Making It Legal:

Forwarded to me by sister Entrepreneur blogger, Lena West, was this curious tidbit from MediaPost, about a case before a European court. It seems that “Internet service providers in the EU need not disclose the names of suspected file-sharers.” This is in stark contrast to the latitude given the Recording Industry Association of America to subpoena suspected file-sharers.

Why does that matter? Because culturally, in Europe, privacy rights are far stronger than they are in the U.S. So strong, in fact, that a ripple effect from this case could be that an IP address would be regarded as personal data (at least in Europe).

This is a healthy reminder of a couple of important things. First, that U.S. laws and perspectives on business, commerce and privacy are not necessarily shared worldwide. The U.S. may have taken the lead in many aspects of internet use and protocol, but attitudes are still somewhat territorial. The global availability of information does not equate to a globally unified perspective on how it should be used. Second, within the U.S. itself, there are differences in how issues of state laws on privacy (among other things) are handled. That’s why it’s so important to be sure that you consult an attorney who understands the laws of the state in which you are doing business. Also, your terms and conditions should name your state as the place where (and the law) where disputes will be handled. Otherwise, you risk having to consult attorneys in every state in which you have a customer to make sure you have not run afoul of their laws.

My husband receives a lot of “flag-waving” e-mails from his friends, some of which annoy me because they often end with the chorus of, “It’s all the fault of the politicians!” or “blame the lawyers!” But there was one–when taken out of its “(sigh) for the good ol’ days when Mom just stayed home to raise the kids and we didn’t have so many laws” context–made me stop and think.

There are a lot of laws that business owners need to follow. There are laws concerning how to form the entity that is your company, how to handle decision-making in your business partnership and what rate of interest you can charge on your contracts. There are many, many laws about how to deal with your employees. And there are volumes of laws about the taxes a business is required to pay. Relatively few taxes were imposed 100 years ago. And while I’m not a proponent of going back to “days of yore,” I do admit that running a business is made more complicated as a result. That’s why it’s so crucial for business owners to have a good advisory team. The basics include an accountant, an attorney, a banker and an insurance broker. For no one person can know everything there is to know about building and running a successful enterprise, especially when there are so many taxes floating around (which, if not paid timely or properly, could cost you penalities and interest). Do you know which ones in this list you are responsible for?

• Accounts receivable tax
• Building permit tax
• CDL license tax
• Cigarette tax
• Corporate income tax
• Excise taxes
• Federal Income tax
• Federal unemployment tax (FUTA)
• Food license tax
• Fuel permit tax
• Gross receipts tax
• Inventory tax
• IRS interest charges/IRS penalties (tax on top of tax)
• Liquor tax
• Luxury taxes
• Medicare tax
• Property tax
• Real estate tax
• Service charge tax
• Social Security tax
• Road usage tax
• Sales tax
• State income tax
• State unemployment tax (SUTA)
• Telephone federal excise tax
• Telephone federal universal service fee tax
• Telephone federal, state and local surcharge taxes
• Telephone minimum usage surcharge tax
• Telephone recurring and nonrecurring charges tax

• Telephone
• State and local tax
• Telephone usage charge tax
• Utility taxes
• Vehicle license registration tax
• Vehicle sales tax
• Well permit tax
• Workers compensation tax

Do-it-yourself legal sites drive me crazy.  I came across a DIY legal site called Negonation this week – yeah, OK, it’s in Brazil, but the principle is the same.  It touts a “get-your-contract-off-this-site-and-avoid-legal-feesâ€? service.  It claims that “its contracts are legally enforceable in the offline world, even if the parties are in different countries.â€?  That’s quite a bold claim.

Online sites don’t necessarily empower the lawyer in all of us.  What they do is delude many people into thinking that they have an “inner lawyer�.  Not everyone does, and that’s okay.  I don’t have an “inner doctor� –- if I have a medical need (even a regular check-up), I get help.  I don’t have an “inner accountant� – I make sure that I have one on call who can provide guidance as to how I should handle my financial statements and taxes.  I am who I am:  anal, cautious, and detail-oriented (among other things).  That makes me perfectly suited to being a lawyer.  I am not cut out for many other professions, and that suits me just fine.  I’ll leave those areas of specialty to the experts.

