Latest / The SmallBizChat with Melinda Emerson / How to Protect Your Business Legally with Sharon Tasman, Esq.

Transcript

How to Protect Your Business Legally with Sharon Tasman, Esq. · The SmallBizChat with Melinda Emerson

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  Three, two, one, zero.
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  Ignition.
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  Lift off.
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  Ending small business failure.
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  Welcome to the Small Biz Chat podcast with the number one small business expert, Melinda
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  Emerson.
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  Melinda's goal is to end small business failure, and she'll give you the information
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  you need to succeed and live the life you dream of.
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  Now here's your host, the small biz chat lady herself, Melinda Emerson.
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  Have you subscribed to the Small Biz Chat podcast?
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  Well, it's time.
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  Every Wednesday, we offer listeners bite sized actionable tips to start and grow a successful
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  small business.
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  In just twenty minutes or so a week, you can get a ton of insight and resources to propel
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  your business forward.
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  Be sure to subscribe to the Small Bitch Chat podcast today.
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  Hi, everyone.
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  Now it's time for me to introduce my guest, miss Sharon Talzman.
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  She is a seasoned business technology and life sciences attorney with over thirty years of
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  experience, including fifteen years as a top global law exec inside a biotech firm.
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  As founder of HTBizLaw, she brings her big law expertise to entrepreneurs, solopreneurs, and
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  small businesses of all stripes.
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  Sharon is passionate about empowering women and other underrepresented founders with the legal
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  tools they need to succeed.
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  Learn more at htbizlaw.com.
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  Sharon, welcome to the Small Bitch Tap podcast.
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  Thank you, Melendez.
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  I really appreciate being here.
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  I am I think your show is wonderful, and I want to help founders of all sizes build and grow
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  and stay out of trouble.
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  I love it.
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  I love it.
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  So let's get started.
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  I mean, you've been in you've been a business lawyer for thirty years.
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  So what are the top legal mistakes that new entrepreneurs make when starting a business?
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  So I would say the first mistake that entrepreneurs make is they don't set themselves
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  up as a legal entity.
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  They may just operate under their name instead of being an LLC, which stands for limited
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  liability company, or filing as an Inc.
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  To set this health up.
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  And the reason is, if you only operate under your name, it's called being a sole proprietor,
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  there is no legal difference between you as a person and you as a business.
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  So, if you as a business get in trouble, all of your personal assets are at risk.
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  And an LLC is fastest, easiest, cheapest way.
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  You don't need a lawyer to set it up.
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  You can just go online in the state you're in, and the filing fee is between 1 and $300, and
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  it will save you potentially thousands or tens of thousands in liability of your own assets
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  that you've worked so hard to build up.
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  That's mistake number one.
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  Mistake number two is people don't realize that the person who creates their content is the
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  person who owns their content.
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  So if, for example, somebody's a software developer, and I used to be a programmer, so
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  this one rings true.
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  You have a couple friends that sit around.
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  Well, think Apple.
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  Steve Jobs and and his friend Steve Wozniak sitting around in their garage.
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  If when you are helping a friend out or a friend is helping you out, you and your friend
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  each own what you did.
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  You don't own what your friend did.
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  Same thing if you have an independent contractor or a freelancer that's working for
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  you.
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  You're paying them, but unless you have a written agreement with this person that assigns
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  all of what they created to you, you don't own it, they do, and it can come back to bite you
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  if, let's say, you've built an app.
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  It becomes successful.
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  Somebody wants to buy it, and they'll dig, and then you have to pay off the person who helped
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  you for free as a friend.
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  So I would say those are the two biggest mistakes.
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  You know, and it's so interesting that you mention the whole work for hire thing.
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  When I first, first, first got started twenty five years ago as a business, I had a friend
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  create melindaemerson.com.
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  And then after they created it, I hated what they did.
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  And I said, well just give me the URL and I'll have someone else build it.
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  And they said, no, they said they owned melindaemerson.com.
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  And I literally had to get a lawyer to negotiate with them to get back my own URL
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  because even though I had given them the money, they had registered it instead of me.
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  And so I ended up having to pay these people for a URL that was my actual name because I
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  didn't register my own URL myself.
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  I let my web developer do it.
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  So here's a cautionary tale boys and girls, Do not do that.
