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Wednesday, June 1, 2011

Writing and the Law, Part III: Pen Names, Copyrights, and Business Entities

I belong to several writing loops. During my travels, from time to time, I see statements of the law that are inaccurate. The other day, I came across a discussion about pen names, copyright notices, and business entities on one of my loops. My primary area of expertise is business law (corporate and securities), and my secondary area is intellectual property (copyright and trademark). So these posts couldn’t help but catch my attention.

While I was glad to see that some of the statements were accurate, I was troubled to see that some weren’t. For example, I read statements to this effect: (1) an author’s legal name has to be used in the copyright notice; (2) a corporation or LLC is no big deal to form; (3) an author can use a DBA to establish a pen name; (4) a corporation or LLC can use a pen name without consequence; (5) a LLC provides better protection from personal liability than a corporation; (6) a business entity can protect an author’s privacy; and (7) an agent can advise an author on legal matters.

The above seven statements are all false.

Let’s take a twirl around some of the concepts.


An author's work is under copyright protection the moment it is created and fixed in a tangible form.

When an author uses a copyright notice on her ms, or includes one at the bottom of a post on her blog, she gives notice to the readers that she claims a copyright for that writing. Here’s some general information about the copyright notice on the U.S. Copyright Office's website:

"Use of the notice may be important because it informs the public that the work is protected by copyright, identifies the copyright owner, and shows the year of first publication. Furthermore, in the event that a work is infringed, if a proper notice of copyright appears on the published copy or copies to which a defendant in a copyright infringement suit had access, then no weight shall be given to such a defendant’s interposition of a defense based on innocent infringement in mitigation of actual or statutory damages, except as provided in section 504(c)(2) of the copyright law. Innocent infringement occurs when the infringer did not realize that the work was protected. The use of the copyright notice is the responsibility of the copyright owner and does not require advance permission from, or registration with, the Copyright Office."

For more general info on copyrights, see

However, print publishers register (in the name of the author) every work they'll publish in the U.S. by filing an application with the U.S. Copyright Office. In fact, those same publishers will take advantage of the protections of the law afforded by every country in which they'll publish the work (think Harlequin). But let's focus on U.S. law.

The U.S. Copyright Office has some wonderful circulars about copyright. Here is a statement from the above-referenced circular on the advantages of registration of a work:

"Even though registration is not a requirement for protection, the copyright law provides several inducements or advantages to encourage copyright owners to make registration.

Among these advantages are the following:

• Registration establishes a public record of the copyright claim.

• Before an infringement suit may be filed in court, registration is necessary for works of U. S. origin.

• If made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.

• If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.

• Registration allows the owner of the copyright to record the registration with the U. S. Customs Service for protection against the importation of infringing copies."

So, no, a publisher doesn't just include a copyright notice on a page inside the book. If they're a print publisher, they'll have put their dollars behind the editing, production, distribution and perhaps even promotion of a book. They'll want to afford themselves, or place the author in a position to afford herself/himself, of the maximum protection under the law.

I wonder, though, how many e-publishers are filing copyright applications on behalf of their authors. This isn't to say that an e-published author doesn't have the same reason for wanting her work registered as a print published author, just that an e-publisher mightn't have the same incentive to expend the time and money to register a work as a print publisher has. [Note: See postscript below for follow-up information on this question.]

Moving on, contrary to what someone said, an author isn't required to use her/his legal name in a copyright notice. Likewise, an author isn’t required to register a work with the U.S. Copyright Office in her/his legal name. Here’s part of the instructions for filling in the author's name on Form TX (literary copyright application):

“If the work is “pseudonymous” you may: (1) leave the line blank; or (2) give the pseudonym and identify it as such (for example: “Huntley Haverstock, pseudonym”); or (3) reveal the author’s name, making clear which is the real name and which is the pseudonym (for example, “Judith Barton, whose pseudonym is Madeline Elster”).”

For more on Form TX, see

The best example I can give you off the top of my head is Penny Jordan. Penny writes for Harlequin Presents. Her copyright notice is in the name of Penny Jordan, but her legal name is Penny Halsall. Penny uses the third choice on the application—“Penny Jordan, pseud. of Penny Halsall.” To see the info on one of her recent copyright applications, click on 


A DBA isn’t a form of business entity. The primary purpose of a DBA is to provide the public with the names of the owners behind a fictitious name being used by a business. In New York, any sole proprietor, corporation, LLC, or other business entity that uses a fictitious name in connection with a business must file, or cause to be filed, via the Secretary of State, a certificate of assumed name in the clerk's office of every county in which they do business. There are 63 counties in New York.