What’s dangerous about these sites is the false sense of security that entrepreneurs get from taking legal agreements from the Internet, without having the background or training to fairly evaluate whether what’s in the agreement is in their best interests, or whether there are other things that should be in the agreement that aren’t.  There’s no one affiliated with the sites who will give you the legal advice about your specific situation –- they’re just selling you a product (the agreement).  Take it or leave it.  They don’t take your own needs into account when creating the agreement –- it’s an off-the-shelf product. 

It would be like walking into Bloomingdales and buying a suit without looking at the size.  You know you need a one, but if it doesn’t fit properly, you could end up spending more for alterations than you paid for the suit.  Getting the right legal protections in place for your company isn’t just a matter of one-size-fits-all merchandise. 

Lawyers provide a hybrid:  product and service.  And it’s the service you receive that ensures that the product truly meets your needs.  For more guidance, see my article “What You Should Know Before Copying Contracts from the Internet.� 

Mani Malarvannan gives some helpful tips in finding a good CPA in his aptly-titled article, “7 Tips for Finding a Good CPA,� in the Small Business Informer.  He also points out the importance of preparing for the interviews with these CPAs by having a list of questions you might want to ask.  He alludes to a few of them in his article, which I think are very insightful, for example, “what kinds of strategies or tips have you given to your clients to help them save money?� 

Personally, I think the suggestion that “you show the CPA your company’s past accounting statements and ask to comment and provide advice for the same� is probably not something that a CPA would prefer to do off the cuff in an initial interview, and/or without getting paid.  Usually, the purpose of an initial interview is to determine if you and the CPA feel comfortable with the skill sets, chemistry, and fee structure.  Going into an analysis of prior financial statements takes more time and depth.

For more questions to ask during an initial interview, listen in to my free postcast on Choosing and Using Attorneys at my Wise Counsel Press site.  Many fo the questions are perfectly suited for screening other professionals (like CPAs) whom you’ll want to have on youor business team!

“The meter is always running,� is a perennial complaint of small business owners when dealing with their attorneys.  And yet, if our attorneys aren’t properly informed about what we’re doing, they can’t give us the appropriate advice.  The latest plaint I’ve heard is:

My lawyer charges me so much money whenever I call him. I try to refrain from calling him but sometimes its important to give him updates. I pay all my bills to him. Are there lawyers that exist that don’t charge you like this for phone time? I feel taken advantage of… 

As business clients, there are a few things to keep in mind. 

1. This is a business relationship.  Your attorney sells his or her expertise, often measured in terms of the time spent.  Would you expect to regularly give of your own expertise without compensation?  Would that be fair to you? 
2. As I mentioned in my post, “Why Can’t My Attorney Be My Friend? � think carefully about why you are calling the attorney.  Are you looking for advice, or do you want to vent ad get general business advice?  If the latter, there may be more appropriate professionals whose time is not as costly. 
3. Many things can be negotiated with an attorney.  I don’t know what hourly rate you are paying, but you could ask for a reduced rate (or no charge) for things like listening to voice mail messages – particularly if the attorney is going to call you back any way to find out more about the situation.  Or, if the purpose of your call is just a status update (and not an in-depth exploration of your attorney’s expertise), a reduced rate might be appropriate.
4. If this particular attorney’s fees are breaking your bank, find another attorney whose fee structure fits better within your budget.  After all, you wouldn’t lease a Rolls Royce if you could only afford a Kia.  There’s no shame in making the price part of the reason you are choosing to work with someone.

In trolling through the blogosphere, I came across a handful of posts that asked (and answered) the question:  which legal issues keep entrepreneurs up at night? 

I found that “finding the right attorney� is definitely among them.  How do you know who’s the right fit?  How can you tell if they really know their areas of specialty?  How do you strike the balance between prudence and overspending?

For some resources to help answer some of those questions, check out Anthony Cerminello’s BizBangBuzz blog, which had a number of posts on how to work with lawyers.  Also, be sure to check out my podcast on choosing and using attorneys at my Wise Counsel Press site!

Leaving aside whether women entrepreneurs ask sufficiently for the financing they need, the fact remains that you need at a least a little money to get your company off the ground.   Not everything can be handled for barter.   So where’s a gal to go for moola? 

