How To Avoid 3 Common Legal Mistakes Small Business Owners Make

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
share it with your friends. And if you want even more great resources to create a business
and life that you love, plus some personal insights from me that I only talk about in
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for watching and I’ll catch you next time on MarieTV.

Comments (92)

  1. I'd never thought of interviewing several lawyers. Great tip! That's my next step.

  2. Ok… Why does Ms. Thang not have a book??? I would buy it!!! In a HEARTBEAT! I want to know more. This was great info and she explained it in a way that this artist could understand! I'm creating products for my brand new business & "contracts signed up front" NEVER occurred to me! And, "doctor for my business"??? BRILLIANT!!! I feel more empowered now. I think I just grew 10 feet taller!… Thanx a million! 🙂

  3. Great topic, thank you for sharing.
    Have a nice ✨day:-)

  4. I woke up today like "omg it's tuesday, marietv" & this is why! Always producing such great material! I love it, thanks marie!! 

  5. These are some really great tips, thanks Marie!

  6. So Tuesdays I look forward to seeing what goodies Marie Forleo is going to dish. I was too pumped when I opened my email to see my music biz coach @Jo-Na Williams being featured! She's the best! Go Jo-Na!

  7. Loved these tips completely!

  8. Marie and Jo-Na, thank you so much for this kick in the pants. About 6 weeks ago I officially established my business and I have been overwhelmed with everything that I had neglected to do some of the things you suggested. Well, today, I took the time to call and consult with an accountant and he is showing me the ropes! I took this small (but big, necessary step) because I was compelled by this awesome video. Now, dealing with legal matters and getting my ducks in a row in that regard isn't so scary. Thank you!

  9. Great info. I'm a small business owner, looking for individuals to contract with and hadn't thought of the non-disclosure agreement. So glad I watched. Thanks so much!

  10. Dumb question, but is there a particular TYPE of lawyer I should be looking for? Great interview, Jo-Na! This really IS a topic you don't hear many talking about. 

  11. First Jo-Na I want to say your hair is beautiful!  Second the info you shared was brilliant.  Just starting out in a service based business and having a service contract, a non-disclosure agreement, interviewing several attorneys…WHEW! You gave me a lot things to think about.  There is so much to building a business than just having the idea.  I will be watching this video several times just to make sure I have what I need in place.  PLEASE keep up the good work!  I also love your B-School bonus video training as well. I was about to jump right into an LLC until I heard what you had to say about it. 

  12. Amazing tips. Thanks!

  13. O MyGosh B*jamin Aye) Thanks Forevers) 

  14. Thank you to Marie and Jo-Na for sharing this legal information, it is invaluable and so important. No one wants to lose their business. Especially when we work so hard on them. Can you talk about Patents one day (or if you have, can you tell me where to find it) please? I need to go interview some lawyers now… 🙂

  15. Wow! This was great. So glad I watched. I'm lucky that my MIL is a lawyer, so she always makes sure our ducks are in a row. But I forgot about the service agreement and disclaimer. I am about to start offering services next week, so this is perfect timing. They are now on my do-list before I send out all my mailers. Thank you, +marieforleo and +Jo-Na Williams.

  16. I love this ! I am so happy that this video came to my inbox. Jo-Na is so smart, I'm visiting her site now!

  17. Thanks for the info

  18. One of the best Marie TV's to date!! Great tips, and Jo-Na is SOOO pretty 🙂

  19. GREAT tips!  I'm in the very early stages and haven't established a business yet but will be sure to see a business lawyer first!

  20. Thank you Maria wonderful tips from Jo Na, I will share this information with my niece who recently went into business she wold benefit from the advice I certainly have. Many Blessings your way.

  21. Much needed information

  22. Hi Jo-Na, so what are some of the cons of not signing a contract with the business you work for?

  23. Great legal tips! One additional document you need for new employees is a employee application with a legal sign off to allow a background check and reference check. You can't trust what people say at the interview alone because many will BS you. We had an applicant that we thought was perfect for the job but in verifying their employment, we found out most everything was a lie. The background check came back that he was a convicted felony that broke in and stole from his former after hours. If we went by the interview only, we would have hired him because he was charming and appeared respectable.

