3. Meet Jean Poole
• She started a hyperlocal site, “The Local
Scoop” that covers local news in
Bucksnort, Tennessee.
• She owns a nice house.
4. The Local Scoop
• Jean Poole hires Rex Carr to
post articles for her.
• Rex writes a story that Jack
Pott embezzled $30,000
from the Bucksnort National
Bank.
• The story isn’t true.
Photos by Krystian_O under Creative Commons License
5. The Local Scoop
• Jean and Rex are sued for defamation.
• A jury finds Jean liable for $100,000 for
defamation as publisher of the Local Scoop.
• Jean goes out of business and loses her house.
• What went wrong?
6. The Problem
• Jean operated The Daily Scoop as a “Sole
Proprietor.”
• She did not create a corporation that would
shield her business from personal liability.
• This is the reason why we begin the course
with looking at business organizations.
• You don’t want to lose your shirt managing
emedia.
7. Business Organizations
• Sole Proprietor
• Partnership
• Limited Liability Corporation
• Corporation
• Non-profit Corporation
8. Sole Proprietor
• An individual runs a business.
• There is no formal requirement to set up the
business.
• The individual gets all the profits --- and all the
liability.
• The individual’s personal assets, that is, bank
accounts, property, are exposed to pay debts
and liabilities.
9. Partnership
• Two or more individuals set up a business.
• You need a partnership agreement to divide
profits and manage the business.
• How can a partner get out of the business?
• For any liabilities – like bank loans –
partnership assets are used first to satisfy any
debt.
• Individual partners are liable.
10. Limited Liability Corporation
• Very Popular. Owners are “members,” not
stockholders.
• You need an agreement to manage
relationships among members.
• You need to incorporate with state. You need
articles and bylaws.
• Only company assets are exposed to liability.
• No double tax – income (profits) are up-
streamed to members.
11. Corporation
• Applies to large companies that sell stock to
multiple shareholders.
• Incorporators need to file articles of
incorporation with state, have by-laws.
• Double taxation – corporation pays income
tax, shareholders taxed additionally for sale of
stock or dividends.
12. Corporations
• Publicly traded stock must be registered with
the SEC.
• Corporation must provide quarterly and
annual filings on performance.
• Corporations usually managed by board of
directors.
13. So…what’s the big deal?
Jean Poole
forms “The
Local Scoop
LLC”
Jack Pott can
R recover only
e from Rex and
x LCC. Jean gets
to keep her
C house.
a
r
r
14. What if you do PR for a Company?
• Coca-Cola wants to set
up a blog that provides
solely human interest
stories about persons
who benefit from Coke
charities.
• Users are allowed to
submit comments.
• Users may post
defamatory comments
or pictures that violate
copyrights.
15. What if you do PR?
Coke sets up
“Coke Blog
LLC” to run
Blog
Users upload
content that may be Another entity sues
a problem for copyright
infringement, etc.
Coke isolated from
liability.
16. Non-Profit Corporation
• Must incorporate as non-profit under state
law.
• Must incorporate for educational and
charitable purposes.
• Must file for 501(c)(3) exemption.
• No owners.
• Pay people.
17. Quiz
• Quiz No. 1 is located at
http://www.proprofs.com/quiz-
school/story.php?title=ksu-advanced-emedia-
management-quiz-no-1-952012
• Your responses are due 11:59 pm, September
11, 2012.
• Keep track of your answers. ProProfs does
crash!!