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  And it's not just something that small businesses get caught in, because all of these
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  things, reports, drawings, a domain name, branding, all of that is covered basically by
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  copyright law.
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  And if you don't make sure you own it in writing, the other person does because
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  copyright law is a little bit counterintuitive.
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  If you could pay them a million dollars if they didn't assign you the rights in writing and the
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  key is assign and in writing.
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  And I have seen big players who should know better get caught in very similar situations
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  where in the end it costs them millions of dollars.
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  And without, clearly without mentioning names, I have seen universities who have lawyers make
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  this mistake.
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  Yeah.
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  Well, I'm very sorry you went through that, but it is exactly what we don't want people to do.
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  So, when you set up your LLC, even before you go public, when you adopt a name, search to
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  make sure nobody else is using it, and then lock everything down.
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  So, when I first founded my law firm, it was healthandtechnologylaw.com, which is really
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  long, and it wasn't highlighting the biz part.
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  When I shortened my URL and changed my branding and name to an easier to follow HTBiz, Health
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  Tech Biz Law, Before I did anything, I got the Instagram, the Facebook, the TikTok, the
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  YouTube, the, the, blue sky.
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  I got the domain.
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  I got misspellings of the domain.
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  I did all of that.
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  And I even filed trademark applications on the name before I ever went public.
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  Because you don't want to go to the effort of building the brand, building your website, and
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  then turning around and having to either change it because someone was using that name already,
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  or in the case of you, when it's your own name, having to buy back your own name.
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  Right.
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  Well, well, how do we I mean, so let's go down that road for a second.
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  Do people search?
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  Is it a simple Google search to find out if somebody else is already using the URL?
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  How do you do it?
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  To search for a URL, if you actually go to a site like Squarespace where you can get
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  websites and buy domains, you can pretend to buy a domain.
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  And you can search for the domain, and it will let you know if it's available because if it's
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  available, it'll come up and say, click here to buy.
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  If it's not available, they will show you alternatives.
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  So that's one thing that you can do specifically for URLs.
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  You want to check two other things.
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  You want to do a search in the trade name database of the state you are in.
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  So if when I did HDBizLaw and even when I did Health and TechLaw, I first searched, because
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  my company is based in Maryland, I first searched in Maryland, the Maryland Government
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  Secretary of State Office, and there's a state office, every state has it online, searchable
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  databases, and you just type in the name and see what comes up.
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  And you want to make sure that it's not only the exact name that's clear, but you don't want
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  something that's confusing.
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  Because the third thing you want to do is do a Google search, And you need to make sure that
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  search is nationwide, if not global, because names are covered by trademark law, not just
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  copyright.
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  Names are covered by trademark law and because trademark serves as brand.
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  So the Coca Cola brand of soda.
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  When you see the name Coca Cola, you know what to expect.
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  When you grab a box of Kleenex tissues versus puff tissues, you know what to expect if you're
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  grabbing one versus the other.
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  So you want to make sure that your brand isn't already taken or isn't close to somebody that
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  already started before you.
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  Because if somebody is using your name, and in your case, Melinda Emerson, not likely somebody
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  else was using Melinda Emerson, but, like for me, Health and Tech Law.
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  I was shocked that healthandtechlaw.com was available even thirteen years ago.
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  I was shocked.
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  Was sure it was gone.
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  It wasn't.
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  No one was using it.
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  But I did a search on Google as well to make sure there wasn't somebody out there, for
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  example, in California or Oregon.
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  It was clear in Maryland, in my Maryland state government office, for names, but was it clear
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  elsewhere?
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  Because name is who used it first.
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  So if somebody in California used that name first or something that the trademark office
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  would consider confusingly similar that's a legal thing, confusingly similar they win.
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  You don't want to go to the effort of creating the brand, creating the marketing materials,
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  coming up with your logo, getting well known, and then having that California person come
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  back and say, No, no, I've been using it first.
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  Right, right.
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  So let's move on because I think that's an important point and I'm glad you talked about
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  that.
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  But let's talk about LLC versus S Corp versus Social Security number, right?
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  Your Social Product.
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  Okay.
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  Can you talk about the differences and the advantages of each of these, you know, where it
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  could make or not make sense?
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  Sure.
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  If you just run your business under your personal social security number, that is being
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  a LLC.
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  I mean, that's being a sole proprietor.
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  If you are running solely under your Social Security number, there is no difference between
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  you as a person and you as a business.
