I want to share something with you. Starting my own business was scary — REALLY scary (but also exciting)!! When I decided to leave my legal career behind and start my first business 11 years ago, all I had was an idea (or several all at once but was unsure where to start), and a load of self-determination to actually try being a business owner.

The hard truth is… your first 3-5 years in business are typically the most challenging and the time when many amazing people simply give up. Many new business owners experience some, or ALL, of the following entrepreneurial fears:

  • “I have an idea but don’t know where to start”, or
  • “How do I even set up a proper/legal business structure?” or
  • “I’ve started my business but I’m spinning my wheels, feel frustrated and I’m losing money… I need to get a ‘real’ job…” or
  • “You know what… this is just too much for me, I’m not cut out to be my own boss.”

Well, I’m happy to tell you: First, you’re not alone, and second, you can absolutely get through the first 3-5 years and thrive with the right business guidance, information, planning, support and mindset. With expert support and training, you can create the success you envision and so much more.

lmgu-lisaWhat has always been heartbreaking for me is to watch how many fellow entrepreneurs give up too soon because they never find the solid information, training and support they need to succeed at an affordable level. That’s why I’ve created LMG University (or as we affectionately call it, LMGU), an online business and personal development training campus, to support all entrepreneurs and small business owners in achieving maximum success (and non-business owners too — stay tuned for future programs that are not targeted at a business owner, like career and professional development, and life coaching).

PLUS, I’m thrilled to announce the first LMGU course starting on September 5, 2013, Successfully Self-Employed Semester w/Lisa! (with more programs/courses coming Fall 2013 and Winter 2014). This 3-month course was designed with the newer entrepreneur/business owner in mind — to move through those first 3-5 years successfully!

The Successfully Self-Employed Semester is a teleclass-based training program for newer business owners or anyone that is serious about starting a new business. This course offers all the required skills, knowledge and guidance for the newer entrepreneur/business owner. Topics covered will include: business identity and branding, legal structure and issues, marketing, networking and public relations, sales, pricing and money issues, and operations. PLUS, as your “Professor,” I’ll be with you the entire time, teaching and guiding you. Visit the campus today where you can get all the details for the semester.

be_the_star_of_your_lifeA little bit more about LMGU. Naturally this is not a real University, but it’s my fun and comprehensive version of a business and personal development training campus designed just for you. I’m so incredibly excited to share LMGU and this first “Bachelor’s” level 3-Month Successfully Self-Employed Semester with you as it’s my way of being able to support more people to create their own version of business and personal success, fulfillment, and balance.

To register and learn more about the Successfully Self-Employed Semester Bachelors program starting on September 5, 2013, as well as LMGU, hop on over to take a campus tour!!

Campus doors are open, and until August 19th, 2013 at midnight Eastern Time, you can enjoy special admission pricing (and even choose a two-pay installment option to make it easier for you to join me). And if you know someone that may be interested in or benefit from the Successfully Self Employed Semester, please share this with them. Thanks!

I’ll see you in class –

Warmly,

lisa-sig

I recently was a guest expert on Small Biz Chat with Melinda Emerson. I spoke about the legal issues of running a small business. I happened to mention The Company Corporation as a good resource for those that want to incorporate their business online. Incorporating your business online may not be for everyone, but for those of you do-it-yourselfers that can handle it, that is the resource I happen to like best.

Well, The Company Corporation reached out to me, and thanked me for the mention. Nice! They also sent me this really cool infographic that outlines the steps to take to create a business in a handy flow chart style. I think it is nice and simple, which makes it easy to understand and follow. Check it out! (Click to view the larger version)

10StepstoFormaBusiness

And if you are starting a new business or have one in the beginning stages, stay tuned for a new online coaching/training program for newer entrepreneurs that I am launching in September, which will be comprehensive in scope, while remaining affordable. Details and registration will be announced on August 2nd!

