1. Legal Advice
As you proceed with your business, you will want and need to get legal advice. When exactly to do that is up to you, but I recommend planning with at least a tax accountant. Remember, tax accountants aren’t bound by client confidentiality. If you have potentially sensitive tax questions, a tax attorney is your best bet.
1.1. D.I.Y. Legal Work
There is a lot of legal work you can do on your own. A great resource that I have found to be paramount to the others I will list is www.business.gov.Business.gov provides information and resources that help small businesses comply with federal, state, and local business laws and government regulations.
Some other great resources are:
Nolo.com: Nolo provides law forms and do-it-yourself legal kits and books for consumers and small businesses, including information on estate planning, business law, debt and credit, etc.
SmallBusiness.FindLaw.com: FindLaw’s Small Business Center provides information and resources for small businesses, including employment law, human resources, an overview of legal issues faced by small businesses, and more.
LegalZoom.com: LegalZoom was founded by renowned attorney Robert Shapiro, whom you may remember from the O. J. Simpson trial. LegalZoom provides all sorts of valuable legal forms and services for both personal and business use.
1.2. How to Get Sound Legal Advice
As you proceed you will undoubtedly run into questions that an attorney is best suited to answer. When (not if) this occurs, be sure you have already found an attorney to rely on. Make sure your attorney specializes in business and tax law for businesses. You don’t want someone inexperienced handling matters that could send you into financial ruin and incredible stress if not handled properly. I often ask colleagues and friends for referrals—if they have worked with someone successfully for a while, that makes me feel more comfortable.
By far the most important aspects of your choice of legal counsel are whether he or she is bar certified, experienced, and recommended by others in your line of work. You can check this status by contacting your state bar association and validate there are no complaints against the attorney. The attorney will most likely have his state bar ID number listed on his business card, which will make checking his status easier. You can find your local bar association’s contact information by searching online or contacting your local court system.
1.3. What to Ask to Find a Good Attorney
So what do you ask to find a good attorney? Well, first, as I mentioned above, you want to be sure he is board certified. You also want to make sure that he practices the type of law that you need advice on and/or representation in. For example, if you are involved in a real estate deal, you will need a real estate attorney, not a family law and probate attorney, and vice versa.
Next, you will want to know what type of record he has. How long has he been in business? Has he ever had any actions taken against him by previous clients during the course of his career? What is his win/lose ratio—if the need should
arise that a court case is presented? Don’t be afraid to ask for references; the selection of an attorney is a big deal. Remember, you often get what you pay for, too. If you live in a big city, consider driving an hour to the suburbs for lower costs but still quality practices.
Locating an attorney can be a daunting task, like finding health or life insurance, but there are some ways to make it easier on yourself. First, ask your friends, family, and colleagues who handles their legal work. Personal referrals can often prove to be the strongest methods for finding a good lawyer, and some lawyers may even offer a referral discount to both you and the referrer. If this doesn’t pan out, you can contact a lawyer referral service. Although there are hundreds (dare I say thousands?) of these services out there, in my view the most reputable ones are those that others recommend to you without bias—without getting paid for a click-thru or a link on their website. You can also call the courts and ask for recommendations. A simple call to the court clerk or county bar association will provide you with contact information for any local lawyer referral services, organized by type of law. Another benefit of this is the ability to receive information on reduced-cost legal services that may be available to you, depending on the situation.
Just like asking your friends and family, you can ask other business owners. If you don’t know any other local business owners, again, contact your local SBA office. They will be able to put you in touch with valuable resources, whether those are other business owners who you can inquire with or a listing of recommended legal counsel.
1.4. What You Need to Know to Move Forward
So what else do you need to know to move forward? You have an idea, an initial marketing plan; you’ve registered your business and have done your preplanning with an accountant and/or attorney. From here, you need to make some additional decisions: How many resources (capital, human, technological, and financial) do I need? Am I going to start slow or go all-out from day one? Am I going to quit my day job now, or wait for business to pick up? How much working capital do I have? And so on. Go through the checklists throughout this book. Once you’ve done so and can answer the questions, it’s time to begin!
2. Paying Yourself
As you begin your business, one of the first things you’re going to have to do is make sure you can continue to eat and pay the bills. If you quit a day job to start your own business, you will need to figure out how much you’re going to pay yourself. Chances are you aren’t going to be making the big bucks from day one, so you will need to preplan your needs and the minimum you can pay yourself now, and cover your expenses. Remember that you need to reinvest as much as you can in your business to help it grow. If you pay yourself a salary, you can reinvest the rest of the earned money back in the business. If you pay yourself all the earnings, then you will need to use your own money to build the business.
2.1. Determining Your Own Worth
This is a bit of a trick question, because you are your business! Your worth is invaluable, immeasurable. If all of your contractors and employees disappeared, your business would still run. Nonetheless, you’ll have to figure out what you are worth. In the early stages of your business, you will pay yourself the most you can afford while maximizing reinvestment and paying the bills. As you move forward and become more successful, you will need to assess your worth, allowing yourself a higher wage while still maintaining business needs. Again, it is very dependent on whether you still have your day job and what revenue and profit your business is making. This is a decision to make as you go. Most likely what you are worth isn’t what you’ll pay yourself—it will be considerably less until the profits of your business support what you deserve.
2.2. Deciding How Much You Should Pay Yourself
Deciding what to pay yourself and what to pay others is tough. You cannot promise wealth to these individuals because you don’t know the outcome of your business. If they work hard, you can promise you will do your best to match their earnings to their contributions.
Often the business owner ultimately profits less than lower-paid employees after bills are paid. Little discretionary income is common among small business owners, particularly in the first five years. Chances are you won’t be able to pay
yourself what you’re worth, but be sure your clients do. This will ensure your continued success. Pay yourself as much as you can, and need (so you can pay the bills), but as little as possible so you can reinvest.
2.3. Making Enough Money to Not Only Survive But Thrive!
Remember that your business goal isn’t to make enough money just to survive, but to thrive! Keep close tabs on your expenses and income and you can readjust your own pay monthly or even biweekly—paying yourself more in “good months” and less in “bad” or slow months. Be sure you compensate those who contribute greatly to your success, because money is a common motivator.
Source: Babb Danielle (2009), The Accidental Startup: How to Realize Your True Potential by Becoming Your Own Boss. Alpha.