Getting Your Business Legally Legit

Wondering how to decipher all the legal “stuff” when it comes to your business?

In this podcast, I spoke with Demetrius about how business owners can navigate their businesses through a legal lens. Demetrius has been my lawyer since I got serious about Robles Designs. From answering crazy questions to creating contracts, he’s patiently been helping me get legit while explaining jargon again and again.

Listen to the full episode or catch our notes below!

How is getting your business legally covered similar to relationship management?

“I think one of the first things we learn rather quickly is, it doesn't matter if you're selling goods or services, someone has to has to buy that right. That's your customer. Well, that customer sort of builds a relationship with you in one way, shape or form.” Demetrius explains that in order to have that relationship, there needs to be trust, and that’s where a continual contract comes in. “...so that you end up building what hopefully becomes a long term relationship.”

Although it might seem like a contract is just a document with a lot of words, to an attorney, every word has meaning. “...and you have to make sure that the meaning of those words align with what your interests are.” 

Then you layer on the trust. Trust that the person you’re creating this relationship with has your best interest at heart and can understand how to solve issues.

Here are a few things Demetrius suggests you keep in mind:

Duration

This is basically dealing with the length of the relationship. The longer the duration, the more likely you need an attorney to review it. For example, you buy a burger from a local place. That’s short-term and lower cost than a one-year commitment to something else.

Renewability

Basically, does this renew, and how? For example, that one-year thing auto-renews for another year. In this case, you’ll need to know either how to get out of it or terminate the relationship.

Payment Terms

“So most contracts, we want to get something for something else. Sometimes it's goods [and] sometimes it's services. But we want to understand what that is.” You want to understand what you’re getting and how long you have to pay for it. I.E. If you buy a burger, you likely pay for it and get it the same day versus a house with a mortgage.

How to deal with projects taking a longer or shorter amount of time due to issues out of our control?

When it comes to occurrences like a pandemic (fingers crossed it’s once in a lifetime), these shifts use the term called force majeure, “...which basically means if there is a particular situation that is out of your control, it's usually associated with acts of God.” says Demetrius, “You have those sort of provisions that if those things are triggered, then either performance by one party or the other is suspended for a period of time sometimes that is outlined in the contract, or the contract can be terminated at the option of either party.” 

This means that if I contract someone for a service and a pandemic hits, then I may terminate the contract. Although, this doesn’t ease the pain for performing services already and so on. “So that is also an important piece to understand is, if I'm supposed to do something or another, my performance may be contingent on someone else doing something as well. So if the person who's contracting need to do something, you know, expense, financial consideration to someone else, because they're counting on me to do that job, I may need to compensate them for failing to do so even if my failure is sort of outside my control. But again, that sort of comes down to the terms of the contract.”

What’s the biggest mistake when it comes to business owners and contracts?

“The biggest concern that I see is not knowing their negotiating power,” says Demetrius. Although we might not all be giants like JP Morgan, we should still use our voice in order to know just how much we’re giving up in this new relationship.

What is compliance?

Demetrius sees compliance as a business decision. As the business owner, we can choose not to be compliant or to take steps in order to get it off our list. “...the decision not to remain compliant, while it has potential legal implications, can be also just a purely financial implication to you as the business owner, right.”

You can think of it this way: if it takes you $X thousands to get compliant but you only make that much, the answer to becoming compliant might be no. Business owners need to understand the risk versus reward: aka what’s really going to come back to bite us in the ass?

“One thing that's gonna bite you in the ass, if you're not compliant, is taxes,” says Demetrius. “Especially things where you're a trustee for the government for things like sales tax, or employment taxes. And the reason those are gonna bite you in the ass is because it's not your money, and the government likes to have its money, if you don't give them their money, they usually come after you for that.”

Demetrius also explains that compliance issues can also be created when someone tells on you. “So for example, and this is not an area I practice, but the law requires certain accommodations for individuals with disability, those are areas you want to make sure you're compliant. Because if you're not compliant, the cost of being non-compliant sort of outweighs any cost associated with referring meaning in compliance.” 

Oh, taxes, we all love them [insert your most sarcastic voice].

Unfortunately, taxes aren’t covered well, if at all, in schools. “So as a business owner, you have to focus not only on the personal tax side, usually, but you have to focus on ‘does my business have tax obligations? If I have employees? Do they have tax obligations that I'm responsible for? Am I in a jurisdiction state or local, that also has taxes that I need to be in compliance with? Am I shipping to other states? And now I have tax obligations to those states? Either withholding or pain or? or other nuances? Am I shipping goods overseas, and now I have potential VAT tax or other sort of obligations.’” 

“The reason I say taxes are always going to be more than than you think, is because I think most time business owners focus on just the personal taxes,” says Demetrius. 

Instead of asking yourself “what is my tax obligation at the end of the year,” ask yourself “what are the total obligations that I may have as a business owner?”

For Demetrius, the focus is on educating clients on what taxes should be focused on as a business owner. Then, taking it further to understand that it’s not just the dreaded April 15th. Your business might need to file sooner. Add to that the layer of employees and you might have another thing to think about. If you have a service or goods that are subject to sales tax, that will also go on your list. Have an e-commerce business - well, you’re list just got longer.

“Those are nuances, unfortunately, aren't things that most small business owners are well aware of. But it's something that you want to get pretty familiar with rather quickly. Because of its impact to you.”

Last tips for business owners from Demetrius.

“I think more importantly, than just sort of looking at your business from the legal lens, is looking at yourself from the lens of, of mental health,” he says. 

One of the things that Demetrius says he learned as a business owner was, that if he was under a lot of stress, he would feel his mental health slipping. These can often be behaviors that just aren’t productive. 

“I encourage other business owners to find an activity outside of work that helps, sort of releases the valve in a way that is productive.” For Demetrius, it’s running. That activity helps clear his mind and reset himself. 

Another suggestion he has to to get together with a group of people in similar positions or experiences. 

Finally, just talk about what’s going on. Whether it’s bouncing ideas around or with a mental health professional. 

About Demetrius

Demetrius spent several years working for a Fortune 25 company before transitioning into law, based on his desire to combine his understanding of business with the legal complexities. Demetrius is passionate about helping businesses navigate the nuance of tax law in order to create better outcomes. He has provided tax and business advice to businesses of all sizes from multi-national businesses, including Fortune 100 companies.

Find Demetrius on LinkedIn, Twitter, Instagram, and Facebook.