How To Avoid 3 Common Legal Mistakes Small Business Owners Make


Hey, it’s Marie Forleo and you are watching
MarieTV, the place to be to create a business and life you love, and this is kinda like
Q&A Tuesday. I’ll tell you what’s going on. There’s a topic that hardly anybody
talks about and it is so important. In fact, it’s so important that if you don’t get
it handled, it’s the kind of thing that can take you and your business out. What I’m
talking about is how to protect yourself legally, especially if you’re an artist, creator,
or entrepreneur. Now, y’all know I am not a lawyer and nor do I play one on MarieTV.
However, I have brought an amazing attorney in today who’s gonna help me out, and this
woman is incredible. She’s one of our B-School grads, she is so smart, and she’s someone
that I turn to when I need legal advice and council. Jo-Na Williams’ story began 15 years ago
as a background vocalist for independent artists and it took a fortuitous turn when she was
not credited or compensated for her work. As a result, she’s committed her life to
educating and protecting artists and entrepreneurs through her work as a lawyer and business
adviser through her companies: J. A. Williams Law, The Artist Empowerment Firm and The Artist
Empowerment Group. Her clients include Grammy nominated musicians, award winning coaches,
talk show hosts, international speakers, and bestselling authors. Jo-Na, thank you so much for being here. Thank you so much, Marie. It’s so great
to be here. Well, I’ll tell you, I have wanted to cover
this topic for a long time because we get a lot of questions about it and I know it’s
a very big subject area and, of course, we could sit here for days, but we ain’t gonna
do that. We’re gonna keep it focused today about 3 main areas. Really, the most important
areas that we need to get handled legally if we want to move ahead and really have a
strong legal foundation. So the first is choosing the right business structure. What do we need
to know, Jo-Na, about choosing the right business structure? How do we make that decision? Well, first of all, Marie, I’ll just tell
you, there are lots of misconceptions about this. Most people think that you should just
jump and just register whatever, but the bottom line is is that the most important thing that
you need to know about having a business structure is that it protects your personal assets from
the debts and liabilities of your company. So it’s basically putting a shield around
you personally and allowing your company to contract with your clients or provide services
and things like that. So you really wanna make sure that you pick the right one for
you and you don’t wanna just jump to an LLC. That’s what most people do. They think,
“Oh, business structure. Perfect. I’ll just go register an LLC.” But that may not
be the best option for you because it depends on your tax situation. You may have kids,
you may have other assets, your company might want to grow to a different level. So you
really should just talk to an accountant and a lawyer to decide which one is best for you. I love that. And just coming back to my own
story, when I first started, I was terrified to even talk to a lawyer because I felt like,
“Oh, I can’t afford that.” So that’s actually what I did was talk to my accountant
and that was the best thing that I did because exactly as you said, we went through my specific
tax situation and he also asked me about where do I see the company going and that’s how
we made that decision. So I love that. So for people watching, it doesn’t have to cost
that much money. Right? I know that that’s… money is always the big thing. That was my
big thing. Oh, I can’t afford it. So when it comes to choosing your business structure,
if you can’t necessarily afford to go to a lawyer right now, an accountant is a good
choice. I think that’s… that is a really great
option. If you decide that you can’t afford to have a lawyer work with you, then, yes,
talk to an accountant if you’re strapped for cash and the most important entities that
you… that give you the legal shield are the C corp, the S corp and the LLC. So you
wanna speak to your accountant and find out specifically which one would actually work
for you based on your tax situation. But I wanna talk about a little bit about the misconception
about it… a lawyer being a lot of money. Yeah, absolutely. Because I know that’s
what holds so many of us back from even thinking that we can get all this stuff handled is
I can’t afford it. So when do you have to say to people if that’s their excuse? Well, as you know in our industry, it’s
often that people want to pay for solving a problem versus prevention. Right? And, I
mean, and that’s all of us. We all… when the stuff hits the fan… That’s when we’re ready to pay. Of course.
I mean, it happens… I didn’t want my dog to go pay for him to prevent him to get fleas,
but once he got fleas I spent hundreds of dollars to get rid of them and now, of course,
I want to prevent them from ever happening again. So same thing. Yes. Absolutely. And so I like to liken it
to if you have a car, for example. You wanna pay for regular oil changes, tire rotations
and things like that so that your engine doesn’t break down. So that’s gonna cost you a lot
more money than if you were to just pay for prevention, preventative care. Or if you go
to the doctor, for example. Instead of going when you’re getting sick, just going regularly
and getting your checkups and making sure that your health is ok. It’s the same thing
with having a lawyer for your business because your business is its own entity, so it needs
to be taken care of, right? So it needs to have that legal health. So you wanna make
sure that you have a lawyer on your team, kind of like a doctor for your business. Yeah, no. I mean, that’s great. And that
analogy because think about it, and I know this, as the business gets bigger if you don’t
have the right legal foundation in place, something happening legally can be fatal for
your business. Absolutely. It can totally take you out. And I’ve actually… I actually had a client
come to me a long time ago and she… this was the situation that happened with her.