Someone suggested that an author could form a corporation or LLC, then use a pen name (which would be the "product" of the corporation or LLC) on the cover of books so that the author's real name would show up nowhere. The pen name wouldn’t be the “product” of the corporation or LLC. The pen name would be a fictitious name used by the corporation or LLC. So, the corporation or LLC would have to file a certificate of assumed name to use the pen name, once again in every county in which it does business.

And that’s the most important point of this section. A corporation and LLC (as well as a sole proprietor) must file, or cause to be filed, a certificate of assumed name in every county in which it does business under a fictitious name. More, as you'll see in the next section, an author's legal name will always show up somewhere.


The formation and use of corporations and LLCs by authors isn't all that common. There are certain requirements for, and inherent costs to, the formation and continuing operation of business entities as well as limitations to their possible benefit to an author.

Let’s take a cursory look at some of them (and I do mean cursory because I could write/talk at length about each of them). My comments will be skewed toward New York because, although I’m admitted to practice in three jurisdictions, I currently practice in New York. However, I’d be surprised to discover that most, if not all, other states don’t have similar provisions.

1. Business Corporation

For this section, let’s assume we’re talking a Subchapter S corporation, not a C corporation such as IBM.

The formation of a corporation isn’t that costly (in terms of filing fee payable to the secretary of state), but there are many post-formation requirements. Someone suggested that an author could just use an incorporation service, and someone else suggested that an author shouldn't do this. There are on-line companies that charge as little as $99 for the filing of a certificate of incorporation. The bottom line on this is that you get what you pay for because this filing is only the birth of a legal entity. Think of what comes after the birth of a child. A service company doesn't even give you a diaper and blanket in which to bring the baby home.

The filing of a certificate of incorporation is just the first in a lifetime of documents for a corporation. Following the incorporation, the corporation must adopt initial authorizing resolutions (the ratification of all actions by the incorporator, the election of the first board of directors, the election of officers, the authorization of the treasurer to open a bank account and apply with the IRS for a taxpayer identification number, the authorization of the president and secretary to issue stock, the adoption of by-laws, the procurement of checks and other items, etc.). After the adoption of the authorizing resolutions, the appropriate individual(s) must carry out the acts authorized.

In addition, after the initial resolutions, anytime a corporation is to undertake certain actions, the director(s) and/or officer(s) must adopt a resolution. So, for example, if the corporation is going to enter into a significant contract, the director(s) will have to authorize the president to execute that contract. These formalities are required even if only one person is involved in the corporation.

Moving on, there are external filings as well as internal actions.

New York corporations have to file annual franchise tax reports and pay franchise taxes even if the corporation doesn’t do business or loses money that year.

A corporation has to file a biennial statement.

A corporation has to file a federal and state corporate tax return. The corporation files a corporate tax return on Form 1120S, then each shareholder's share of the profit or loss of the corporation is recorded on a Schedule K-1, then the K-1 information for each shareholder is reported on Line 17 of the shareholder's Form 1040. This applies even to a corporation with just one shareholder. Of course, the state has a similar set up. So, are you willing to file a subchapter S federal and state tax return as well as a federal and state individual tax return every year?

Keep in mind that the primary reason for incorporation (i.e. protection from personal liability) requires that a corporation comply with all legal requirements in order to have this shield of protection.

Lastly, an author who incorporates might think they’ve shielded their true identity from their readers. But consider this scenario: Romance Reader happens to notice Riante, Inc. (a company formed by an author) in the copyright notice in a novel, and curious about the author, does a quick on-line search. To see what Romance Reader can discover in about a minute, click on, type Riante, Inc. into the name box, and once the next pages opens, click on Riante, Inc. Sorry I can't give you a direct link, but as the Arkansas Secretary of State adds corporations, the links change.

By the way, I see that Riante, Inc. has no fictitious name filings in its state. So Riante, Inc. may use only its legal name in connection with all matters.

And just by typing the words “in its state,” I’ve thought of yet something else. If a corporation does business in any state other than its state of incorporation (and the definition of “doing business” is often loosely construed), it must file an application for a certificate of authority to do business as a foreign corporation in those other states.

And what if you don't want to have the corporation any longer? Well, you have to dissolve it in accordance with the requirements of the law. Yes, think of the effort and cost of a funeral and burial.