Thanks to Anthony Cerminaro’s BizBangBuzz blog for alerting me, I now have a handy list of 25 alternatives to venture capital, conveniently set out in Business Fund’s aptly-named article, Top 25 Alternatives to Venture Capital.  Each of the alternatives has its benefits and drawbacks, so make sure to talk to your advisory team (accountant, financial planner, and lawyer) to confirm which might be the best option for you! 

Don’t ask me where the past week has flown.  It’s been a flurry of activity . . . and a flurry of comments on my post Why Women Entrepreneurs Don’t Get the Financing They Need.  Seems it struck a bit of a nerve on all sides with some proponents in the “small-is-smart-not-weak” camp (and yes, I agree, expansion for its own sake isn’t necessarily good growth strategy) and others in the “yeah, you got me” camp who are feeling the fear and doing it anyway (great book by Susan Jeffers, if you haven’t read it).  I’m just tickled that it has started a great discussion!  J 

There are a few steps that it helps to follow.  First step is to know how much money you need, why you need/want it, and how you intend to use it if you received it.  If you haven’t done one before, this is where putting together a business plan can really help.  Start to gather the financial information that you would need to complete one.  Do you have a solid handle on your company’s finances?  Are all of your P&Ls and balance sheets up to date?  For that matter, have you reconciled all your bank statements?  Do you know where your bank statements are?  If all of your receipts and company documents are stored haphazardly on our computer or in a Henri Bendel’s bag, it’s time to bring in a bookkeeper to get this sorted out and systematized!  If you can’t handle your $10,000 budget and operations smoothly, will you be giving your lenders or investors the confidence that you can handle a $100,000 budget (and their money) well?

Second step is to familiarize yourself with the different kinds of financing.  Our own Entrepreneur magazine website has a finance section with a lot of information.  Also check out Rosalind Resnick’s Vest Pocket Consultant blog and Money Matters column.   Michelle Anton’s Weekend Entrepreneur blog refers to Count-Me-In, which helps women-owned businesses get funding.   And don’t forget Springboard, too!  So you see, resource abound!

Third step is to network!  No doubt you’ll know people who have gotten financing, or who would make great advisors.  Ask about their experiences.  Did they regret the path they took?  What would they have done different?  Asked for more money?  Less?  Chosen equity instead of debt, or vice versa?  Did they give up too much control of the company for their liking?  All of those things will help you get comfortable with the deal terms you want to achieve.  They may also know of angel investment funds or bank representatives who “get itâ€?.  They can also give you insight into what it’s like to manage a larger company once the funding comes in and how you can (or should) keep bankers or investors apprised of your progress.

Final step (for now) is to get a team of advisors on board.  Whether it’s someone to look at your business plan, an accountant who can help you work out the numbers, an attorney who can help explain the legal responsibilities you’ll be taking on – this is a big step.  Don’t feel you have to go it alone – and good luck! 

Well there’s absolutely no reason that she can’t.  Many attorneys are fun, interesting, caring people (you have to be, to go into a profession to solve people’s problems)!  But the “I thought my attorney was on my side . . . until I got the bill� plaint has come up a few times since I published my “Even the Big Players Complain About Legal Bills� post.  As Lauren commented: 

I started using my attorney for everything and felt so covered and so safe BUT then I got the bill. I was charged for things like “Listening to clients voicemail” and I couldn’t believe it.  

So let me add this to the subject.  Because of the stress of entrepreneurship, many business owners look for support.  That’s perfectly natural (and wise!).  Being part of an entrepreneur’s advisory team, a small business attorney is a natural place to look for it.  But sometimes, business owners may be looking for emotional support even more so than professional support.  Take the example of “Susan,” a consultant who worked with a difficult client.  Susan was upset that the client didn’t pay all of the fee . . . but what’s even more galling is that the client is complaining and wants her money back.  Susan spoke to an attorney (me!) and unleashed a torrent of information about the client, how she’s crazy/inconsistent/unrealistic/hasn’t a leg to stand on.  Part of what Susan was seeking was emotional support and validation, of the “Yes, you’re right, the client is crazy; you’re not being treated fairlyâ€? variety.  Susan wasnted to vent to a sympathetic ear (don’t we all?).  After all, who understands the trials and tribulations of her business better than her attorney?  However, attorneys sell their time, and the more you lean on an attorney in a quasi-therapeutic capacity, the higher the charges for telephone calls will mount. Here’s a way to manage that: 

