Episode 237: Are You Protecting Your Assets? with Sharon L. Tasman
Law contracts done right are a small business owner’s best friend. They will protect your personal assets. They will protect potential clients from stealing your work and not hiring you, which happens more than you think.
Sharon L. Tasmin is a seasoned business and technology attorney with over 30 years of legal, and over 10 years as a business. Having spent 15 years at HoganLovells, one of the world's largest law firms, and serving as in-house counsel at MedImmune, Sharon founded HTBiz Law to offer clients the best of both worlds—a boutique law firm experience with the expertise of a global firm.
Sharon's passion lies in empowering women and members of the BIPOC community to start and grow their businesses. She understands the challenges faced by solo and small businesses and offers tailored solutions to overcome them.
As you listen to today’s conversation, grab a notebook and take notes on the different ways you can protect yourself as a business owner and listen as we discuss your experience, how valuable that experience is to the people you serve and to reflect it in what you’re charging.
Choosing law and contracts
Sharon started her career in law in one of the world’s biggest law firms. In house, she saw what it was like to be a woman on the inside in big law, big corporate. She saw women choose not to have children to make partners, or women who did make partners give birth and take calls from the hospital. Sharon knew that wasn’t what she wanted.
“For women in general, we should be able to have balance, do the things that we want in a sane way,” says Sharon. “And unfortunately for a lot of the time still, it means being your own boss. And I started my practice in 2013, so wow, we're going on 11 years now. Flexibility matters.”
For Sharon, as someone who was good in business, good in tech, and had a friend who gave her advice after starting a similar business, -- it was still way harder than she expected. She knows how hard it can be. So she’s trying to empower women and give them the resources.
“Men will apply for the job, start the business, ask for the raise when they're only 50 to 60 percent qualified,” says Sharon. “Women wait till they're 80 or 90 percent, and we don't have to.”
Importance of contracts
Sharon says there is a stereotypical image people have of lawyers – that they’re scary, evil, ambulance chasers, or unaffordable. While there are people who do fit that stereotype, Sharon wants people to avoid getting trapped in a bad contract and be able to protect their personal assets. Contracts don’t have to be scary. The reality is, is if you are in business, you deal with banks. They make you sign things. When you have business insurance, you sign things. Your clients, your customers sign things all the time. They sign contracts every day. They may just not think of them as contracts.
For example, you buy software. You signed a contract. You may be clicking “I agree”. We do not think somebody is evil because they bought software and clicked agree.
“If somebody refuses to do business with you because you want them to sign a contract that protects you and still gives your client or customer what they need run, because that's the potential client that will not pay,” says Sharon.
They will likely leave bad reviews. They will likely have unreasonable expectations.
The contract protects both of you. The single greatest disagreement between service providers, consultants, business owners and their customers is when there wasn't the clear understanding of what you are going to do, for how much money and in what time, versus what they were going to get in, what time and pay how much. The simplest way to solve that problem is to put it all in writing and sign.
The reality is, is not all money is good money and not all clients are good clients for you, says Sharon.
“The hardest decision a new business owner will make when they are new and desperate for money is ‘I must take every bit of work that comes in the door,’ and that is 100% the wrong thing,” says Sharon. “If you are so desperate or foresee that you will be so desperate that you will not be able to say no, you're not ready to start your business as your full-time job yet.”
Two mindset tips to protect yourself
Sharon has two questions to ask yourself if you’re thinking of starting a business full-time.
- 1. Are you ready to make the change from employee to boss? Sharon notes that when she was a lawyer at a firm, she had support. There were accounting and billing departments, she had access to a legal secretary, car service and health care. But as a business owner, in addition to the billable hours, you’re doing everything else. Are you ready and are you capable? You might be the world’s best business consultant, but maybe you hate preparing invoices and chasing clients for money.
- Are you financially ready? What will happen if no income comes in the door for the first six to 12 months? Sharon says she believes that everyone should have three to six of their of all of your living expenses in the bank, in cash, sitting somewhere completely accessible every day – or 12 months if you’re going to start a business.
In Sharon’s case, she was ready to launch her business when her mother relapsed with cancer. The experience was emotionally draining and exhausting. Sharon herself ended up in the hospital twice.
“It may be that when you get that far enough in the business, the first hire you make isn't your assistant,” says Sharon. “It's a housekeeper or a chef, or you send out all your laundry because it is true. We cannot do it all, all the time.”
You have to make sure that you can, in your business, do the self-care you need to do, the home care you need to do, and your job.
File an LLC
If you are operating under your own name, if it isn't a separate LLC, it means that there is no distinction in the eyes of the law between you as a business and you as a person. This means if you make a mistake and get sued, all of your personal assets are at risk.
Sharon says it’s not just the business assets: your house, your car, your savings. “The first thing you need to do is file an LLC and it will be the best one to 300 hundred dollars you will ever spend. If you can't afford that, you should not be starting a business for sure.”
The next step is to operate as a business, says Sharon. Get a business checking account and credit card as well as an operating agreement. The agreement helps establish a line between you as a business and you as a person.
It also lets you indemnify yourself, which means to protect yourself. The business can say, as long as you, person and manager of this business are doing things in accordance with the law, the business will cover your damages. And so it will lay out what you want to happen if something happens to you. Do you want it to go to a spouse, a child, or just shut down? You want to protect the image after you're gone or after you're done with the business, and you do all of that in the operating agreement.
What do you actually own?
Sharon says when she asks this question, she wants to get people thinking about all the things they use every day in their business – that they have created over years of experience – that they don’t think to charge for.
This might include a code bank, algorithms, a spreadsheet with custom macros, reports, and whitepapers. For example, Sharon has a roadmap that she gives away for free, but it’s her intellectual property. She owns it, and she has a copyright on every page.
“If you don't sit down and think about doing inventory of all the things that you use … I guarantee you don't know everything you own. And I'll also guarantee you're charging less than you should,” says Sharon.
Do the inventory. Think of everything that you've created, and then make sure that you're taking that into account in the rates that you charge. Do you add $25 an hour? Is it in a flat fee?
Get clear on what you’re providing
Sharon says the other missing piece is oftentimes people don’t get specific enough about what they are providing in the contract. She says there might be something like “the consultant will perform the services to the client’s reasonable satisfaction.” What this means is legally you’ve agreed to a free performance of services until the client says they are satisfied.
Get clear and specific to protect both parties. Let’s say you’re going to build a website for a client. Don’t just say, “I’ll create a website for your business.” Instead, “I’ll create a website for your business with five main pages and four subpages. It will be built on this platform and integrated with this payment processor, and I’ll provide X hours of re-performance services for free. The rest will be at my hourly rate of …”
“If you take the project that absorbs 40 hours a week of your time, it isn't just that it may not be the right client and you may be getting paid less for this project, it's you're losing the opportunity cost of something else,” says Sharon.
More from Sharon
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