2. Limited Liability Company (LLC)

To form an LLC in New York, there's a publication requirement (i.e. the notice of formation) in addition to a filing requirement, which can add substantially to the cost of formation. In New York, the county clerk(s) must designate the two newspapers in which the notice must run. If she/he/they choose a larger newspaper, an author could be looking at several hundred dollars and up just to fulfill the notice requirement.

After the filing of the formation papers, the LLC must adopt an operating agreement (just to give you an idea, the operating agreement for most of my clients has ranged 35 to 40 pages), apply for a TIN (taxpayer ID number), open a bank account, order checks, issue member certificates, etc. It isn’t unlike the initial work for a corporation.

Unlike the corporation, the LLC is a little looser in terms of internal operation.

As with a corporation, though, there are external filings. For tax purposes, a single member LLC (SMLLC) can be treated as either a corporation or a single member “disregarded entity.” To be treated under federal law as a corporation, the SMLLC has to file Form 8832 and elect to be classified as a corporation. An SMLLC that does not elect to be a corporation will be classified by the existing federal guidance as a “disregarded entity” which is taxed as a sole proprietor for income tax purposes. If the LLC is a sole proprietor for federal tax purposes, the entity will most likely have to file Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship). If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax.

Contrary to what someone said, the LLC doesn’t afford better protection from personal liability than a corporation. As with corporations, a LLC must follow all legal requirements to afford its member(s) protection from personal liability. By the way, in my experience, accountants tend to push their clients toward forming a LLC...and not necessarily because it's a better form of business entity.

As with a corporation, if you don't want to have an LLC any longer, you'll have to trudge down a similar path to the graveyard.

3. General Partnership

By law, a partnership requires two or more partners. Contrary to what someone said, it isn’t that a person “can’t easily form” a partnership with one person...but rather that a person can’t form a partnership at all without a second person. Based on my experience, the use of partnerships started to fall out of favor in the late 1980s. Today, investors prefer a corporation or LLC. Doctors often use a PC (a professional services corporation) or a PLLC (a professional services limited liability company). Lawyers are about the only ones who still use the partnership model, but even so, they now form LLPs (limited liability partnerships).

4. Limited Liability Partnership (LLP)

Someone asked me to cover the LLP as a possible entity for authors.

First, two or more persons must form a partnership under state partnership law.

Second, in some states, only certain partnerships may register to become limited liability partnerships. For example, in New York, LLPs can be formed only by law, accounting, engineering, and architectural firms. In fact, under the law, each of the partners of the partnership must be a professional authorized by law to render the professional service, such as a lawyer licensed to practice by the New York State Bar.

So now you know why I didn’t cover LLPs in my first post.

However, for those still interested, I’ll give a little more basic information.

Again, I'll skewer this toward New York, but other states (those that have enacted LLP statutes) may have a similar set-up.

In New York, the formation of an LLP is accomplished by the filing of a certificate of registration with the Division of Corporations. As with the LLC, there is a publication requirement, which can add to the costs of the creation of this type of business entity. Upon completion of the publication requirement, the LLP must file affidavits of publication with the Division of Corporations.

In addition, an LLP must make additional periodic filings with the Division of Corporations. For example, an LLP must file an LLP Statement within sixty days prior to the fifth anniversary of the effective date of their registration or notice of registration, and every five years thereafter as required by New York Partnership Law.

As to tax filings, just as with a corporation and LLC, an LLP has to file an annual federal and state tax return. The LLP files a partnership tax return on Form 1065, then each partner’s share of the profit or loss of the partnership is recorded on a Schedule K-1, then the K-1 information for each partner is reported on the partner’s individual Form 1040. The state has a similar set-up.

Of course, as with any business entity, an LLP may need to make other tax-related filings which depend on a host of factors.

So, why do partners of a law, accounting, engineering, or architectural firm in New York elect to register as a LLP?

In the old days, if one partner was sued for malpractice and the plaintiff got a judgment, the other partners were personally liable for the satisfaction of that judgment. But the partners of an LLP aren’t personally liable for the actions or omissions of their partners if they are sued. For example, if one partner has a malpractice lawsuit brought against him, the other partners won’t be personally liable for any judgment made against that partner. This is what makes the LLP so attractive to professionals.

Of course, all partners are responsible for the general obligations of the partnership, such as bills and expenses.