In the meantime, be sure to register for my complimentary teleclass on August 1st, “The Entrepreneurial Curse and How to Avoid It,” which will offer great insight for all entrepreneurs, but especially those of you in the early years. (And it will be recorded, so even if you can’t join us live, you will get the MP3 recording as long as you register!)

small_biz_ladyI had the pleasure of being interviewed by the Small Biz Lady, Melinda Emerson, on Twitter on May 29, 2013. Melinda conducts a weekly Tweet Chat using the hashtag #SmallBizChat and has quite the following. She interviewed me on “Using the Law as a Protective Shield for Your Small Business.” If you missed the live chat, here is the full transcript of the Q&A. Hope you pick up some great tips on using the law in a powerful and proactive way for your business!

melindaemersonJoin me on May 29th at 8pm EST as I am interviewed by Melinda Emerson in her Small Biz Chat Twitter Show. We’ll be discussing one of my favorite topics, “Don’t Be Afraid of the Big Bad Law: Using the Law as a Protective Shield for Your Business.”

We’ll talk about issues that every business owner needs to be aware of such as:

  • The reality of lawsuits for the small business owner.
  • What a small business owner can do to create a shield through business structure.
  • Written agreements
  • What small business owners should do to protect themselves when hiring or retaining help.
  • Investing in business owner’s insurance.
  • Classifying team members in your business as employees or independent contractors.
  • Handling funds.
  • Protecting your intellectual property.
  • And how an attorney – and other resources can help you protect your business.

You can participate in #SmallBizChat: http://bit.ly/S797e; try our prepared @Tweetgrid and join us at 8pm ET on May 29th http://bit.ly/SBChat181

 

I was recently invited by my colleague and fabulous blogger, Janet Barclay, to comment on a post about naming your business, and thought many could benefit from my response. So I am sharing it here. If you want to read Janet’s original post that it relates to, and other great comments, click here.

As you know, I rebranded last year (by choice). I kept the name of my professional organizing division which I founded in 2002 as LM Organizing Solutions, but now have a new parent company name, Lisa Montanaro Global Enterprises. I chose that name for several reasons: 1) I am going global, playing in a bigger sandbox, and wanted to share that intention through the name, 2) I am running a personal brand, and 3) I mostly use my real name online and that is what I noticed people would search for. To be honest, I use the business name less and less now, and focus more on my “brands” and “slogans” to market myself, always connecting them to my real name. My corporate name does not show up in many places. This was a very strategic decision.

business buildingAs a business coach and legal consultant for organizers and other entrepreneurs, I have seen the ugly side of business naming. Many clients have had to rename their businesses due to trademark disputes. I have filed trademarks for my clients, negotiated consent agreements for them to use the same name as another business owner, and advised them to rebrand altogether when the trademark issue was not on their side or too expensive to pursue.

But this can often be avoided up front, as you suggested. I use a 4-part test with my clients when choosing a business name:

  1. Domain Name Search – Check to make sure you can get the domain name that you want to represent your proposed business name.
  2. USPTO search – You can conduct a free search on the U.S. Patent and Trademark Office site at USPTO.gov or use a paid service to research trademarks nationwide.
  3. State Corporations Database Search – You can do a quick search on the Secretary of State web page to see whether your name is available. If the name is available, you may want to reserve the name through the Secretary of State, but you are not required to do so before forming your business entity.
  4. NAPO Member Directory Search – If you are a professional organizer, you should check to see if the proposed name is already being used by a NAPO member. Remember, it is not NAPO’s responsibility to police names as a professional association. It is the business owners!

Is the Threat of a Lawsuit a Real Fear?

As a small business owner, you may be one of the 48% concerned about frivolous or unfair lawsuits.  According to the U.S. Chamber Institute for Legal Reform, actual lawsuits and the fear of lawsuits cost U.S. small businesses $98 million in 2005.  That figure may seem large because it includes money spent on damage awards, settlements, legal costs, liability insurance premiums, and costs incurred by insurance companies on behalf of policyholders.  Is the fear of lawsuits a real fear?  Unfortunately, yes.  Anybody can sue anybody over anything at any time.  In reality, 46% of small business owners have been threatened with a lawsuit, 34% have been sued in the past 10 years, and 62% have made business decisions to avoid lawsuits.  Indeed, small businesses bear 69% of the total cost of the tort system to all U.S. businesses.

What is the Best Course of Action?

What’s a small business owner to do?  For starters, realize that the best defense is a great offense.  While most small business owners fear the law, it is much wiser to use the law as a protective shield.  There are many business and legal components that contribute to creating the strongest shield possible – business entities (the type of structure that governs your business), insurance, and intellectual property (copyright, trademark, patent, and trade secrets) to name a few.

As a former full-time practicing attorney and now a small business owner, I have been on both sides of the fence when it comes to the legal issues a business owner may face.  It is imperative that organizers understand the basics of the legal side of running an organizing business, and how to use the law as a shield to protect yourself and your business.

