL's own policy, which I think goes further than the legal requirements.  LL has gone further than the law requires in other instances, probably because their number one priority is avoiding liability and litigation expense for themselves.

---

Filing of the DMCA absolutely requires the content to be taken down, thats the purpose of the legislation, if someone acts against me in this way, I have the right to file a counter claim and then the content is replaced, unless or until a legal action is started in support of the original DMCA.

You point out that this appears to be a bluff, it may well be, there is certainly something very fishy going on with this whole story, people have posted on blogs with images of the ripped skins compared to the originals, all of these images had to have been ripped, so people speaking if defence of the apparent offended party are themsleves using copy bot techniques to make their case. 

People are discussing this as if it has all been decided, the person who filed the claim will still have to see through their legal action and if a genuine counter claim is made they will almost certainly lose, which could then see them facing bankruptcy, loss of their home etc, since DMCA allows a victim of an incorrect claim to sue for their losses, it seems highly unlikely they would take such a risk if they knew that they were in fact the thief in all of this.

I am not accusing anyone of anything, but this story just does not add up, people should consider it for what is actually is , which is more BS SL drama, the idea that thieves are going to be making regular legal challenges in order to take ownership of other peoples work is utterly preposterous. 

[Shelby Silverspar]

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Jennifer Boyle wrote:

...people have posted on blogs with images of the ripped skins compared to the originals, all of these images had to have been ripped, so people speaking if defence of the apparent offended party are themsleves using copy bot techniques to make their case. ...

You don't know this to be fact. It's possible the files used for comparison have been obtained legally.

[Jennifer Boyle]

For the record, I am not the person who said that.

[Jennifer Boyle]

---

Ziggy21 Slade wrote:

Filing of the DMCA absolutely requires the content to be taken down, thats the purpose of the legislation, if someone acts against me in this way, I have the right to file a counter claim and then the content is replaced, unless or until a legal action is started in support of the original DMCA.

You point out that this appears to be a bluff, it may well be, there is certainly something very fishy going on with this whole story, people have posted on blogs with images of the ripped skins compared to the originals, all of these images had to have been ripped, so people speaking if defence of the apparent offended party are themsleves using copy bot techniques to make their case.  

---

First, I said nothing to the effect that filing a DMCA notification doesn't require content to be taken down.  I said that I thought filing a

lawsuit

 didn't.  In fact, my understanding is that the normal course, if the case was taken to a legal conclusion, would be for the DMCA notification to be filed, the content taken down, a counter-notification to be filed, the content to be put back up, the original filer to file suit, the content to remain up (unless taken down voluntarily) until a court made a decision or the parties reached a settlement that included taking it down.  Is your understanding different?

However, there is no

requirement

 that content be taken down in response to a DMCA notification.  I get really tired of people saying there is.  If an ISP does take the disputed content down upon receipt of the notification, it has a safe harbor, so that if a court later determines that there was infringement, it is not liable.  They are perfectly free to leave it up if they wish.

 

[161488303349]

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Jennifer Boyle wrote:

 

In fact, my understanding is that the normal course, if the case was taken to a legal conclusion, would be for the DMCA notification to be filed, the content taken down, a counter-notification to be filed, the content to be put back up, the original filer to file suit, the content to remain up (unless taken down voluntarily) until a court made a decision or the parties reached a settlement that included taking it down.  Is your understanding different?

 

---

in lindens case yes is quite a bit different in how they do it. pretty much opposite to what you said

heres the sad story that the OP (and heaps of other SL creators) are kinda worried about

 

on here http://secondlife.com/corporate/dmca.php

linden say:

 

"Linden Lab will respond to allegations of copyright violations in accordance with the Digital Millennium Copyright Act (DMCA). The DMCA provides a process for a copyright owner to give notification to an online service provider concerning alleged copyright infringement. When a valid DMCA notification is received, the service provider responds under this process by taking down the offending content. On taking down content under the DMCA, we will take reasonable steps to contact the owner of the removed content so that a counter-notification may be filed. On receiving a valid counter-notification, we generally restore the content in question, unless we receive notice from the notification provider that a legal action has been filed seeking a court order to restrain the alleged infringer from engaging in the infringing activity."

 

the thing that worries a lot of people is the last sentence in bold

+

basically what it means is that if i not give a chit then i can file a DMCA claim against you. even if is your stuff. then you counter-claim. then i notify linden that i have file an action in some court anywhere not in USA

 

is no court hearing yet. i just filed for there to be one one day some day when the whatever Court gets round to maybe granting me a hearing or not

 

your option 1) is then to file with the same Court somewhere whereever somehow that you intend to challenge my claim to your stuff

 

what will linden do when you advise them that you have a filed your intent to challenge is what exactly ?