• As I mentioned before, get really clear before beginning the attorney-client relationship on what the attorney will charge you for.  Use Lauren’s example (“listening to client voice mailâ€?) as a launching off point.  Ask for cost (and time) estimates for the services you’ll want performed.  You’d do it with a web designer – why not with your attorney?  If you want to be sure that the attorney’s style and demeanor is “simpaticoâ€? with yours, arrange for an initial in-person meeting where you can clarify many of the “how-will-we-work-together?â€? issues.
• Before you call your attorney, think carefully about what you want to say and why you are calling.  Are you looking for your attorney’s advice?  Or are you calling because you want to do the talking?  You are paying an attorney for her expertise, not just to listen to you talk.  If you real need is to be listened to, think about using a business coach or therapist instead to clear the emotions out of the situation.  You’ll then be able to use the attorney more effectively for, and with greater focus on, the business problem-solving. 
• Join networking and mastermind groups.  Your attorney can help you solve a business problem – and even prevent them from occurring in the future.  But for ongoing emotional and business strategy support, you should also cultivate a team.  Networking and mastermind (also called “peer advisoryâ€?) groups can help you develop and find members for your “Support Squadâ€?.
• Cultivate the attorney relationship “off-lineâ€?.  There are ways to develop a comfort level with your attorney other than taking time on the telephone.  Ask to be placed on an invitation list if she gives seminars or teleclasses on business-related subjects.  Subscribe to a newsletter or other publication list that she publishes.  You’ll not only learn a lot; you’ll have a better idea of the questions you should be asking her when you next speak on the telephone.  And that will help keep your costs down!

Everyone has a favorite “whipping boy,� and for entrepreneurs, lawyers and legal fees often fill that role.  Sigh.   

Well, entrepreneurs, you’re not alone.  Seems a study of in-house and general counsel of major corporations in the UK have a similar gripe -– in particular, that the bills are padded with junior associate time.  There are ways to handle the legal fee situation without foregoing legal help altogether. 

• Ask detailed questions about billing structure before you start.  You have every right to ask, and you certainly don’t want to be surprised.  Who will actually be doing the work on your matters?  What is their billing rate?  Are you charged for inter-office communications, that is, two attorneys talking to each other about your situation? 

• Get clear before you call.  While an attorney can (and should!) help assuage your fears and anxiety, attorneys are like many other consultants:  they often sell their expertise in time-based increments.  And have a little sympathy; we can only (legitimately) sell the same 24 hours.  Every hour an attorney spends listening to the vengeful fantasies of a wronged client is an hour that can’t be spent on someone else’s matter.  So if you have a question, ask it; if you want to chew the fat and be “chummy,â€? try to find another alternative – take your lawyer out to dinner or drinks, or save the therapy hour for your friends.

• Set a budget.  Unquestionably, you don’t want to drown in legal fees, but it’s not reasonable to expect to get everything for free.  You expect to be paid for your products and services, yes?  And to be paid a fair amount (like, not 50 cents on the dollar just because someone doesn’t like what you charge)?  Discuss in advance what you can reasonably expect to pay for the services and how you can help keep costs down. 

• Raise billing questions immediately.  If there is anything you see on the bill that you don’t understand, ask about it.  There’s no shame in doing so.  My mother had a saying (about, for example, the diamond necklaces that would sparkle in Tiffany showcases): “If you have to ask [the price], you can’t afford it.â€?  Not only do I disagree totally, but in the business world, that’s a senseless attitude.  You want to know that you’re getting value for your money.  And people do make mistakes.  For the same reason, you should check your bank and credit card statements carefully every month.

You’re an entrepreneur – be fearless!  Don’t let the prospect of attorneys and their possible fees (you could be pleasantly surprised) deter you from seeing the help you need.  Here’s a shameless plug for a resource I have created on my Wise Counsel Press website – a free podcast on savvy strategies (and questions to ask) for choosing and using attorneys.  Check it out and let me know what you think!