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  So you if if the business gets sued, you are getting sued.
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  If the business gets sued, it's your checking account, your savings account, your house
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  that's on the line.
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  Personally, I don't think anyone ever should run their business under their name because it
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  is so cheap and easy to get that first level of protection, which is filing to be a limited
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  liability company, which stands for LLC, and you file that in whatever state you're in and
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  it's recognized nationwide.
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  When you have that, it present, it prevents you as a person from being sued for, for damages or
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  claims from you as a business.
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  As long as you're running your LLC like a business, it's shielding you as a person.
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  Now, is taxed almost exactly the same as if it was just under your social security.
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  When you have an LLC, it's considered what's called a pass through entity, where the
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  expenses of the business and the income of the business pass through to you on your ten forty,
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  would be on your Schedule C, but as long as you are running it like a business, a separate
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  business checking account, a separate business credit card, The income goes into the business.
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  The expenses come out of the business.
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  You pay yourself out of the business.
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  Money is transferred from the business to you as a person.
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  That creates a shield.
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  It's like drawing a black box around your company and keeping claims from leaving.
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  What an S corp is is when you have an LLC for a while and you have a regular, stable level of
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  income, you can elect to be taxed as an S corp.
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  It's predominantly a tax distinction where you are taxed as a corporation instead of as a pass
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  through basis.
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  But typically, with an S corp, you need to be paying yourself a regular, steady salary at
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  that point that is predictable that you can pay yourself every month the same.
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  Whereas with an LLC, if one month the business makes more money than another, you can vary
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  what you pay to yourself.
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  But if you get to the point where you're large enough and have a predictable income, an S Corp
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  may help you save on taxes, even though it's a little bit more complicated.
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  So let's talk about the legal essentials, right?
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  Every small business owner needs to have, you know, for their business as they're getting
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  started or they're updating their website or whatever.
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  What is the legal stuff you gotta have when you start out in business that you actually need a
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  lawyer for?
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  Because I think there's lots of websites, right?
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  There's Rocket Lawyer and Nolo and all this other stuff, but tell me the stuff you need
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  when you're getting started or you're reinventing that you might not think about.
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  Okay.
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  So the first thing you need is, in my opinion, it's a need, file to be an LLC.
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  Do not operate under your own name ever.
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  Just don't.
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  The second thing you need is business checking account, business savings account to treat your
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  business like a business.
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  I would say you need to get in the good copyright habit, a copyright notice on
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  everything, every page, every footer, every time.
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  It's very simple.
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  It's that copyright seen in a circle, the year, and then your company name if you created it in
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  your business.
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  Because what it is, it's literally notice to the world that you are claiming copyright
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  ownership.
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  Now, you automatically have the rights, but people forget, either innocently or not so
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  innocently, that just because they can find something on the Internet doesn't mean they can
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  use it.
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  So by having the copyright notice, it makes it much harder for somebody to say, I didn't know.
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  So I think a copyright notice is essential.
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  And if you look at anything, any of my websites, any of my downloads, my social media
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  posts, Copyright notice, everything, every page, every time.
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  Wow.
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  Okay.
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  Well, what about, like, terms of service and privacy policies?
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  I I see a lot of businesses websites that do not have these things.
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  Okay.
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  It is better to have none than have them wrong.
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  That's the first thing I will say, especially with the privacy policy.
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  Because the single biggest way people get in trouble with a privacy policy is that the
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  privacy policy says one thing, but they actually do something different.
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  Now, everyone should have a privacy policy because privacy laws now have global reach.
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  If you have an audience, if you have visitors, for example, from the European Union and these
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  visitors or customers, they purchase your service, they purchase your products,
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  physically reside or live in any of the European Union countries, the European Union
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  countries will apply to you because privacy laws attach to the data, not necessarily the
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  country.
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  So if you have a customer, you want to be able to comply with the privacy laws, so you should
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  have a privacy policy, but the key is it must be tailored to what you do.
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  So don't say, You never sell or share your customer data if you do.
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  Don't say, I never use cookies if you do.
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  So you can't copy somebody else's.
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  This is
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  what I see all the time.
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  I've seen people copy and not even change the name of the company they copied it from.
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  If you copy your privacy policy, you're doing two things.
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  You're committing copyright theft and I guarantee you, you are breaching your privacy
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  policy the second you post it.