 

the big fat wat wut??? is that my notification of a filing has no substance in fact. there is no actual restraining order been granted by any court anywhere. only a notification that i am seeking one against you so that linden will according to their own policy keep your stuff off the grid until ordered to restore it by an actual Court order

 

so whats your other option 2) ??? seek a restorative order in the Federal District Court, San Francisco, California citing linden as the defendant

 

you will still have to get a Judge to hear you tho. whenever that might be. is also a chance that linden legal will want to contest it maybe. if only bc of the ramifications for them if they do not

 

linden legal really need to think about all this more. bc their current policy is predicated on the idea that the content actual does belong to the person who files the first DMCA notification

 

can see why they thought that

i mean like you would have to be crazy to claim for stuff that was actual made by someone else yes ??? crazy enough to not give a chit. like a greifer or something

or more dangerous for everyone ........ crazy delusional enough to think that i somehow magically made it out of moonbeams and you stole my stuff out of  my head

+

edit

ps

the ramifications for linden is its own policy statement. the bolded bit. linden would have to change that if the sad story unfolding is to change

[Deja Letov]

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Nella Drillon wrote:

I have been a member of SL life for many years now.  I come and I go.  I'm a fashion designer as a hobby here.  I am now back and I'm looking at doing more designs.

 

I recently came across something that has happened to a store I've known since I first created my AVI.  I remembered getting my first skins in this store.

 

http://curioonline.org/2012/07/05/curio-news-release/

  Here is the information on it.

 

This has actually scared me, I know content stealing has been around for years now.  I myself have never had to deal with it because I'm not big, I'm really small compared to so many others.

 

My issue is now this.. and I'd like to ask the professionals here on SL what they think.  Should I register my business on SL in my state?  And if I do, what protections will I have?  If someone throws me a lawsuit like this, I can't afford to fight it, I'd just end up shutting down my store.  If I register my business, will I have to pay taxes?  I live in the state of texas and my proceeds from SL do not reach over 100.00usd per month.

---

The decision to register with your state really depends on your state. Many states do not require a business registration for sole proprietorships while others do. As far as protections, registering your business isn't what gives you protection. What gives you protection, and I'm assuming you mean lawsuit protection, is filing as a corporation. As a corporation, your personal assets are protected from lawsuits. There are also other legal requirements than just filing as a corporation such as if you continue to operate as a non corporate business versus a corporation a court of law could force your personal assets into the equation if they think you are not operating as a corporation and are simply hiding behind it for protection. An LLC corp is the easiest and cheapest form to setup and what most one person shows tend to go with. However, you not being able to afford fighting a lawsuit absolutely does. It mean you cant just close your store and have it go away. If someone files a lawsuit against you, you will be required to fight it or concede and possibly pay damages depending on what you are being sued for. As far as taxes go, it doesn't matter if you are registered or not, if you meet the minimum annual income requirement you have to pay income tax on that. However the good news is you only pay taxes on actual income and not linden. Which means if you never cash out you'll never have any realized income to claim. This also of of course means you can't claim expenses unless you pay for them with real money. I know some people have tried converting their expenses to cash, but my own accountant has told me that isn't legal unless you spend real money to purchase lindens. You can't claim anything as an expense unless at some point it was real money. This is why even if you rent a private sim you should ask your landlord if you can pay via PayPal if possible. And why it's a great idea to purchase lindens with cash to track expenses. There are a lot of things you can do with taxes and if you're making a healthy amount I would definitely talk to an accountant at least for a conversation, even if they don't manage your business just to make sure you are on the up and up.

[MoiselleErin Teardrop]

It is kind of hard to say.

Say you are breaking $1,200 a year on your business. I doubt the IRS is going to send the leg breaking squadron to your house. $100 a month is chump change.Usually people who find their asses in the hot seat with the IRS are those who are making serious cash. They probably won't be at your house asking where you got the money to eat out of junk food vending machines.

 

Of course on the other hand -

In the bible, in (ironically called here) Job 1 - 21, the second part of the verse does mention - The Lord gave, and Uncle sam hath taken away.

 

With the whole "intellectual property" thing, that is true but honestly - unless you are using a really well known texture, say like a disney character on bed sheets, copying your own logo after a big company or something, I doubt anyone is going to report you to Gweedo.

[kinda Fallen]

From reading the Curio blog, what info i am gleaning is, whomever copyrights their content first wins. It would only make sense if you are depending on RL income from your business in SL, you had best protect it with a copyright. First of all, i am not sure threatening anyone with DMAC is a good idea until you have legal proof the content is yours, and that takes a copyright time stamped prior to the date the other content hit the grid. Getting a copyright would not require you to register your business, but in LL's eyes, makes you the legal owner of it.