015 Legally setting up your online business with Christina Scalera

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a Little bit aBout today’s guest

On this episode, I chat with Christina Scalera – a remote online attorney for creative entrepreneurs and small business owners (once again proving it's possible to run just about any business from the internet!) About a year ago, I attended a conference where Christina was giving a talk, and she gave such a clear breakdown of the steps that you need to take in order to start a legally legitimate business. Get ready, ladies, because today she is going to share those same tips and trick with YOU!

A few Highlights

  • From dream job right out of law school to private yoga instructor, Christina shares how she got her start in online business. (1:55)

  • Marrying her legal background with her love of all things creative. (4:55)

  • Fighting perfectionism. Plus: How not to design a contract. (6:58)

  • What it’s like to run an online law firm and contract template shop (and why the legal industry think’s she’s totally weird.) (9:09)

  • Listen carefully! Christina drops a hint about what’s to come in thecontractshop.com. (11:29)

  • Learn how Christina went from having no idea how to pay herself to finding herself on her company’s automatic payroll. (29:15)

8 Steps To Legally Setting Up Your Business

1. Get a Tax id or EIN Number

It’s quick, it’s easy, and it’s free (at IRS.gov). It’s basically a Social Security Number for your business (Social Insurance number for my Canadian peeps) because you don’t want to go handing out your actual information.

Oh, and you’re going to need it to open any sort of bank account; Paypal, stripe, local bank – whatever. But I opened an account without one! Great! But what you have there is a personal account in the name of your business, and according to Christina, you’re going to be really sad when you start making the big bucks because there is a limit to the amount of money that is allowed to flow through that account each month!

Ps. Constantly losing $$ to crazy exchange rates and conversion fees? Tune in around the 15:58 mark to hear a little hack on that!

2. Terms And conditions & Privacy Policy

“So the the GDP Armageddon has passed for most of us (if you're still in Germany, it hasn't) but one of the things that every business has always needed is a privacy policy, and that just came to light in a much larger fashion after the European General Data Protection Regulations came into effect in 2018.” - Christina

A privacy policy lets visitors know what kind of information your website or supporting software is collecting on them, how that information is being stored, and what you plan to do with it. People have a right to have that information deleted. The terms and conditions page is the part of your website that lets people know what they can and cannot do with your content, products, etc, and is a great place to inform them of any refund policies.

3. Contracts, Contracts, Contracts

Contracts are a must! They not only protect you in the case of conflict, but they also help to set proper boundaries and expectations, which is especially important when working with clients.

But my client is the sweetest person in the whole-wide-world, and I’m a really great service provider, so what could possibly go wrong? Many things. (And usually when – and from whom – you least expect!)

Worried that potential clients will balk at having to sign a contract? Don’t be! In this episode, Christina shares with us how to help clients see that a contract actually benefits and protects them, too!

Speaking of working with clients, Christina is a huge believer in starting out as a serviced-based businesses. It’s easier to profit more quickly when you are just starting out, and it helps to build your audience, as well as the trust needed to turn around sell them your product!

4. Get a business Bank Account

Ever heard of co-mingling? (And no, we’re not talking about co-mingling at a party, here!) It’s when you put your personal and business funds in the same account. And according to Christina, it’s a major no-no.

“The most common place I see this happen is with well-meaning business owners who are like, ‘Yeah, I set up my separate bank accounts. I have a personal checking and a business checking…” but then they forget about PayPal, and so they're paying people out of PayPal, and they're receiving payments out of PayPal, but their mom’s also reimbursing them for the lunch that they had into their PayPal account…you can forget about outsourcing this to a bookkeeper.” - Christina

5. Insurance

Christina does note that insurance could probably be moved up the list a little, but she felt it was important tick off a few of those “quick wins” before moving on to the slightly more expensive steps.

“General Liability Insurance has always been important for business owners to have, especially if they have some kind of physical component…if you're an event planner, a wedding photographer, or you're engaging with clients in a physical setting…” - Christina

Besides that, you will need Commercial Property Insurance – to cover things like your lenses, lighting or cameras (if we are sticking with that photographer analogy.)

As your business grows, there is a third type of insurance that you are going to want to consider which is called Professional Liability Insurance, AKA errors and omissions.

“…the risk that you run, especially as you start to sell online courses, is that people take your advice, they apply it, it doesn't work for them, and they lose money….” - Christina

You might be thinking, but what if I have an LLC? You still have to pay for the lawsuit and lawyers fees etc, they’re just suing your company, rather than suing you personally. With Professional Liability Insurance, it’s as if they are suing your insurance company instead.

Christina mentions that it can be a challenge to insure your online business, as it is a relatively new arena and it can be difficult to explain what it is that you actually do. She recommends Carla Ramirez Insurance Agency based out of Manhattan Beach, CA.

6. Standard operating procedures AKA SOPS

Sexy right? Christina and I both think so! We love automation, we love outsourcing, and we love SOPS.

“Those are things that are going to not only make your life a lot easier, but also from a legal liability perspective are really great to have in place….” – Christina

Having clearly documented systems and processes could seriously cover your butt in the event of a legal conflict. Using tools like Trello, Asana, and Loom to outline the steps in each of your processes gives you something to refer back to, in the event your practices are called into question. Pro Tip: show your insurance company you have some serious SOP’s in place and it’s possible they will give you a break on your premiums! Bonus!

7. sole proprietor to llc

“Sole proprietorship is simply a fancy name for you as a business owner. There is no new tax entity that's created, necessarily. You can still have an EIN so that you're not giving out your social security or your social insurance number, but there really is no way to technically use it. It’s just the default entity that you get if you are by yourself starting and starting a business….” - Christina

Let’s get one thing straight! Just because the IRS classifies you as a non-entity, does not mean this is not a legit way to do business. (Tune in around the 39:30 mark to hear more on my experience with that.)

Accountants will typically advise that you do not need to move over to an LLC until you are making a certain amount of money, but they are only looking at it from a tax perspective. Christina shares with us the benefits of having an LLC from a legal standpoint:

“…it puts the responsibility for delivering the services that you say you're going to provide [on the LLC]. For any kind of expenses and debts you're taking on, it puts the burden on the LLC to make good on those promises, instead of you personally…if someone sues you for the work that you've provided, it's your LLC who's entered into the contract with them…they are not able to come after you personally. They can't come after your personal assets….” – Christina

8. Quarterly Taxes

Taxes are tricky, and if you are not intentionally saving up money, or prepaying your quarterly taxes, your tax bill can come as quite a shock! Listen in as Christina outlines some pretty important distinctions between different business structures come tax season (44:46):

“..the benefits having an S Corporation vs. a regular LLC – as far as taxes go – is that sometimes you can reduce that tax burden. You are also paying those taxes monthly, so if you're really bad at keeping up with quarterly taxes, or you don't really understand how they work, that can be helpful.”

And lastly…

My Fave Quote From the Show

“…the beautiful thing about starting a business is that you don't get to just start it and walk out onto Oprah's Favorite Things list! You start it to crickets, and nobody cares about you, and nobody cares what you have to say, or do, or share, or sell…and you find little moments of traction – little tiny things that give you momentum. Maybe a little client project here or there. I was listening to your podcast earlier with the girl that had some friends that needed websites…find little opportunities like that. You start charging for them, and when you realize that this is something that you actually want to do as a business (even if it's not your full-time thing) that's when you can start to look into all of this…it's very rare that somebody gets really hurt by moving forward and taking action in the very beginning baby steps of their business. I feel like what I do at The Contract Shop is give permission. I'm just giving people permission to get out there and sell, and do the things, because they've literally crossed all the other excuses off their list….” - Christina

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