March 12, 2020
Paige is the founder of The Legal Paige, a virtual law firm working with online businesses and wedding industry professionals. She is a certified Juris Doctor and holds a double B.A. in Economics and Political Science. After working as a federal law clerk, Paige traded in the traditional law life for a virtual one and opened the doors to The Legal Paige in 2018. She helps her clients run legal and protected businesses and counsels them on issues related to contracts, intellectual property, privacy, and business law. She has worked with Jasmine Star, Hope Taylor, Hustle & Flow, Davey & Krista, Libby Rothschild with Dietitian Boss, and dozens more. Her mission is to create an online space where the law isn’t so scary and entrepreneurs can get legally legit in no time. Law aside, Paige is a small town Montana girl who loves hiking, her dog, Sugar, and a good glass of red wine.
In today’s episode, Paige breaks down EVERY SINGLE THING you’ll EVER need to know about the legal side of your business. If you’ve ever struggled with knowing WHERE to start with registering your business, what the heck a sole proprietor, DBA, LLC, or S-Corp even are, and contracts overwhelm you, LISTEN UP!
Paige goes over when and how to set up the legal side of your business in a “Legalities for Dummies” way that is SO easy to understand and will make you feel so capable of tackling the legal side of business. I wish I had Paige in my corner (or in my earbuds) when I first started my business, guys. Paige is a GENIUS and this episode is about to rock your world in all the best ways.
Paige’s background in the photography, entrepreneurial, and legal world is a bit unconventional. She began her photography business about 8 years ago when she was entering into her first year of law school. She knew since she was reading, writing, and doing academia all day long that she wanted a creative outlet.
She decided to give photography a go right as she was starting law school. Since Paige was back in her hometown, it was easier to get her business up and running with all of her connections. She quickly fell in love with being a business owner and entrepreneur.
During law school, she got an offer to be a federal clerk for a judge, which was a dream job! At this same time, her photography business was exploding! She was shooting 20-30 weddings a year while having a full time federal clerkship. It was insanity.
After her clerkship, Paige had the option to enter into the traditional law life as an associate for a law firm but she didn’t feel like it was the right fit. After being in the wedding and photography industry, she saw this huge gap and need for easy to find and understand legal education. This led her to create The Legal Paige.
Balancing Wedding Photography and Law School
It boils down to a lot of hustle. Paige was incredibly good at time management because she was forced to be. We all have the same hours a day as Beyonce and you have to make those hours count! Paige learned early on that she needed to outsource to get everything done. She had virtual assistants and a private editor.
What you need to know to be legit when starting a business
Although it’s important to get your website and social media set up, Paige likes to tell people to imagine they were starting a brick and mortar business in their hometown. You can’t open your doors until you have certain things in place through your county and state. We tend to forget this as online business owners.
Start from that lens. The first thing Paige tells people to do is to get your business registered, or at least register your name in your state. People often forget that even if you are starting your business at home, you need permits and licenses to do so.
You can do two things to get your business registered. You can officially register by applying for an LLC through your state or you can be a sole proprietorship. Being a sole proprietorship is not a registered business entity, you are just registering your business name. You can do this through your Secretary of State website. This just alerts everyone that you are going to use that name for your business. A sole proprietor is acting as an extension of you as a person so you just use your social security number and a business name that you are operating under. An LLC is a completely different business entity bubble. You don’t have to register your business name because you are registering it with your LLC.
It’s totally fine to start as a sole proprietor! There is a process and a trajectory of how your business goes. Be a sole proprietor and get the business name you want. Apply for a trade name if you want to. Just be sure you have the correct business license for your county.
There is no magic number of income to be an LLC. It is when you start making enough income that it becomes more than a side hustle and when you have more risks, liabilities, and clients that you should look into becoming an LLC and separating it from your person (like a sole proprietorship is). About 6 months to 1 year is when you should look into becoming an LLC.
Do you HAVE to hire a lawyer to set up your LLC (or S corp, etc..)?
You can definitely register your business yourself as a limited liability company. When Paige says “register your business entity” she always means register your LLC. It can get complicated pretty fast if you attempt to go down a Googling rabbit hole. There is so much information out there that can be overwhelming.
Google “Secretary of State X” and find your state website. It should be pretty straight forward of how to register. If you look at the form and are not comfortable or confident with some of the sections, this is when you need to get a professional such as a lawyer or CPA. Paige has a course called Ready Set Legal that gives you step by step help on how to get set up. It gives a little more hand holding of what to do, how to do it, and what legal steps to take at what time.
If you are a more established business owner who may need a legal audit of contracts it is definitely time to chat with a lawyer or CPA who specializes in that area.
