Risky Business: Legal Checklist Final Chapter

You have probably seen the mayhem commercials for insurance. Mayhem is not your friend. We often go about running our little businesses without giving him much thought. Today is the day to consider what Mayhem could cost your business and perhaps your family.

I advise all of my small business clients to do a liability assessment every year. This is pretty easy but most people would just rather not think about the what ifs.

1. Drag out all your insurance policies.
     
      Is your inventory covered to be replaced if your home or place of business burns down?

      If you are creating your product in your home and using a torch does it void your homeowners  
      policy?

      What business activities do you need extra coverage for? Soldering, welding, glass fusing??

       Jewelry almost always requires additional insurance! You must find out exactly what your policy
       covers.

     How much liability coverage do I have and is it enough? Could I loose my home if I am sued.

2. Make a list of things that could result in a lawsuit.

      Someone injured on your property or in your store.

     Defective merchandise.

    An injury during a class.

     Are you giving warnings about dangers? Are students signing a liability waiver? This is a must!

     Did you know soldering with a torch destroys your retinas and the damage is cumulative? All
     persons soldering with a torch must wear didymium lenses to prevent damage. I bet your instructor
     did not mention that every time you use a torch you are risking your eyesight.

     An injury at an event or show- someone trips in your booth.

3. Research what permits you need and any laws that might regulate your business.

     Many cities limit the type of business you can run from home.
   
     How does California proposition 65 effect my products?

     What warnings must I post or give?

     What type of license or permit do I need?


Play the devils advocate and figure out all the things that could go horribly wrong. Now take steps to protect yourself. Insurance is not as expensive as you think and it is part of running your business and is necessary. Make insurance expenses a part of your financial business plan. I cannot afford insurance is not an excuse it simply means you need to tweak your business plan to realize a profit.

Don't be afraid to understand your potential liability. Knowledge is power. Safer, conservative business practices often mean higher profits long term. You can do this without all the risk!! This is just a partial list of all the things you need to consider but it is definitely enough to get you started! Go out there and realize your business dreams! You can do this!

XO,
Tara

Ramblings of A Madman, Ok Woman

Sorry for the blog absence- things have ben a little crazy. Good crazy but crazy. Glitterfest seems like a distant memory as I begin prepping for my fall jewelry line. I am having such fun gathering all things sparkly and shiny. To my surprise I have been using loads of color too. I often shy away from color but not this year- it is all about color.  I have found the perfect vintage color pallet to work with and I am really enjoying all the possibilities.

The best laid plans often become an entirely different journey. I intended on listing a few summery pieces on etsy but Art and Soul beat me to them! I have tons of jewelry at Art and Soul on 101 in Encinitas so if you are looking for a little bit of summer that is the place to go. I just mailed them the rest of my summer goodies so they are well stocked with Lulu Max jewelry. I will actually have to make a few more items for etsy. That will be a pleasure as I do not often get to work in season. Most jewelry is actually created one or two seasons ahead. For me it is always Christmas in July. It will be fun to work with summer colors and still be enjoying the summer! I just scored some amazing butterscotch bakelite swallows and I am pleased I will not have to wait until spring to debut them!

Tomorrow I am going to take a little break and head to the beach for some surfing! Sometimes you just need a day at the beach.

Back thursday with our legal checklist wrap up blog post!!

Tara

Grab your Partner Do Si Dos: Legal Checklist Part 5

As you can see my three dogs were able to come to an agreement about sharing the tiny bed. If only it was always this easy for people to agree and work together.  Frequently we fall into business with friends and family. Most experts would recommend against this idea. The reality is people do not always agree especially friends and family.  Since I know advising against doing business with people you enjoy will be ignored I will tell you how to make it work. The key is communication. A partnership agreement is just a document that reflect the conversations you have had and the decisions you have made about your business. Every partnership must have an agreement in writing. The simple task of putting your agreement into writing ensures that there is a clear understanding of your agreement. This clear understanding will help avoid most of the common problems partners encounter. The document itself can be very simple or excruciatingly detailed. Either is fine as long as all the questions about the business are answered.  The purpose of a partnership agreement is to avoid conflict.

The following is a list of some of the questions you and your partner must answer. You will have to add more items to meet all the specific details of your business. Be complete. This is just a start for you to get the ball rolling.