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  The terms of service is it is not, at the moment, a legal requirement, but it is very
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  important because what it does is it gives you the stake in the ground to limit your liability
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  against anyone who visits your website or uses your website or buys any products or services.
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  It's also where you publicly state all of this content is mine and you can't use it.
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  Again, needs to be written for what you do.
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  Got it.
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  Yeah.
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  But the other thing I think people really, really need, and I know we have short on time,
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  is the essential is if you're doing pitches to clients, you have to make sure that you get
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  those potential clients to sign something that acknowledges all of your pitch materials or
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  yours.
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  Whether it's a copyright acknowledgment or a confidentiality notice or a simple, like,
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  letter form of a nondisclosure agreement.
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  Because if you do a pitch and you don't tell them in writing they are not allowed to use
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  your materials, they can and they will.
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  And there are companies out there that deliberately request pitches from many, many
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  people just to get the information and then use it without them.
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  That is scandalous.
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  That is horrible.
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  That is just ridiculous.
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  We only have time for two more questions though, I wanted to get in.
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  Tell me about contracts and specifically contracts with, let's say, independent
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  contractors or vendors overseas that are doing work for you in your business.
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  How should you handle that?
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  So first of all, you if someone is doing work for you, no matter where they are and what
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  services they're doing, if they're creating anything for you, you absolutely need a
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  contract.
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  Whether the vendor is in The US or overseas, it's still going to be fundamentally the same
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  contract.
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  The only thing that might change is venue and governing law.
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  Like, it we agree what law it will be governed by, but who owns it, the fact that you need
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  them to assign all the work to you, how much they're going to be liable for if they cause
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  harm to your business, all of that needs to be in writing.
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  Whether you're working with someone in The US or someone in The United Kingdom, it's
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  functionally the same contract.
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  What about non compete, non disclosure agreements within independent contractor
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  contracts?
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  So, non disclosure, you will never have a problem getting that enforced because they are
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  having your information which they only have because they're doing work with you.
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  Non competes are trickier.
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  Non courts do not like to limit people's ability to work.
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  So if you have an independent contractor working for you, you need to make sure that the
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  non compete language is reasonable as to geography, scope, and duration.
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  So if somebody is working on just a small thing for you and of a very short duration and they
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  have no confidential information of yours, you're never going to get a two year global non
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  compete enforced.
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  But on the other hand, if somebody is doing highly sensitive work for you or creating what
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  will be the keys to your kingdom, right?
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  If you're a software vendor, they're helping you write the source code.
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  That situation, you could enforce a non compete where they wouldn't go to one of your
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  competitors.
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  But even without the non compete, they're still not allowed to use your confidential
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  information as long as you have a confidentiality clause, which can either be a
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  separate agreement or right in the contract.
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  All right.
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  Now, Sharon, what is the best business advice anyone has ever given you in business?
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  You're not too old and it's not too late.
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  I love it.
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  Really, it if you can get through life, you can start a business, build a business, but you're
• 21:09
  never too old.
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  I didn't start my own law firm until my first number was a four.
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  I love it.
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  And in fact, 62% of businesses are started by women over 40, and they are more successful on
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  average than men.
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  100%.
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  100%.
• 21:32
  Thank you so much, Sharon Tasman, Esquire.
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  She is the founder of htbizlaw.com.
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  If you need some legal advice for your business, she's your girl.
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  Give her a call.
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  Reach out to her on her website.
• 21:49
  And thank you so much for joining me for this edition of the Small Biz Chat podcast.
• 21:53
  I'm Melinda Emerson, Small Biz Lady, your host.
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  And don't forget, if you are a women business owner looking for a confidential community to
• 22:02
  get help with your business, all you have to do is head over to smallbizladyacademy.com.
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  We would love to have you.
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  And I coach all of my business owners inside my academy.
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  Alright.
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  I leave you with this.
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  You never lose in business.
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  Either you win or you learn.
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  God bless everybody.
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  Thanks for listening to the Small Biz Chat podcast with Melinda Emerson.
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  Subscribe to this podcast wherever you listen to podcasts, and join us next Wednesday for
• 22:36
  more fantastic information and interviews.
• 22:39
  You can find more sources and small business success strategies by visiting Melinda's
• 22:43
  website, succeedasyourownboss.com.
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  Thanks again for listening, and we'll see you next week.