The things that every lawyer wants you to know.
Cost of a 30 minute contract outweighs the time spent dealing with client disputes.
1. Customer paid for half of website, and on completion of project, contractor took website down. What happens in a situation when the customer doesn't pay?
Make sure you have a contract!
Good fences make good neighbors. Both sides need good understanding of what their responibilities are. No mismatched expectations.
Clearly delineate responsibilities. When creating a deliverable for someone, this affects the price structure. This could cause conflict after the fact.
2. What are the professionals do I consult in the beginning of opening a business.
Interview your professionals. ie. Accoutant, bookeeper, lawyer. You're choosing someone who you're going to trust with your business, so you need to have a good relationship. Think about what someone can do for you, that saves you time and saves you headaches.
3. What's a reasonable amount to expect for lawyer fees?
a) Online resources do flat fee, standard agreements ($200-$400). Cookie cutter, keeps costs down. Downside, no customization.
b) Dealing with professionals they will ask the right questions. The more complex your situation is, the more this helps. ex: Do you want liability protection?
c) If you have a long-term client, and need changes made later. You need to know what the options are and present them to your client.
4. Do you have enough liability protection?
It is a cost benefit. If you're only making a $100 or 200 here and there, no big deal. If you have employees, premises or make larger amounts per contract, you become personally responsible for that.
Ex: commercial liability, doesn't cover everything. make sure you read your policy ,they are more about what they don't cover then what they do. Insurance brokers help with getting the right liability.
5. What are the first things you need to get as a freelancer?
a) Contract - check out Shane & Peter blog. Get a good form, so you know how to structure things, you know the rules of the game, and the ability to deliver to what you're promising. You can also use a lawyer.
b) Just start with your own name, is good for testing and don't worry about becoming an incorporation b/c you end up spedning too much money on legal, account fees, plus alot of paperwork management.
c) wait to go LLC until you move from home to a work space, bringing on employees, once revenue is there, you'll want the liability protection, hire a lawyer.
d) Put 50% of your paycheck away for taxes, track all your expenses (mileage, utilities, etc). Make your quarterly payments to taxes, that way you're not penalized by IRS.
6. What happens with the distribution of one share of the business? Ex: divorce causes common law, half ownership.
Setting up a structure must be done in advance.
7. How do you value a business?
• Business appraisers
• Multiples of revenue (income or profit)
• Fixed assets
IP Based business- value generated by revenue of service based business. Value is tied by the IP. How do you count for the future value, especially in IP? You need a business professional, accountant, subjective person that does not own business. This should be in the contract upfront. You need an understanding if something goes wrong.
8. Pay Cycle and Paychex. Payroll services software. Managing your books and sending your forms to the government quarterly. Witholding taxes and security. If you have employees, this helps save you time, and keep you out of trouble. Paychex, they even have an HR department that helps you with employmee handbooks.
If you're employing people, make sure you have a good HR dept. Laws heavily favor employees.
9. Ownership of work. Does employee, client, subcontractor own it? Make sure everyone is properly getting credited. Go into it with positive intentions before you move into litigation intentions. If you have IP processes and trade secrets, you need to have employees send a contract with disparagement clauses.
10. Attorney fees if you go into litigation?
In your contract you have a provision, the prevailing party has no attorney fees (the losing side must pay for both). Gives a better chance at settling before legal fees.
