This week, we’re focusing on ‘works for hire’ and the contracts that control them.

Location, location, location. We all know it’s important, but why should it matter when you’re signing a work for hire contract? These days, with so many freelancers working with clients all over the country (if not all over the world), it’s become crucial to decide what state laws cover the contract in question. I can’t offer much advice on international projects — I just don’t know much about how international contracts would work out.

If something goes wrong with your project, and you find yourself in a position where you need to take legal action, you could theoretically handle it in your state of residence, or that of your client. Your contract may stipulate which one, by establishing location with a clause.

Such a clause could read something like:

This agreement has been negotiated, executed and delivered in the State of NAME OF STATE. The parties hereto agree that all questions pertaining to the validity and interpretation of this agreement will be determined in accordance with the laws of the State of NAME OF STATE.

Because contract law can vary, and it can be expensive to handle a case in another state, it’s in your best interest to make sure that your contract is handled in your home state. However, your client has exactly the same situation.

There’s another reason to keep an eye on this sort of clause: if you, according to a contract, executed a project in another state, and were paid for it, legally, taxes on that income must be paid in that state.  The IRS isn’t going to get too picky — they’ll get their share of your income either way — but state tax collectors might. This tax trap isn’t limited to work for hire contracts, either. Any project you complete can technically be executed in a different state.

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