Ep. 27 | How to Prioritize When the Legal Stuff Feels Overwhelming

Your to-do list is long enough when you're starting your business... Adding "get legal" to it can feel like just one more thing you don't have time for. 

Tune in to hear the number one piece of the "legal stuff" I think is absolutely necessary when starting your business (even though it's not *technically* legally required).

If you're ready to take the guess-work out of the legal aspects of your business, sign up for the free, live training on March 14 that walks through the 3 Steps to Get Your Business Legally Legit Without Hiring a Lawyer: https://artfulcontracts.com/liveclass

If you're an online business owner who’s ready to take the guesswork out of the legal aspects of your business, watch my free training to learn the 3 steps to get your business legally legit without hiring a lawyer. Let’s get the legal stuff covered so you can grow your business with confidence. Go to artfulcontracts.com/legalclass to sign up.

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Full show notes at artfulcontracts.com/podcast

Transcript

SPEAKER_00 0:00

When you're starting a business, it can feel like there are a hundred million things to do. Your to-do list is a miles long already, just with getting the ball rolling on accepting clients and figuring out payment processors and setting up your email list and literally the list goes on and on. That means you're often going to have to prioritize. But when it comes to the legal aspects of your business, what things are essential? What things do you have to absolutely do first to start your business? And what can fall further down the list? Because realistically, it's really hard to get all of it done immediately. So today we are talking about the most important legal aspects of your business. If you don't do anything else, if you ignore the legal stuff entirely except for this, this is what you need to do. Let's get into it. Hey, I'm Amy Nessheim, licensed attorney for online business owners and founder of my own business, Artful Contracts. You're listening to Legal Made Easy, the show that makes the legal aspects of online business easy to understand and implement so you can grow your business with confidence knowing you've got it all covered. Let's dive in. Alright, as I was recording that intro, I was honestly making myself a little nervous because I do not want to give you permission or like a blank slate to skip certain things that are legally required. That's not that's not my goal. That's not what I'm trying to do. But if you think about it, for online business owners especially, there is not a whole lot that is absolutely legally required. Most of the legal stuff comes down to risk management. It's a choice that you make to limit the risks in your business. So to give you an example of that, if you run an in-person restaurant, you probably need a license to serve food or a liquor license. But if you run a coaching business, there may not be any legally required licenses or permits, if that really depends on your town, but there may be none. So if you have no requirements, what are the things that you really should be doing legally to protect your business? How do you prioritize of the infinite possibilities of things that you could do to protect your business? How do you choose the ones that are the most important? As I'm sitting here thinking about it, as far as legal requirements for online business owners, of things that you absolutely are legally required by law to do for your business, most of it does not have to do with setting up your business structure or working with your clients. And it's usually going to be like action-based too. So if you do X, then you're required to do Y. So I'm thinking of like a privacy policy. If you have customers from the EU, you have to have a privacy policy. Or if you do affiliate marketing, you have to disclose that you're an affiliate. So it's like behavior dependent, right? If you do an activity that falls under this law, then you have to follow this law. But in terms of setting up your business, if you don't have a brick and mortar storefront that needs permits and licenses and things like that, most of the setup involved in running a business is not legally required. It just has to do with mitigating your risk, reducing your risk as much as possible. So making it less likely that you're going to get sued and making a lawsuit cost less if it does happen. And making sure your personal money is safe from a lawsuit if that does happen. So in terms of setting up your business, there are two things that I think are that should be the top priority. And if I and I know that you can only have one priority, so we're gonna start with number one absolute requirement from my perspective, not legally required, but just the thing that is the most important, is going to be your client contract. If you do nothing else to set up your business to get the legal side going, put a client contract in place. I don't care what kind of people you're working with, I don't care what kind of service you're offering, you need a contract. If you are exchanging value services, if you're exchanging, you're doing something that the other person values and they're giving you money, you need a contract. It doesn't even have to be money. If we're talking brand deals in exchange for product, that should still have a contract because you're giving away your content that's valuable, you should have a contract. All right, here's why. This is the most important thing because a contract outlines the rules of a relationship between you and another person. It makes sure that you're on the same page about what you promise, about what you're going to deliver, about what you expect from the other person, what they expect of you, that your boundaries are clear, that your deliverables are clear. It creates a foundation for a better relationship because everyone knows where they stand and what the expectations are. If you think about just like any interpersonal relationship where you're not clear on the expectations, it's gonna create, at a minimum, awkwardness and at the worst case, like a breakdown of the relationship entirely if the expectations aren't aligned. So, as an example, let's say your friend invites you out to this like really fancy steakhouse to celebrate your birthday. You think, great, I would love an awesome steak dinner, especially if I don't have to pay for it because they're treating me for my birthday. Your friend forgets that it's your birthday and just really wants to go out to the steakhouse and gets there and the bill comes and the friend is expecting to split it, and you're you're there thinking, this is my birthday dinner, they're treating me. That's an awkward situation, and it's gonna cause a breakdown. Somebody is going to leave that dinner feeling upset. There was a miscommunication. So contracts help you avoid those kinds of miscommunications and unaligned expectations, which leads to easier projects, better relationships with your clients, more clients that are likely to repeat. Because you better believe you're gonna remember that experience the next time that friend asks you out to dinner, you might