Who owns what?
What are my responsibilities?
What are the responsibilities of the other partners?
How will profits be shared?
How will taxes be paid?
Who will pay the bills?
What type of bookkeeping will we use?
What if I decide I do not want to do this any longer?
If I quit is the business dead? Who keeps the name?
What if I get hurt? What if I can no longer do my part?
What if someone dies?
If we disagree who has final say?
How will vacations work?
Who can sign a contract?
Who has access to bank accounts?
How are decisions made?
Can one partner sell their share?
How do we wind down and close the business?

These are just a few of the questions you and your business partner need to discuss. Include everything in your partnership agreement. Of course if everyone agrees you can change the agreement later. If there is anything you do not understand in the partnership agreement you create you must hire an attorney before you sign the document. A partnership agreement is a contract and should not be taken lightly. There is just one rule you must follow with contracts. Never sign any document you do not understand.

Next week we will discuss your risk factors and talk about doing a liability assessment.

To Fly Solo or Incorporate? Legal Checklist Part 4

As I was setting up to be a vendor tonight at the Create Mixed Media Retreat I was looking around the room admiring all the amazing art that was being unpacked. Somewhere in the back of my mind a little voice was asking whether they were incorporated or a LLC or perhaps a sole proprietor? Sorry, my mind just wanders off into legal land sometimes. I would have loved to take a poll of the artists and vendors to ask what type of legal business structure they had chosen. I would be willing to bet that many of those selling there wares had not made a choice but had simply begun operating as a sole proprietor.

It is important that you choose the type of business entity you will be running. One word sums it up nicely LIABILITY. You choose the type of business to form based on two factors: tax liability and personal liability. Tax liability is simply the amount you will have to pay the IRS in income taxes. (You should have learned about this from your visit with a CPA. It is not too late- go see a CPA for tax advice.) The second type of liability is personal liability which simply put is what assets creditors (those the business owes money to) can get from you and what can you be sued for if someone is injured.

As a sole proprietor you have zero protection. This means that your personal assets like your car and home are not protected from creditors or law suits. This is really important especially if you teach classes where there is the possibility of an injury. You might be able to purchase insurance to cover these potential issues and I would encourage you to look into liability insurance. The good news for a sole proprietor is that your business earnings just go right onto your personal income taxes. Easy!

A LLC stands for a limited liability company. This type of business for allows you some protection in limiting your liability.  It is the most common type of business for recommended by professionals like CPA'S and attorneys.  The paperwork is simple as is the book keeping. You can have business partners too. Talk to your insurance agent about having liability insurance for your business. The information is free and a policy could be very affordable! Taxes are slightly more complex here but manageable.

Of course you could just go for it and incorporate! This costs money in state fees and requires annual document submissions to the state and record keeping. Go to CA.gov for loads more informaion. Use the California government websites to give you an idea what you need to do to incorporate and what type of business for is right for you!

Spend some time researching your options and keep in mind that you can always change your business form! We are working our way through the checklist and next week I want to spend some time talking about partnerships and having a partnership agreement.

Feel free to ask questions and I will do my best to point you in the right direction!

Tara

Time for a professional!: Legal Checklist Part 3

By a show of hands how many of you have taken positive steps towards reaching your goal of owning your dream business? I see a few hands are still not up. It is not too late! We know you have an idea or you would not be here. Most of you have a name for your business so get your research done and get ready for the next step. This next step sounds scary but I promise it will be ok. You are about to make your first monetary investment in your success. It is time to make an appointment with a certified public accountant known as a CPA. This might be the person that prepares your taxes or you may need to find someone new. Your CPA should service small businesses on a regular basis. You will need to rely on your CPA to help you decide what legal form your business should take. Ask around and get references!!

Why do I need a CPA to advise me on my business? Shouldn't I hire an attorney? Right now you need financial and tax advice. An attorney cannot offer you financial advice. A CPA can talk to you about your personal tax situation and discuss different business set ups that will be comfortable for you. You also need to set up a bookkeeping system. This can be a simple thing so do not panic.

For a new business the most important thing for you is knowing how to track your business expenses. It is easy to overlook things like mileage on your car which at .51 cents a mile add up quickly.  Only your CPA can tell you what records you need to keep and what you can use as a tax write off. You must capture ALL of your expenses as most new business operate at a loss. This appointment with a CPA will pay for itself almost immediately! You can expect your consultation to cost between $150 and $300. You will save more that $300 per year in deductions you never even thought about. Painless!!

