Perhaps the most common way of carrying on online publishing activities is as part of an informal group of individuals acting collaboratively. In this situation, there is no written partnership agreement or LLC operating agreement, and the individuals involved have taken no steps to create a formal business entity such as an LLC, a corporation, or a nonprofit organization.
A common example of this type of relationship is a so-called "co-blogging" arrangement. This could be a situation where two or more bloggers publish their content on a single jointly-run blog or website on a regular basis, sharing administrative responsibilities to a greater or lesser degree. Alternatively, it could be a situation where a blogger or group of bloggers invite a "guest blogger" to publish content for a limited period of time (generally with no administrative responsibilities). Co-blogging is not the only example of this kind of collaborative relationship – any citizen media or other site run informally (without an agreement or formal entity structure) by two or more individuals fits the bill. For the sake of convenience, in this section we will refer to individuals working in such a relationship as "co-publishers" because the activity all these different groups share is publishing their content online.
While this form of publishing content has the advantage of informality and flexibility (no formation or operating costs, no burdensome bureaucratic requirements), it creates a great deal of uncertainty about the legal and tax status of the co-publishers' relationship. This uncertainty can have negative consequences, including exposing co-publishers to personal liability for the unlawful acts of their colleagues, and creating complications in the management and/or dissolution of the enterprise, as well as certain tax consequences. The sections that follow discuss the advantages and disadvantages of operating as an informal group and outline two methods for dealing with the legal uncertainty that goes along with it.
There are several potential disadvantages to operating as an informal group:
There are two ways that co-publishers can reduce the uncertainty inherent in their informal group arrangement: (1) entering into a "co-publishing" agreement; or (2) forming a limited liability business entity like an LLC, a corporation, or a nonprofit organization. Neither or these routes is a complete solution, but, in the words of Eric Goldman, both are "preferable to co-bloggers [or other co-publishers] doing nothing proactive to override the default rules."
Co-publishers can enter into a formal "co-publishing" or "co-blogging" agreement in order to clarify the status of their relationship and set out the parameters under which the group will operate. If co-publishers are carrying on a business for profit, then this agreement will be legally indistinguishable from a partnership agreement, and they will have adopted the partnership form of business. If co-publishers are not carrying on a business for profit, then the group won't legally be a partnership, but the agreement can set out group decision-making procedures, delegate duties, and describe what assets (including copyrights) will belong to and be licensed to whom.
The benefits of adopting this approach is two-fold. First, it is cheap and involves few requirements in terms of paperwork. Co-publishers can draft the agreement themselves, although there is no assurance that the entire agreement will be legally enforceable without the assistance of an attorney. Besides signing the agreement, there are no other steps or legal requirements to make it binding. Second, this approach allows for a great deal of customization to take into account the specific circumstances of the group and its publishing activities. In other words, much of the flexibility of the informal group structure can be maintained, but now with some framework to fall back on. Effective customization, however, sometimes increases complexity in the drafting process, and may necessitate the assistance of an attorney to make the agreement fully enforceable.
Despite these advantages, there are limitations on what a co-publishing agreement can do. For instance, in an effort to avoid personal liability, co-publishers might put a clause in their agreement specifying that the group is "not a partnership," or saying that certain individuals are not the employees of others. A court could give some weight to this type of language, but would disregard it if the facts showed otherwise. Additionally, assuming that the group is operating for profit, a co-publishing agreement would not eliminate personal liability for the acts of co-publishers. As noted, with such an agreement, the group would be treated like a partnership, which still exposes partners to personal liability for the unlawful acts of partners taken in furtherance of the partnership. The agreement could allocate liability in a particular way among the co-publishers themselves (for instance, requiring one co-publisher to indemnify or pay back the others for liability arising out the group's publishing activities), but this would not be binding against injured third parties. To obtain limited liability for the actions of other co-publishers, the group would have to form an LLC, Corporation, or nonprofit organization.
Co-publishers can create a formal business entity like an LLC, corporation, or nonprofit organization. The common benefit here is limited liability, and each will bring the desired level of certainty to the group relationship (though not necessarily any more than a co-publishing agreement).
There are benefits and disadvantages to each of these business forms -- for specifics, please see their respective pages (linked above). The common disadvantage vis-a-vis a co-publishing agreement is the relative expense and burden that they all require to form and operate. Additionally, adopting these forms may remove some of the flexibility in management and other affairs that the group enjoyed in its informal days. This is not necessarily the case, however -- owners of an LLC usually enter into an operating agreement, which allows for the same kind of customization found in a co-publishing agreement. Keep in mind that, even with a limited liability business entity, co-publishers would remain personally liable for their own personal misconduct, like writing a defamatory article or post.
For a group that is not operating for profit, a co-publishing agreement may be the best course to take, because liability exposure is limited (the agreement does not affect this), and the agreement provides a relatively cheap and easy way to bring increased certainty to the relationship. Moreover, if the group generates no revenue, it may be hard to justify the costs of forming and operating a more formal business entity.
For a group that is operating for profit, whether to go with a co-publishing agreement or a business entity with limited liability protection depends to a great extent on the group's potential liability exposure. Some factors to consider in determining this exposure include the number of individuals publishing content (the more people, the more risk of liability) and the character of the published work (is it the kind of material that might be defamatory? other problems?). The co-publishers would also need to evaluate their comfort threshold for risk and any economic constraints that might stand in the way of creating a formal business entity.