Paige likes to think of it as adding a new team member. It’s not hard to justify outsourcing to a photo editor, copywriter, social media manager, virtual assistant, bookkeeper, or accountant but for some reason people leave lawyers off this list. Paige doesn’t believe that you should be the Chief Legal Officer of your own business. When you start becoming a more established business owner, don’t leave that type of outsourcing off your list. It will come back to bite you later on. Be proactive. Get your legalities in order and hire a professional to help.
There are so many virtual lawyers popping up all the time. The world is moving towards the online industry. With this happening, the lawyer world is going to become a lot more approachable. Lawyers can really help you get all of your legalities in order from the get go. It can save you tens of thousands if not hundreds of thousands of dollars later on because you will not be reacting to a situation. You have all the steps in place to begin with.
Definitions: LLC, S-Corp, Sole Proprietor
A sole proprietor is under your social security number and is an extension of yourself as a person. There is usually no registration needed, only a trade name, fictitious name, or assumed business name that you can register with your state if you don’t want someone else to use that particular business name. You have to ensure you get the proper licenses or permits from your county that you need to operate a sole proprietorship out of your home. A sole proprietorship means personal and business assets are commingled. The issue with this is that there is no liability protection whatsoever.
When you want to get liability protection for your business, a LLC, or limited liability company, is what you need to do next. This allows you to separate your business and personal assets. Your LLC then operates as a separate registered business entity through your state. You have to register with your state and it is anywhere from $70-$800 to register. An LLC is the best insurance you can get for your business. You do have to pay annual dues to keep your LLC active, but think of this as an insurance policy for your business. You must make sure to keep your business and personal funds separate. Your income and expenses need to come out of your business bank account that is linked to your LLC.
A S-Corporation is a misnomer, it is a tax designation. You still want to be an LLC that is registered in your state. A S-Corp is a designation through the IRS for tax purposes.
Say you make $150,000 gross profit, and your net profit is $100,000. LLCs and Sole Proprietors are pass through taxation entities. This means that you are not getting taxed twice (through your business and personal income). When you net $100,000 as an LLC, you will be taxed self employment tax on the entire $100,000. What you can do is pay yourself a “reasonable salary”. For example, as a photographer, if you made $100,000 you can pay yourself a reasonable salary of $50,000 and you will only have to pay self employment tax on $50,000 as a S-Corp and just pay the regular income tax on the remainder. You can save thousands on self employment taxes each year.
Always remember that Sole Proprietor and LLC is the legal world. S-Corp is more of the tax world, and that is when a CPA gets involved.
How to Protect Yourself Legally
Contracts! If you are a sole proprietorship and are not registering your business, the one thing you want to have in place before you take a client on board is your contracts! These lay out all the rights, rules, and responsibilities for each party under the terms of agreement of working together or producing a service for your client. Make sure you have your contracts in place. Please don’t piece together your contracts, this can lead to a lot of sticky situations!
Seek out contract help if you don’t know the answer. You didn’t go to law school and that’s okay. Lawyers and CPAs went to school for years to be professionals and experts at what they do.
Miscommunication won’t occur if you outline everything in your contract. Contracts are at the core of everything.
Be really cautious of buying contracts from people who aren’t attorneys. Paige does highly recommend templates! Every 12 months be sure to sit down and review your contract. You are going to have client experiences and situations that have come up in those 12 months that may need to be addressed in your contracts moving forward. Assess whether you need to add or remove clauses or if you need to clarify. You may want to have a lawyer review your contract or even create a custom contract. If you have a very specific service offering, you will know when you need a custom contract.
Template contracts are great to start with just make sure you are getting them from a reputable legal source.
How to Set Yourself Up For a Successful Tax Season
Hire a really great bookkeeper. Don’t be afraid to ask for help! It will save you hours, days, and weeks at the end of every year.
Hiring a bookkeeper will allow you to see your profit loss statements monthly so you can budget properly, be a better business owner, wear your CEO hat, and make more money. Bookkeepers really help you figure out where you should focus, where your income is coming from, and where you need to spend less.
On the legal side of things, people can really miss things when they do their own taxes such as reconciling bank accounts. From a legal standpoint, to set yourself up for success during tax season, make sure you have a business bank account, even if you are a sole proprietor.
You want to set yourself up for success so you don’t get audited. When you get audited, you don’t hire a CPA, you hire a tax lawyer.
What’s one of the biggest lessons you’ve learned in business?
Paige’s biggest advice is to continue educating yourself. Go to conferences, go to workshops, seek out help when you need it from a professional, find colleagues or industry friends that know the answer to your question. Don’t sit, ruminate, and get overwhelmed.
Continue educating yourself. Become a better business owner and really work to ensure that you are doing everything possible to protect yourself and that the livelihood of your business stays for many many months and years to come.
Paige loves to put things in checklist form. She’s created a free download of a 10 step checklist to getting your business legally legit today. It includes the step by step process to do so. She also has a course called Ready Set Legal.
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