Make your appointment with a CPA and get ready for next week when we talk about what type of business forms are recommended from a legal viewpoint. Are you looking to set up a partnership? Be a sole proprietor or go large and incorporate? Part four will be an overview of these different types of business set ups and loads of resources to help you decide what is best for you and make it happen! Stay tuned we are just getting to the good stuff.  See your CPA and avoid the mayhem at tax time!

Tara

Legal Checklist: Finding a name!

Naming your business is your first legal decision! So now you have polished up your idea and you are ready to find that perfect name for your new small business. I see loads of really cute and funny or clever names out there but rarely does the chosen name tell me anything about what they do. Consider a business name that gives customers at least a hint about what you will be selling. For me, Lulu Max is not just my business name she is my alter ego. My name was being used for my law practice or I would have just used Tara Wilson Art Jewelry. Instead I used the names of my chihuahuas Lulu and Max to create Lulu Max Art Jewelry.

Now that you have a few ideas for potential names it is time to do a bit of research. Are you sensing a pattern yet? At each step of the checklist you will have a bit of homework. Sorry- I know we all hate homework. You could pay someone to help you start your business and do the research but it it not necessary. (Not to mention expensive.) You can do this!

First, you must make sure your chosen name is not being used. Start with a simple Google search of the name and see what pops up. There should be nothing similar popping up on Google. If you get hits on the name go back to the drawing board. Once you pass the Google search without finding your business name it is time to proceed to the California state website at Governor's Office of Business and Economic Development. There is a ton of information including links to check and see if the name is incorporated in the state of California. The site is complex so give yourself time to explore it fully and take advantage of all the amazing FREE information that is offered. They use checklists too which I love.

Even when you have carefully researched the availability of a name it is possible that the name you have chosen is already taken or a copyrighted phrase. Be prepared and have a "plan B" name. If you are contacted in any manner by a company or individual claiming that you cannot use your chosen business name do not ignore the request. It is time to seek legal advice immediately. There is always risk in starting a small business. Good research will help you avoid some of the risk so take the time and do your homework.

FInding the perfect name for your business is challenging but it is your first step is creating your brand and launching your idea! I would love it if you would post your business name and a brief bit about what you sell in the comments!


XO,
Lulu- I mean Tara

A Head Full of Ideas! The Legal Checklist Series #1

It begins with an idea. Perhaps a head full of ideas. Or in my case simply having more inventory of supplies than one person could ever use. So with a surplus of art materials an idea was born. I should sell the excess and keep my eyes peeled for a bulk lot great buy when I am out hunting for treasures. So, with my good friend Crystal Basica and a few hunting tips a business selling vintage mixed media art supplies was born! Lulu Max Art Jewelry now had a companion in Serendipity Salvage!

This is the first blog post in a series I am doing based on a speech I gave at Launch your Creativity- your legal checklist for starting your business! Perhaps you have always wanted your own business or maybe you are just looking for a way to supplement your income. You have an idea or a spark of an idea but don't know hot to begin.

Time to do a little research. Jump on your favorite search engine ( google) and search for your idea. You ned to see if it is already being done. Ask yourself:

                         1. Are they doing it well?
                         2.  Where are they doing business?
                         3. How is my idea better or different?
                         4. How much are they selling theirs for?
                         5. Will I be in direct competition with the sellers
                             I have found?
                         6. Do I need a new and fresh idea?

Now time for a little product research. Jump on Etsy and any similar online seller of goods that might carry a product like the one you have in mind. How are they presenting the item? What is their price point? How is the item tagged? ( This is how a vendor uses words to list an item so buyers can find them.)

Time to fine tune your idea! This is the beginning of developing your item. Begin with a product you are passionate about. Now that your idea is complete you will need a name for your business. If possible the name should tell customers something about what you do and who you are.

Next post- How to find out is your proposed name is legal and available! This series will be posted every Thursday for the next 15 weeks. Stay tuned and take that first step! You can do this and make your dreams of your own business a reality! Please follow my blog so you do not miss a step and share with your friends on Facebook!

xo,
Tara