Creating a Shield Through Business Structure

The first item an organizing business owner should consider is the structure of the business.  There are 4 basic types of business entities: sole proprietorship, partnership, corporation, and limited liability company.  A common misconception of small business owners is that the business entity itself always creates a legal shield.  In some instances (a corporation, or limited liability company, for example), this is generally true.  However, if you are a sole proprietor (and, if so, you are not alone, as 78% of all small businesses in the U.S. are sole proprietorships), then you essentially have no shield.  As a sole proprietor, you are personally liable for all business debts and other obligations.  Fortunately, the law is not the only means to create a shield to protect your business.  If the business entity itself does not provide a shield, then you can create one by acquiring appropriate and adequate insurance coverage.  Thus, a sole proprietorship that is adequately protected by insurance may have an effective shield.

In the case of partnerships, another misconception is that the partnership is a distinct legal entity that provides a shield.  A partnership is essentially a sole proprietorship run by two or more individuals.  Thus, the structure itself provides no shield.  Again, insurance can be used to fill in the gap, and/or a different business entity can be chosen.  For example, did you know that you can create a corporation and the same two people that would have created a partnership will now be shareholders?  What about a limited liability company with more than one member?  There are many ways for two or more individuals to own a business together.  Carefully consider which makes the most sense, not only from an operations and decision-making standpoint, but to garner the most legal protection for the owners involved.

Even with corporations and limited liability companies, there are limits to the force of the shield.  Simply creating a business entity is not enough.  The business must be operated as a distinct legal entity, including refraining from co-mingling of personal and business funds, keeping personal guarantees on behalf of the company to a minimum, maintaining corporate/business records, and paying business-related taxes.  If the business entity is a sham or the owner does not follow the rules in terms of keeping the business shield up, the legal doctrine of “piercing the corporate veil” may be applied by a court if the business is sued.  Piercing the corporate veil allows a litigant to pierce the business structure and reach the owner personally.  Granted, piercing the corporate veil is only applied in very limited situations, but it should be used as a reminder to keep that shield up at all times when it comes to operating your organizing business as a distinct legal entity.

Creating a Shield Through a Written Client Agreement

As an organizer, when you agree to perform services for a client, and the client agrees to pay you for such services, you and your client have entered into a legal contract.  The terms of the contract, however, are difficult to recall and prove unless in writing.  A written contract is pivotal as it puts clients on notice of business policies and terms, sets a professional tone, promotes consistency of policies, and is legally enforceable in court (the decision whether to sue a client to enforce a contract is, of course, a business decision, as well as a legal one, and should be carefully considered).  The contract, thus, helps to prevent misunderstandings and clearly defines the expectations of the parties.

Some organizers choose not to use contracts for fear that a written agreement may be too formal or legal in nature and, thus, may scare a client away.  Again, this is a business decision that should be given consideration, and you should determine if this is a real or imagined fear by communicating with your clients to test the waters.  You can also use a “letter agreement,” which may be less intimidating for residential clients.  In the corporate organizing arena, a written contract is generally expected.  Another disadvantage of using a written contract is the cost of creating and advising if you use an attorney.  While there are standardized contract forms available online and in books, be careful not to accept such standardized forms carte blanche.  I often see small business owners fail to adapt contracts appropriately, which causes embarrassing typos, inappropriate clauses, and general confusion.  Not only does this look unprofessional, but in extreme cases it can also result in unenforceability of the contract in court.  Therefore, it is a good idea to have a business lawyer review the agreement to make sure it adequately protects you, contains the relevant terms, and fulfills the goals you want to accomplish.  It is an expense worth paying for to secure adequate protection in the long term.

A word of caution: stay away from “legalese.”  Use plain English so that the agreement is easy to understand and helps, rather than hinders, the understanding between you and your clients.  If you do use a client agreement, here is a list of sample clauses you should consider including:

  • Definition of the parties (define your status as an independent contractor if the contract is for corporate organizing);
  • Services to be performed;
  • Code of ethics;
  • Confidentiality;
  • Pricing and payment policies (pricing structure, retainer guidelines, travel time or expense, shopping charges, cancellation policy, when payment is due, fee for bounced check, credit card acceptance, payment of expenses, etc.);
  • Provision of materials, equipment, and office space;
  • Assurance of insurance coverage;
  • State law governance;
  • Permission to take and use photos;
  • Term of agreement/termination of relationship.

