Making It Legal:

As those of us employees-turned-entrepreneurs know, life is full of risk. Yes, we could have stayed at our (theoretically) secure jobs, continued to make predictable sums of money (again, theoretically) and known what was expected of us. The risk, though, was that we would stagnate–as workers, people, souls. Or get laid off and thrown back into a predictable world.

So we took the leap of faith and started our own companies. We faced more risk–financial risks, legal risks–but we felt the trade-off was worth it. As we make changes to our business, different risks will arise. Some we can anticipate. Some we’ll evaluate as too remote to worry about. When you start to expand your business–such as with strategic alliances–new issues will arise. Can you withstand the risk?

As in the Three Little Pigs fable, you want to be sure your business has a strong legal foundation so that if a “wolf” (disgruntled customer, irate business partner) huffs and puffs, your house won’t blow in. What are some of the things that could blow your “house” in, if not handled properly?

• Operating as sole proprietor in the face of a lawsuit
• Not having a written agreement with your business partners–whether in your company or in an alliance
• Doing business on a handshake
• Inadequately protecting your company information or intellectual property
• Insufficient insurance (especially if you have employees)

There are many areas that can leave your company vulnerable . . . many of which can be easily rectified. For more guidance on the potential risks to keep an eye on, I’ve created a handy tool, Is Your Business Legally Healthy?, available through my GreatBusinessLawResources.com site. It’s an easy-to-follow questionnaire. Because it’s self-scoring, you’ll know right away if your company is thriving or slowly succumbing to an unidentified illness.

I’ve been on a murder mystery/detective fiction kick for a bit. Having just devoured Sue Grafton’s T is for Trespass (and she’s already written books A-S), I realized that we’re both nearing the end of the alphabet. Today’s Basic Training–which brings me, like Grafton, to the letter “T”–involves a not-so-basic situation: What do you do when you’re an employee and the boss seems to be siphoning cash out of the business? Are you responsible?

Q.: I do the books for our company. My boss regularly uses corporate funds for personal use. Thousands of dollars of company money went to pay for a cruise, paying off his personal credit card debt; he bought his wife a car, pays himself a hefty salary and bonus–all while we owe more than $1 million to creditors. Could I be liable for not reporting this matter?If so, what agency do I report it to?

A.: Generally, employees of a company are not held personally liable for the actions of the company they work for or the actions of the company owners. “Whistleblower statutes”–that is, the laws that protect employees against reprisal from their employers for blowing the whistle on their fraudulent activities–tend to focus on areas where there are federal or state government contracts involved, not on privately held companies where the contracts are between private companies.

That said, laws of the different states vary, so it would be well worth speaking to an attorney familiar with whistleblower issues. Also, the state attorney general may take an interest in a company that may be defrauding creditors by diverting corporate funds for personal use. Either way, it sounds like you’d be better off finding another job–if the owner is taking as much money out of the company as you say, will there be enough to pay your salary when the time comes?

In a world where Ashton Kutcher pushes to get 1 million followers on Twitter, it’s sometimes hard to believe that networking and developing alliances isn’t just a numbers game. For most of us mere mortals, though, it’s not.It’s about relationships. It’s about contributing to a community and providing value.

As Staci Shelton asks in her blogpost:

“How many people do you truly engage? How many people are talking with you and about you, positively, whether you’re present or not? [Whom] have you affected to the extent that you’ve influenced them to promote for you, not in a manipulative way, but because they have identified you as a source of something of value?” When you’re perceived as someone who provides value, then you can attract new opportunities for growth . . . especially through alliances. Make sure you’re working with people who are providing value themselves, and not just riding on your coattails.

Once you’ve found that person/company, then you can start exploring ways to provide value together. Maybe you’ll test the waters by doing some joint podcasts or interviews. Give some thought to whether you’d like to take the relationship a step farther, either by pitching clients together or creating a product together. My article, Is a Strategic Alliance Right for You? (published on WomenEntrepreneur.com) gives you the top 10 questions to ask when you’re ready to move to this more formal stage. But remember, you can’t get to the part where money flows if you haven’t done the groundwork in nurturing the relationships first.

Any time you want to delve into areas of health or health care, it’s wise to consult a local attorney who’s familiar with those regulations. Otherwise, you could be found to be practicing medicine without a license . . . which gets you into a world of hurt.

Q.: “I am a licensed practical nurse and want to start a business as a nurse entrepreneur in the area of patient advocacy. I will not necessarily be giving medical advice but will act as a “go-between” or liaison between patients, their families, doctors and insurance companies to help patients negotiate the health-care system. I also will act as an educator so that people understand their choices and be able to clear up misunderstandings about care and their health. I also want to do this online.”

A.: There are several steps to investigate.