  24. I am going to hire a doctor for my business aka lawyer

  25. I definitely was meant to see this video! I need see an attorney since I don't have one. But is it a good idea to give my spouse a NDA?

  26. So glad to be attending your workshops Jo-Na.  You rock lady!  Looking forward to this Wednesday 🙂 

  27. I highly recommend Legal Shield ( for personal and business legal assistance if you do not have an attorney. Monthly membership differs by state (it's $16/mo here in PA). It allows me to contact my designated attorney firm to ask a legal question or have a letter written to a creditor, debtor or individual/corporation with whom I'm having difficulties. If additional legal action is required, I am referred to a local attorney who will give me (usually) a 25% discount off fees. Check it out! (And, no….I'm not being paid for this endorsement!).

  28. Would anyone be interestedn trading my art for your accountant or lawyer services?

  29. This is great stuff. But what are NDA's ?

  30. You're awesome I <3 you!

  31. Thank you for the great information here. I am curious how paying a child in my home who is working for me in my business applies to the choice of company structure. I chose to LLC but I may, in the near future (when my daughter turns 16), employ my daughter to work in my home office and help with general work, etc. I was told I could pay her, and she could receive the pay, tax free (up to the standard deduction) as a child employee in a home business. So does that affect the LLC structure I chose to set it up as? I hope that makes sense… LOL

  32. I need to get my service agreement and NDA.   

  33. These are some really great tips! Thank you so much Marie!

  34. Thank you for that great legals tips.

  35. I am a 26old young lady and have a online art gallery I'm from London UK. I have been reading up over last 8 months to what I want to be and I feel limited company would suit me. As from tomorrow im going to see if I can get secondary advice from a accountant. As always Marie TV is excellent and thank you Jo-Na for your straightforward bubbly advice.

  36. @10:26 what if you are in the United States and will be hiring someone OUTSIDE the US (outsourcing) how will you write off such expenses in the tax for hiring an individual abroad?

  37. I LOVE this topic! I'm a business coach & attorney and I have added a whole step to my course just to focus on this! I get such good feedback I've launched a speaker series with my attorney & CPA to help small businesses START with this info! Good stuff ladies! 

  38. Brilliant video! Our law firm are keen on doing something similar to advise small business owners in the UK and this has been a great inspiration! 

  39. Very awesome video! Thank you so very much!

  40. Loved t his one! I will definitely be using some of these tips. Especially having the service agreement clauses. I will definitely be revising my contract.

  41. Great video, I found this very helpful.  I'm starting a new business in 2016 and right now, I'm doing about 1.5 years of research on it.  My new buisness involved amateur sports.  Is there some type of license or any legal things I should worry about when providing a service for kids?

  42. So useful ! Thank youuuu ! I just moved to US as a foreign citizen and Im trying to start my business so I do reply to your challenge : I start from the bottom. I have to find which business entity, which legal structure suits to my project… Well Long way to go but Im motivated and I love what Im doing. Im ready to contact an accountant : where should I look for ? Yellow pages ?

  43. This is good advice

  44. I dont understand the type of business structures you are referring too.  For a photographer are there different types of business structure options?

  45. First talk to my accountant.  Then seek an attorney

  46. Marie I came across your videos about 3 months ago….. watching Marietv is like personal development with a twist… (cool)
    well this is my first time making a comment. i came across this video today which was very interesting because I recently started my 1st networking marketing company by the name of Legal Shield- which offers legal and identity plans to families and small businesses… I have been really holding back from marketing the service …this video tells people need it..its very affordable….you guys are saying people should have it …..  
    Has anyone heard of this company? Thanks for your dedication to keep us informed……….Netaphia

  47. abolutely GREAT advice! Thank you!

  48. This was a great video! According to your suggestions, it seems I have been on the right track with my online entreprenuer business. I did speak with my accountant initially to decide on the structure for my business. Like many in my position, I was unable to afford a lawyer initially, so I solicited help from my accountant and sought out some legal advice from an online service. I currently work as an independent contractor offering consulting services. Do you recommend this approach for entreprenuers in the beginning stages of setting up the business?