Now, go forth with shields raised!

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues commonly encountered.  For a comprehensive overview of legal issues involved in running an organizing business, refer to the CD “Navigating the Legal Landmines of an Organizing Business”  from the 2008 NAPO Conference in Reno, NV. 

Contact Lisa Montanaro by visiting www.LMOrganizingSolutions.com, by email at Lisa@LMOrganizingSolutions.com, or by phone at
(845) 988-0183.

This article originally appeared in NAPO News, Volume 23, Number 4, September 2008
Copyright © 2008 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2008. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

Deciding Whether to Go Legal

As a former full-time practicing attorney and now a small business owner, I have been on both sides of the fence when it comes to the legal issues a business owner may face. This provides me with the distinct advantage of knowing when to call in an attorney for assistance, as opposed to using another professional, such as an accountant, financial planner, insurance agent, or business coach — or perhaps handling the matter myself. In addition, my background helps me to select an attorney that is the best fit for the business matter at hand. Many entrepreneurs have had limited experience deciding whether a matter needs legal attention and, if so, what type of attorney to retain, how to find the best match, and how to maximize the attorney-client relationship. As an entrepreneur, it is imperative that you understand when to “go legal,” and if you do, how to find and work with an attorney that is the best fit for your issue.

If you are confused about whether your matter needs legal attention or whether you can handle it yourself, try researching the matter on the American Bar Association’s Self-Help online center at www.abanet.org. Go to Public Resources, then Legal Help, and then Self-Help. The section is organized by state and is a user-friendly resource for determining whether a matter is complex and needs a legal expert, or whether it is something you can handle yourself.

In addition, a good business coach, especially one with a legal background, is a great sounding board to assist you in determining whether an issue is truly legal in nature, and if so, which type of attorney to retain. You would be surprised how many issues appear legal in nature, but turn out to be business decisions instead. So don’t be hasty when deciding whether to go legal!

Not All Attorneys Are Created Equal

So, assuming you have decided to “go legal” and retain an attorney, which one are you going to call? If you broke your arm, would you make an appointment with an allergist? If you had an ear infection, would you seek the advice of a surgeon? Of course not! Yet, everyday, many entrepreneurs contact and use attorneys to handle matters for their businesses that are completely outside the realm of what that attorney specializes in. Yes, attorneys specialize.

First, there is the main issue of whether your matter is civil or criminal in nature. Generally (and, thankfully!), the average legal matter an entrepreneur will face is a civil matter. Thus, you will be dealing with a civil attorney (hopefully in more ways than one). However, civil law is a huge umbrella. Typical small business matters may include incorporation, intellectual property (trademark, copyright, and patent), contract drafting and enforcement, employment or labor law issues, etc. Thus, look for an attorney that specializes in the area you need help with. Don’t be tempted to use your cousin, who is a residential real estate attorney, to assist you with a complex trademark issue. While this may be tempting in terms of saving money, it may (and often does) cost you more money in the long run if the matter is not handled properly. So match the attorney to the problem, and you are on the right track.

If you are unsure what type of legal issue you are even facing, speak up! Talk to a friend or business colleague that is an attorney, and ask his or her advice on the type of issue you are dealing with. You can also call the local bar association, or do some basic internet research to find out the area of law you are dealing with There are several sites that provide basic legal information for non-attorneys, such as www.nolo.com, www.findlaw.com,  and www.legalzoom.com. This background research will arm you with enough terminology and basic knowledge to make the best match with an attorney whose legal practice covers the area of your business issue.

Finding an Attorney

So, now that you know the area of law, how do you find a good lawyer that practices in that area? The same way you find any other professional to assist you with your business. Referrals from friends, family and colleagues are a fantastic way to find a reputable attorney. You can also ask your local chamber of commerce, local law school, and local and state bar associations. Still can’t find an attorney that is a great match? Try Martindale-Hubbell’s Lawyer Locator online at www.martindale.com.

Money Matters

If you’ve never worked with an attorney before, here are some basics of the legal profession with regard to money matters. Most attorneys charge by the hour, so ask what the hourly rate is, and an estimate of how many hours the matter may take. If the matter is small, or a typical one that the attorney handles often, there may be a flat fee for the entire transaction instead of an hourly rate. Be prepared to pay a fee for the initial consultation, which is standard, but not a hard and fast rule. In some cases, the attorney may require a retainer, which is money that you provide upfront that the attorney works off of as the matter progresses.