She didn’t get the right advising about her business structure and she ended up paying
50% of what she made that year in taxes and it did shut down her business. So it was heartbreaking
for me, but luckily we were able to take care of it. But you don’t wanna have something
like that happening just because you weren’t able to talk to a lawyer or an accountant
about the right business structure for you. So it’s something that’s really important
to your business to make sure you get that handled. Yeah. So what do we need to know about protecting
our goods and services? The thing that you need to know the most about
this area is if you don’t have something written down, you’re creating a bunch of verbal
agreements with people that have no terms. So it’s really important that you have a
service agreement. And the service agreement is going to outline what you’re providing
the person, what their obligated to pay, you wanna make sure you have your return policy
clearly outlined… Yes. …and for people who are in high risk type
of professions, you wanna make sure that you have some type of disclaimer because it’s
just as important to know what you’re going to be responsible for and what you do as a
service provider and what you don’t do. So, for example, if you’re a health coach, you
wanna make sure that you have some type of agreement or some type of disclaimer in there
that says, “Hey, I’m not a therapist, I don’t prescribe medication,” X, Y, Z.
So these are the kind of things that you want. But it’s really important that you talk
to a lawyer about this part of it because then they’ll be able to look at what are
the areas that you are… that you are providing services in and how they can prevent against
the ones that you aren’t. So it’s really important to make sure that you talk to an
attorney about that part of it. So do you have any idea like a ballpark figure
of what someone could expect to pay to get a service agreement and these kind of disclaimers
in place? I think it really just depends on the lawyer
because some lawyers, they charge on an hourly rate and some of them charge on a flat fee.
What you wanna do is interview the ones that you’re thinking about hiring and then ask
them what their fees are and what’s associated with it and then you can make your decision
from there. I love that. And I love this idea of interviewing
several lawyers because I’ve worked with many in my career and I wish I would’ve
done more of that because you can really get a good sense of how people interact and all
that stuff, so perfect answer. It’s a relationship. So you wanna make sure
that if this person is gonna be the general counsel in your business and gonna help you
with developing your business and understanding what you need as you grow, you wanna make
sure you have the right person doing that, so it’s important to interview. Ok, so our final area today is about business
relationships, and I think this is the one that you are the most passionate about. So
what do we need to do to handle ourselves legally with our team or anyone that we’re
doing business with? Well, Marie, this is one of the areas that
I absolutely love talking about because so often it is missed in our industries, especially
when you’re an online entrepreneur. You are hiring VAs, you’re hiring different
team members, and it’s so important to make sure that all of your business and that your
personal information is protected. So you’re exposing them to passwords, client records,
all kinds of credit cards. Yes. So it’s really important that you have some
type of agreement in place that makes sure that they are not gonna take that information
and distribute it outside of your company. So you need to have some type of independent
contractor’s agreement and you need to make sure that it has a nondisclosure in it. And
that means that you come into my business and you can’t take anything outside of my
business when you leave. Yes. Thank sweet heavens. I remember a little
while ago when I first started getting all of my NDAs in place, I breathed a sigh of
relief because I felt terrified. There’s a lot of sensitive information and a lot of
projects and ideas and book things. And I know it maybe not is the best thing in the
world that I’m like, “Oh, God. What if that gets out?” But it made me feel so much
better and it always makes me feel so much better. It’s so true. And also when you’re an
online entrepreneur, most of us don’t have the privilege of seeing our teams or bringing
them… or flying them in. So you really need to make sure that you have the right people
in place and how you ensure that, take a preventative measure, so to speak, is to make sure that
you have something that they’re signing that makes sure that they understand what
it is that they’re going to be providing you for services, how you’re going to terminate
the contract in the event that they don’t work out, and all of these various different
things like protecting your IP, for example. So it’s really important to have that and
the other thing, if you’re in the United States, if you’re planning on paying someone
over 600 dollars in a given year, you wanna make sure that you get their W9 form as well
because you’re gonna have to issue them what they call a 1099 form at the end of the
year so you can write that income off that you paid them. Right. And it’s really important that you
do that because you want as much money as you can get in your business and you wanna
keep it. You don’t wanna pay it to Uncle Sam. Yes. You want to keep it all tight and right
and above board. Exactly. And obviously W9s, that’s appropriate
for a contract based worker. Absolutely. Absolutely. And also, what I always
tell people to do is get the stuff right up front. As soon as somebody comes to you and
they want to work with you and you’re like, “Great, this is gonna be a great relationship,
I wanna work with you,” first thing you do is send them the independent contractor’s
agreement and then send them a W9 to fill out because if you… the relationship doesn’t
work out and you decide that you don’t want to hire or you don’t want to use them anymore,
you wanna fire them, it’s gonna be really hard for you to get that form afterwards.
So… That’s like a pro tip. Yes. That’s a total pro tip. I love it. Get it
up front. Get it up front. Jo-Na, thank you so much for being here today.
This was fantastic. Thank you so much Marie. It was so much fun. So if you wanna learn more, everything is
right down below. So Jo-Na and I have a challenge for you today. If you don’t have all your
legal ducks in a row, what’s one step you can take right now to start making that happen?
Tell us about it in the comments underneath the video. Did you like this one? If so, subscribe and
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