  49. So extremely helpful ! Thank you!!! I always felt lost on where I should get this info… but now I know…. I will find a lawyer! 🙂

  50. This was super helpful. Thanks. 🙂

  51. Great video! Another great resource for determining the type of entity that will be more useful for your business and your assets is checking out the Secretary of States office for the jurisdiction in which you will be conducting business. The Secretary of state offices strive to be a one-stop center. In NV, for instance, you can draft operating agreements and find tools on what licensing requirements you may have based on the nature of business and entity type. It also goes into detail in the liabilities and structures behind each entity type. I hope this is helpful! 

  52. Great tips! Getting a lawyer on retainer for your company could save you a lot of money as well as legal problems!

  53. Very helpful and great tips.


    Just follow the link. Do not pass up the chance for financial stability or earned extra income with no hassle.

  55. I hope this video goes out to people who are planning on starting their own companies. Talking to a CPA beforehand definitely helps to ensure that you are not committing any legal mistakes. 

  56. This is great info.  Thanks for sharing:)

  57. I love your video about passion and how to live a life doing what you love. It inspired me to make the Youtube channel I have now AND I also showed your page to a dear friend of mine who is actually opening up her own pharmacy. This video above really helped guide her. I guess she had some doubts regarding business decisions and this video really helped her out! Thanks for all you do!

  58. is jonA on you tube

  59. Your videos are really good and fill with great content. I'm already familiar in this area but for new business owners or employees wanting to become their own boss, this is definitely for them.

  60. Any tutorial to Lear how to fill E-500? Thanks

  61. We are ready to be your offshore development company

  62. Wow, fantastic suggestions! Thank you!

  63. Finally, great tips without even a hint of spam. Love this! Thanks Marie!

  64. This was so great and very helpful! Thanks Marie and thank you so much Jo'Na!

  65. make an independent contractor agreement 🙂

  66. Hi Marie, The message was very informative. Thanks so much Jo Na Williams.

  67. I really liked Ms Williams statement that most people end up paying to solve a problem instead of prevention and a legal shield will be built around your business by incorporating. Step that can be taken right now? Get a legal plan that offers a monthly price for legal services instead of being charged an hourly rate. Preventive law is affordable with a small business legal plan. We have an incorporation package for C, S or LLC to launch a small business. This is what our company does nationwide and in Canada. You can message me and I will email you some info.

  68. So I am doing business with foreign manufacturing companies, what Tax form would I send out?

  69. soooo cool im going to do all my legal an documented work while my logo an brand is building b4 i sell anything.

  70. 50% in taxes ?!?!? Geesh…. when does the government say ok maybe that's excessive ?

  71. I like the disclaimer on this video, actually the written disclaimer above. That says it all. Every business, every legal issue is different. The details, just one little detail alters every legal issue. Who would like to get legal advice and not worry about hourly charges?

  72. Thank you for the informative video!

  73. I absolutely agree. I stress this more than anything. I tell people that LAW exists in everything; crimes, partnerships, and even the ground your standing own. One bad day can break you down…

  74. There is so much to learn about this important topic, found this video helpful.

  75. Hi ,
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  76. This video is so informative!!!!

  77. very helpful thought of this before but you definitely brought it back to light thank you so much!

  78. This is a very helpful guide to the basic issues that everyone needs to keep in mind. Thanks for posting this (Yeah, I know I am several years late.)

  79. Chef Habari here! 👋 Is there a lawyer with integrity watching who would like to help me structure and grow my food products? I have healthy meals ready-to-eat!

  80. this is a major tips to get start in a Business

  81. UGH! I wish this was lonnnnger

  82. This was incredible free information. Thank you!

  83. What type of lawyer ?

  84. Helping my daughter who’s a Awesome cook, to start her own catering service.. Looking for all I need to do to protect her in pursuing her dream and independence.. Contract first and foremost, even though family & friends will be involved.

  85. Ok, I had to stop and comment before listening through to the end. This is the first time I have heard anyone in the legal profession come against the idea that you should just jump to an LLC. What a breath of fresh air! Now, to finish listening…

  86. Excellent video! Thank you so much!

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