One thing to consider is that law firms are typically broken down into partners and associates. Partners are essentially co-owners of the firm, while associates are employees, albeit high level professional ones. Who demands the highest rates? Usually, the partners. Thus, ask yourself if you truly need a partner, or can an experienced associate handle the matter. Do you need the best litigator in the firm? Often times, the best litigator may be an associate that is still active in the courtroom, as opposed to a partner that may be more of a rainmaker bringing in business for the firm.

In some cases, for very small matters or legal research, even a law clerk or paralegal may do. Ask who is the best match, and don’t assume it is always the person whose last name is on the door.

Maximizing the Attorney-Client Relationship

I cannot emphasize enough the importance of accurate, concrete, and timely record keeping and documentation when preparing to work with an attorney, and during the relationship. An attorney will need to go on a fact-finding mission in order to best represent you and your business. Help your attorney do his or her job better by coming to the table with all of your ducks in a row. Be prompt in providing requested information, as often legal timelines are at play. Honesty is also vital when working with an attorney. The best attorney-client relationships are built on mutual trust and, thus, withholding information can make or break your case. An attorney needs all of the facts in order to make tough decisions with you about the best course of action for your business matter.

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

So, your business is growing and you are ready to outsource or delegate some of the work in your business. However, you are confused about how to classify a new team member: employee or independent contractor? The following is an overview of classification of workers to help guide this important business decision. As with any aspect of your business that is of a legal or tax nature, you should consider seeking the formal advice of an accountant and/or attorney to assist you.

Hopefully, this overview will provide you with enough basic information to ask relevant questions of your business advisors.

Classification of Workers

  • Classification of a person as an independent contractor or employee is important for tax purposes.
  • For an independent contractor, you must file IRS Form 1099-MISC to report payments of $600 or more.
  • If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker, which typically include income taxes, Social Security, Medicare, and unemployment.
  • If you want the IRS to determine whether a worker is an independent contractor or an employee, you can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

Independent Contractor vs. Employee

  • As a general rule, an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work, and not what will be done, how it will be done, or the method of accomplishing the result.
  • An individual is an employee if he or she performs services for an employer and the employer can control what will be done and how it will be done.

Categories of Control

  • The IRS examines the relationship between the business and the worker by reviewing 3 categories:  Behavioral Control, Financial Control  and Type of Relationship
  • These 3 areas form a list of 20 factors that the IRS uses to determine the distinction. IRS Revenue Ruling 87-41 outlines the 20 factors in detail.
  • Generally speaking, independent contractors retain control over their schedule and number of hours worked, jobs accepted, and performance of their job.
  • Employees usually work a schedule required by the employer and their performance is directly supervised.
  • IRS Publication 1779, Independent Contractor or Employee, is another valuable resource that discusses the differences between the two classifications

1. Behavioral Control

Behavioral control covers whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  • When and where to do the work.
  • What tools or equipment to use.
  • What workers to hire or to assist with the work.
  • Where to purchase supplies and services.
  • What work must be performed by a specified individual.
  • What order or sequence to follow.
  • Whether worker is trained to perform services in particular manner.
Training is an area where some small businesses come close to creating an employment relationship with independent contractors by requiring detailed training, including “shadowing” of the business owner/service provider, and requirement that services be provided in a certain manner.
Requiring an independent contractor to have taken certain classes is not the equivalent of providing training, but merely requires a qualification level and skill set required for work. It may be a safer route to take when hiring subcontractors.
Also, training in company policies is not necessarily the same as training in how to do the actual services.

2. Financial Control

Financial control considerations are as follows:
  • The extent to which the worker has unreimbursed expenses.
  • The extent of the worker’s investment in the facilities used in performing services.
  • The extent to which the worker makes his or her services available to the relevant market.
  • How the business pays the worker.
  • The extent to which the worker can realize a profit or incur a loss.

3. Type of Relationship

The IRS examines the relationship between the parties:
  • Written contracts describing the relationship the parties intend to create.
  • The extent to which the worker is available to perform services for other, similar businesses.
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay.
  • The permanency of the relationship.
  • The extent to which services performed by the worker are a key aspect of the regular business of the company.
For more detailed information visit www.IRS.gov and refer to IRS Publication 15-A, Employer’s Supplemental Tax Guide or IRS Publication 1779, Independent Contractor or Employee.