First, business formation. It’s very state-specific, as are special licenses and permissions for patient advocacy/education work. A local attorney could help determine the exact permissions needed. Look for one with experience dealing with professional (medical) practices or patient advocacy businesses, as he or she will be familiar with the rules and nuances of the medical profession. My program, How to Choose and Use Attorneys, can give you a lot of guidance about how to find the lawyer who’s right for your business situation.

Second, business insurance. A business insurance professional should be able to identify whether some form of malpractice insurance will be needed if you’re providing medical “education” without actually practicing medicine. This could help protect against any personal liability for advice given (so that unhappy clients can’t do an end run around the business entity).

Finally, business planning. How to charge for these services? Is it the kind of service that will be covered by insurance? If not, will people be willing to pay for it? How much? Will that be enough to 1. meet business expenses, 2. meet personal expenses and 3. have the growth potential to build a company? A savvy accountant can help get a clear handle on personal and business budgets to know what target numbers to reach–and by when.

I saw the film The Rocker on PPV last weekend (if you’re a Spinal Tap fan, I think you’ll enjoy it . . . and the music kept my toes tapping). In addition to underscoring the power of YouTube (ya gotta see it!), the film got me thinking: When it comes to networking–and building a community of suitable potential alliance partners–are you a rock star or an opening act?

That’s the dichotomy Seth Godin raises in his recent blog post, “Opening Acts and Rock Stars” Are you trying to cast as wide a net as possible, hoping for any possible fish? When someone asks you about your target market, is your response, “Oh . . . anyone, really”?(I actually had a self-proclaimed sales guru say that to me!).

Or are you creating a solid foundation of small groups–communities–of loyal fans who will help spread the word?

Is Mercury in retrograde? Because it seems that I’m encountering a lot of people who are rushing into selling stuff, with nary a thought for how to run it like a business.

Q.: “I have a website I’d like to start. It’s currently online and I would like to sell a product that is 100 percent natural, that could be perceived as medicine. Yes, I used it for this but it could be used for a lot of different things. My questions are: Is the website OK? If not, what’s involved to have this rewriten to be OK?”

A.: This is my beef: Whatever this website maven chooses to sell through the site, he needs to be very careful that he’s not perceived as practicing medicine without a license. He’ll want to make sure he has set up a business as either a corporation or LLC (and is not doing this as a sole proprietor); he may need special permissions/licensing from his state to sell his kind of products. In addition, he’ll want to be sure he has the right liability insurance in place to guard against any customer claims or complaints. That needs to be in place as he’s developing the website content. Otherwise, he’s spending a lot of time and money creating content and setting up the website, which might have to be dismantled if he’s doing business illegally in his state.

Actually, there are a lot of things that are a lot like dating. But strategic alliances are one of them. You meet someone . . . and the urge to “partner” with them forms. Whatever the words you use–”joint venturing,” “partnering,” “having an alliance”–you start with the feeling that you alone are not enough. This other person (or company) could bring you someplace you could never go yourself (or couldn’t without a huge effort).

Maybe you’re excited about the new target markets you could reach. Or the new products/services you could provide. Your heart goes pitter-pat, and you’re eager to skip down the lane with your new “beloved,” channeling your energies into what you dream you could accomplish together. But you may be ignoring red flags and your company’ other needs.

I’ve heard this time and again from entrepreneurs who have gone full-tilt-boogie into new ventures without thinking them through. They say “I do” without taking the time to examine whether the alliance makes solid business and financial sense.

That’s like marrying someone right after the first date. It’s too easy (and casual) for someone to say, “Oh, we really should partner on so-and-such” or “let’s co-market blah-dee-blah.” Here are some questions for exploring whether this particular alliance makes sense for you:

• What are your business goals?
• Can this person/company really help you get there?
• What’s his or her track record in these kinds of relationships with others?
• What’s the person’s reach? How many people does she have in her database?
• How long has she owned her company or been working in her field? In other words, what’s her level of expertise?
• Is she “congruent”? Does the image maven dress like a schlep? Does the communications guru fail to look you in the eye?
• What does your gut tell you? Would you enjoy working with this person?

Few business partnership situations are as unpleasant as those involving family members. If you “kick the bum out,” will your brother run to Mommy and rat on you? Will you be able to show your face at Thanksgiving dinner if you’ve won the company but lost your family’s support?

Here’s today’s quandary:

Q.: My brother and I are 50 percent partners in an S-Corp. I incur 80 percent of the expenses, which I pay out of pocket. My partner incurs 20 percent. However, because of the 50 percent partnership, my partner insists on taking 50 percent of the deductions. As a result my tax burden is very high. Our accountant has suggested that we each calculate our own deductions and that my brother compensate me for the difference. Based on calculated amounts, I actually owe less than a quarter of the taxes I am obligated to pay. Last year I had to borrow to pay off my taxes, as my brother never compensated me for what he owed me.