hesitate a little bit. And you don't want your clients hesitating just because of a miscommunication with you. And then here's the next thing once those expectations are all clear and they're on paper and both sides have signed that piece of paper, once the contract exists, everyone is held to it. So if that friend had signed a piece of paper that says, I'm paying for dinner, and you get to dinner and they say, No, never mind, you have that contract to point back to and say, no, this is actually your obligation. The other thing that contracts do is if there is a breakdown in that relationship, a contract can limit the amount of money that you're responsible for or the types of consequences that you face for breaking that contract or having something go wrong in that relationship. So if a client pays you and you, for whatever reason totally drop the ball and forget about them for three months and they come back and say, Hey, I never got my project. Instead of being able to sue you for delaying their launch and potentially suing you for all the lost revenue that they would have made in that launch, the maximum amount that they can get back from you is the amount that they already paid you. And that's the kind of thing you can put into a contract. And yes, it sounds crazy that they could recover potential lost revenue from a launch that you were working on, but it's called consequential damages, if you are curious. And another thing that a contract can do for you is if you have, you know, something totally crazy come up, or if the client ghosts you, if something happens where it's no longer a good fit to work together, the contract can tell you what to do in that situation. You can decide ahead of time how you're gonna handle things like that, and then you have a blueprint for moving forward. So there's no awkwardness, there's no having to negotiate after a relationship has broken down, because that's the worst time to negotiate, right? You negotiate ahead of time or decide ahead of time in your contract what the rules are going to be, what the process is going to be if you have to get out of that relationship. So, you know, the amount of refund that they might get, the process for ending things together, the fact that they won't get a refund at all if they're the ones to disappear, there's a restart fee if they disappear, that kind of thing. So if you have to prioritize, if you want to start taking clients immediately and you need just the bare bones, basic minimum thing that you need to protect yourself and your business, that number one thing is a client contract. I know I said that there were two priorities. So if you have the capacity and if it makes sense for you, this one comes first or as soon as you're able. The other priority is forming an LLC. Again, not legally required, not mandated by law. You can absolutely run a business without one, but it is a risk management choice. And you can head back to episode nine for a deeper dive into why it might be a good idea to form an LLC and the reasoning about when you might need to and what it does for you. But basically, an LLC separates the risks of your business from your personal money. So it creates a legal wall in between your personal money, your personal life, the personal assets that you own, and the money in your business and the risks in your business. So if you get sued in your business, your personal money, your savings, your car, your house, your retirement is all safe behind that legal wall. Now, I didn't put this first because everyone who works with clients needs to have a contract, but an LLC might not be the best fit for everyone who is running a business. And that's going to be a personal risk management choice. I think there's not a whole lot of downside to it. If you're serious about having a business that supports you, I think it is really important. But if your business is more of a hobby or you don't have very many assets in your personal life, maybe it's not a priority right now. For me, when I decided that I was starting a business, forming the LLC was the absolute first thing I did, and I couldn't even afford it, so I borrowed$100 from my mom because that's how important it was. And you know, she believed in me for my business. I did end up paying her back later from like my first sale or something, but that's how important it was, and that was like a month before I even had my website or anything else happening. The very first thing I did was open up my LLC, but I also was planning on going all in on this business, it's was my only source of income after that, and I own a house, so I had an asset that I wanted to protect, and I'm in you know a relatively more risky field of providing legal information and you know working with clients as a lawyer. So if you are planning on going all in on your business, if your business is your sole source of income, if your business is risky at all, if you have a high volume of sales, a high volume of revenue, or you operate in an area of business that carries a higher level of risk, or you have personal assets that you want to protect, you are married and you want to protect your spouse's income. If you own a house, if you have a good amount in savings or retirement, those are all reasons to start with an LLC. Do that first as the very first thing you do before running before doing anything in your business. And you know, if you already are running your business and you're like, wait, I should have done that, it's okay. You can start now, and then go back and listen to episode 17 to complete that transition from sole proprietor to LLC. Yes, you can do it now. But if you're just starting and you have things to protect, do that first and then you get your contract in place because your contract will be with your LLC. If you are not thinking that an LLC is right for you right now, you still 100% need that contract and you need it even more. You need a contract if you have an LC or if you don't, but it is so much more important if you don't have one because that LLC gives you that extra layer of protection. So if you don't have that layer of protection, then the contract is all you have. If you want to go deeper on this, if you want to hear more about how contracts can support your boundaries and protect you in business and the types of contracts that are important, if you want to hear more about how to use your LLC to actually maintain that legal wall, use it in a right way so that your money's protected. I'm hosting a live masterclass next Tuesday, March 14th at 2 o'clock Eastern, which is 11 a.m. Pacific. And we're gonna walk through the three steps to get your business legally legit without having to hire a lawyer. This is a live training. We're gonna be on Zoom, so plenty of opportunity to ask questions. We'll have time for questions at the end as well. And I'm aiming for 60 minutes of training and then time for QA afterwards, too. And I'm going really in depth on this stuff. If that time doesn't work for you, there will be a replay, but you only get the replay if you sign up. So head on over to artfulcontracts.comslash live class. The link is down below in the show notes as well. Click that link to save your seat, and I'll see you there.