Terms of an Independent Contractor Agreement

The following are typical clauses found in an agreement between a retaining business and an independent contractor:
  • Define independent contractor status
  • Scope of work (duties & required responsibilities)
  • A non-solicitation and/or non-compete clause
  • Non-disclosure clause
  • Copyright/work-for-hire
  • Consent to use of trademark
  • Payment terms (compensation & out-of-pocket expenses)
  • Term of project or relationship/termination
  • Obligation to carry general liability insurance
  • May also include a governing law provision, indemnification clause, conflict of interest clause, non-hire provision, and request for taxpayer ID number for 1099.
Non-compete agreements are reviewed by the courts for reasonableness based on several factors, including the nature of the business, the nature of the worker’s duties, the geographic territory encompassed by the non-compete, and the length of time chosen. They are often hard to enforce.
Non-solicitation agreement can protect against stealing of clients and/or employees.
For an employee, you can draft a basic employment letter outlining date of hire, salary and benefits package, probationary period, pay raise eligibility, etc. Employees are generally “at will” unless otherwise designated, meaning they can be discharged due to any legitimate, non-discriminatory basis.
The employer chooses which benefits to offer (sick leave, vacation, etc.); benefits are usually not required (check state and local laws and regulations). Benefits are mostly based on industry standards and employee expectations, and are used to entice employees.
As with any major business decision, do your homework — speak with expert advisors, (accountant, attorney, business coach, etc.), and speak with colleagues that have experience in retaining workers in order to find out which classification makes the most sense for your business. Good luck!

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

When you agree to perform services for a client, and the client agrees to pay you for such services, you and your client have entered into a legal contract, often referred to as an agreement. The terms of the agreement, however, are difficult to recall and prove unless in writing. A written agreement is pivotal as it puts clients on notice of business policies and terms, sets a professional tone, promotes consistency of policies, and is legally enforceable in court (the decision whether to sue a client to enforce a contract is, of course, a business decision, as well as a legal one, and should be carefully considered). The agreement, thus, helps to prevent misunderstandings and clearly defines the expectations of the parties. But, only if you understand the terms of your own agreement!

Some entrepreneurs choose not to use contracts for fear that a written agreement may be too formal or legal in nature and, thus, may scare a client away. Again, this is a business decision that should be given consideration, and you should determine if this is a real or imagined fear by communicating with your clients to test the waters. You can use a “letter agreement,” which may be less intimidating for clients. A letter agreement is typically a one-page agreement on your company letterhead written in a letter format. Another disadvantage of using a written contract is the cost of creating and advising it if you use an attorney. But do you always need an attorney in order to draft an understandable and concise business contract? Not always. You can use one of the many online, software, or print resources available to draft a simple business contract for your company. But make sure that you understand every term in your own business agreement. Yes, every term. Here’s why.

For a contract to be valid, there must be a “meeting of the minds” between the two parties. If you do not even understand the terms of your own contract, how can there be a meeting of the minds with your client? So, a word of caution: stay away from “legalese.” Use plain English so that the agreement is easy to understand and helps, rather than hinders, the understanding between you and your client.

While there are standardized contract forms available, be careful not to accept such standardized forms as is. I often see small business owners fail to adapt contracts appropriately, which causes embarrassing typos, inappropriate clauses, and general confusion. Not only does this look unprofessional, but in extreme cases it can also result in unenforceability of the contract in court. I can’t tell you how many times I have seen the embarrassing situation where a business owner took a standardized contract and failed to revise it appropriately for his or her own business. This often occurs when people copy agreements off of the Internet and fail to modify the terms. If litigation eventually occurs, the result of this behavior could be very costly indeed.

As a former practicing attorney and now a small business owner, I have been on both sides of the fence when it comes to contracts. So test yourself and make sure you understand your own business agreement. Even if you draft your own business agreement, it may be a good idea to have a business attorney review the agreement to make sure it contains the relevant terms (and to explain the terms to you), and fulfills the goals you want to accomplish. It is an expense worth paying for to secure adequate protection in the long term. Otherwise, your agreement is just a useless piece of paper that you (and most likely your clients) do not understand.

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

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Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.