WRITTEN BY ALLISON WAY, SENIOR COPYWRITER & CHIEF EDITOR
Warren Buffet may have said it best: “Risk comes from not knowing what you’re doing.”
Unfortunately, many times entrepreneurs do not know what they’re doing. They’re constantly reevaluating their business plans, holding meetings blindly and talking with other seasoned entrepreneurs who may just confuse them. The worst part of entrepreneurship is that you don’t know what you don’t know...especially when it comes to legal issues.
Entrepreneurs and small business owners have been turning to lawyers and legal consultants since startups began popping up all over the globe. And startup legal issues couldn’t help but come running after them. Yet entrepreneurs still cannot seem to wrap their heads around the most important legal issues facing their businesses. But could it be because legal explanations are just too complicated to understand?
Legal jargon certainly doesn’t help. Limited liability. Sole proprietorship. Zoning. Promissory notes. Intellectual property. Sure, these words sound pretty, but a lot of entrepreneurs may not know what they mean. When lawyers or legal consultants do not fully explain the legal jargon that is used in small business legal matters, things can get a bit messy. Luckily, we have books like How to Start a Business and Not Get Sued that give step-by-step guidelines to entrepreneurs starting a new business.
How to Start a Business and Not Get Sued was recently published in order to help startups understand what’s important when it comes to legal matters and entrepreneurship. The book is written by Tom C. Brown of Brown Law Firm, a Kansas City-based business attorney who has been practicing for nearly four decades. During this time, Tom has counseled hundreds of entrepreneurs to organized and grow their businesses. But there’s more to Tom than meets the eye—he is an entrepreneur himself, starting up various restaurants, entertainment businesses and promotional products. So what are his best pieces of advice? First and foremost, Tom recommends knowing was legal matters you’re getting into.
Don’t let legal jargon get in the way of protecting your company or moving forward. One company that started out with a $1,000 investment let legal jargon get in their way of growth and development. And when the company finally had the legal concept fully explained to them, the company boomed into a $500,000,000 Fortune 500 company.
Two ladies approached me wanting to set up a hobby business so they could travel abroad and write off their business expenses as they shopped for jewelry to sell upon their return.
When I asked what form of business organization would be best for them, I suggested an S corporate entity. “What does that do?” they asked. To answer their question, I formed a big circle on my conference room table with drink coasters. Pointing to the center of the circle I said, “This is your company. Everything inside is your company’s assets. Everything outside represents your personal ones. If the company is sued, which assets are at risk – those inside or those outside of the coasters?” Pointing to the inside of the coasters, they both laughed and said “Now we get it. We always thought it was the other way around!”
Sometimes, an entrepreneur just needs legal matters to be simplified. Once their legal issues are explained properly, they can continue building a business without the fear of being sued. So, entrepreneurs, I’m encouraging you to do this: ask the “dumb” questions. You may be grateful that you did!
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