5. Overall

I can’t tell you how many times I’ve seen single member LLCs and single shareholder corporations run afoul of the legal requirements, probably because the single member/shareholder thought all she/he had to do was file a certificate of incorporation (corporation) or articles of organization (LLC). No, there's more to it than that...and more to it than an author might want or need.

So, if you comply with all legal requirements, what do you get for incorporation or formation? Yes, you get protection from personal liability (provided you comply with all requirements), but ask yourselves whether you're running the kind of business where the need for protection from personal liability outweighs the costs inherent in formation and operation (for this question, think company that puts products into play such as Gerber or Graco, or company that invites the public onto its premises such as a department store, or company that has employees, trucks, and planes in motion such as Federal Express). On the other hand, for an author who'll generate money from film merchandising, etc. (think J.K. Rowling), I could definitely see the benefit of forming a corporation or LLC.


Now, let’s move away from corporate and tax law and back over to copyright law. As a final thought, I’d like to point out that an author’s choice of name vis-à-vis legal or pseudonymous, and an author’s choice of business entity, can have an impact on the duration of the copyright. Here’s the actual law on duration:

"§ 302. Duration of copyright: Works created on or after January 1, 1978

(a) In General. — Copyright in a work created on or after January 1, 1978, subsists from its creation and, except as provided by the following subsections, endures for a term consisting of the life of the author and 70 years after the author's death.

(b) Joint Works. — In the case of a joint work prepared by two or more authors who did not work for hire, the copyright endures for a term consisting of the life of the last surviving author and 70 years after such last surviving author's death.

(c) Anonymous Works, Pseudonymous Works, and Works Made for Hire. — In the case of an anonymous work, a pseudonymous work, or a work made for hire, the copyright endures for a term of 95 years from the year of its first publication, or a term of 120 years from the year of its creation, whichever expires first. If, before the end of such term, the identity of one or more of the authors of an anonymous or pseudonymous work is revealed in the records of a registration made for that work under subsections (a) or (d) of section 408, or in the records provided by this subsection, the copyright in the work endures for the term specified by subsection (a) or (b), based on the life of the author or authors whose identity has been revealed. Any person having an interest in the copyright in an anonymous or pseudonymous work may at any time record, in records to be maintained by the Copyright Office for that purpose, a statement identifying one or more authors of the work; the statement shall also identify the person filing it, the nature of that person's interest, the source of the information recorded, and the particular work affected, and shall comply in form and content with requirements that the Register of Copyrights shall prescribe by regulation."

Let’s consider an example:

Annie Author was born in 1970, wrote the great American novel in 1999, had that novel published in 2000, and will die at the age of 85 in 2055.

If she took the copyright in her legal name, her estate will hold that copyright until 2125.

If she took the copyright in a pseudonymous name, her estate will hold that copyright until 2095, unless the author/estate reveals her identity before the end of the term, in which event the estate will hold the copyright until 2125.

If her corporation took the copyright, the corporation will hold the copyright until 2095. With these set of facts, the author has denied her/his heirs 30 years of potential royalties.

I think the point I'd like to make is that, if you're going to make a legal decision, you should consult with an attorney (one versed in intellectual property law for copyright issues, and one versed in business law for corporate and LLC matters, not Uncle Johnny who handles divorce cases or Aunt Millie who tries criminal cases).


Let me say that I think non-lawyers should be very careful with what they say about legal concepts because other non-lawyers might assume their words are an accurate statement of the law. I don’t mean to quiet discussion, which is always a positive thing. However, I think non-lawyers need to start or end their posts with a statement that they’re not lawyers and that others should seek legal advice (from a lawyer, of course). Some members of loops do that...but some don't.

Please note that, among other things, the law changes rapidly, differs from jurisdiction to jurisdiction, and is subject to the on-going interpretation of federal and state courts. More, legal advice must be tailored to the specific circumstances of each matter. So, nothing that you read in this post (or in any self-help book or on any on-line site) should be used as a substitute for the advice of legal counsel.

Happy Writing!

P.S. I've done a search of copyright applications for books filed with the U.S. Copyright Office during 2010 (I used 2010 instead of 2011 because it takes a few months for registrations to show up) by several publishers (ones that came to me off the top of my head). Here are the results:

Ellora's Cave 0
Grand Central 1,405
Harlequin 932
Liquid Silver Books 0
Little, Brown 1,340
Loose Id 0
Penguin 1,599
Samhain 0

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