E-Myth President, Wendy Vinson interviews Nina Kaufman, a small business attorney about the three most common questions she gets from her small business clients:
Podcast: Wendy Vinson interviews attorney Nina Kaufman
1. Can I use contracts (or anything else, for that matter) that I see on the Internet?
Did you have siblings or play in a sandbox as a child? If you did, you probably learned that you don’t just grab other people’s toys because, well... it’s not nice. You don’t just take little Stacy’s doll or little Danny’s truck. You ask permission. And it’s the same thing on the Internet. We’re all playing in cyberspace but we have to realize that if we didn’t bring it into the sandbox, it’s not necessarily ours to take.
In terms of using contracts and things that you see on the Internet, because it’s free and readily available, we like to think that we can take it and use it without thinking about the consequences. Wrong!
2. I’m going into business with a couple of friends and we know each other well. Why do we need a partnership agreement?
You need a partnership agreement because you’re starting a business together and its just good business practice to have these agreements in place! If you have any desire to grow the business to a point where maybe you sell it to somebody else you want to make sure that partnership arrangements are spelled out because otherwise there’s the potential for litigation. Litigation can devalue the business and lower your ultimate sale price!
A partnership agreement sets expectations. When everybody’s happy about the partnership, it’s a lot easier to agree to what’s fair and to get it documented. But when you’re in a situation when one or the other has to leave the business, you’re dealing with emotional tension, frustration, fear and despair. Having those discussion in advance gives you a fair baseline. If a trigger event occurs you already have a plan...
3) My clients are slow in paying. What can I do?
First, have you chosen your clients wisely? These days it’s very tempting to take on “anyone that breathes,” and just assume that they’ll be the right client because you’re concerned about cash flow. But a very wise colleague of mine says: ‘They’re not a client until they pay you.’ Make sure you’re looking carefully at who you’re serving, how you’re serving them, and make sure that you are clearly communicating your price and payment terms up-front.
Second, make sure your operations manual includes a process for collections...
Nina Kaufman demystifies legal mumbo-jumbo to save small businesses time, money, and aggravation. She’s also an award-winning attorney, speaker, and columnist/blogger for Entrepreneur Magazine online. For a free copy of her Entrepreneur’s Business Law Primer, visit www.GreatBusinessLawResources.com/bizlaw
How to Hire Employees Safely
Ensuring Employee Effectiveness
How To Say Goodbye To An Employee
Joseph S. says:
Thank you for this great podcast. It is better to clarify issues before the issue comes. I was involved in once project where the 'profits' were to be split, but it was on an oral agreement, and nobody had set what exactly profit would mean (gross revenues, income before taxes...). Getting the record set from the start can save a lot of pain down the road. I think partnerships are open to the same issues, as you said. People move, expectations can change and it is too common for one person to end up doing more work and yet if they are not clear in the ownership structure, they may be only entitled to a proportional share of the business.
Submitted Aug 13, 2009 4:19 PM
Subscribe to the E-Myth ViewPoint Newsletter
Follow E-Myth on Twitter
+1 707.569.5670