In a prior post on the topic of Launching a Consulting Business I mentioned we’d cover the necessary (but boring) stuff that must be in place (i.e., legal, accounting, insurance, etc.) to properly manage the business and mitigate the inherent risks.
An overall theme here is recognizing that there must be separation between your personal and business affairs.
This starts with determining the type of business entity you will form. Key considerations:
- Protection: separating your business from personal affairs (as mentioned above)
- Taxation: as each type of entity has different tax implications (costs / benefits)
- Client preference: I’ve found that “most” companies prefer to engage with a corporate entity vs. an individual.
Realizing the above, I formed a corporation right from the beginning…
It is suggested that you discuss this topic with your Legal Counsel and CPA to determine the type of corporation and/or entity that is right for you / your business.
Building on the topic of legal, you will also want to have in place the appropriate legal support and contracts you may need. This can include, but is not necessarily limited to, agreements between your company and:
- Your clients
- Any subcontract / freelance consultant you may engage
Lessons learned in this regard:
- Your clients will likely have a set of standard agreements (non-disclosure and/or master service agreements) you’ll need to execute in order to engage with them. That said, prior to executing, you may want your Legal Counsel to review these and provide any guidance – for your consideration…
- You’ll want to have a Statement of Work (SOW) template that generically outlines the nature of services you provide and the parameters you use to frame-up / scope / price the project as well as documenting a standard set of expectations and assumptions that your client must be aware of when engaging you to deliver the services you render. Then, once you begin discussing a specific project with a client you can update this with the relevant details.
- Bottom-line: When engaging Legal Counsel make sure you feel 1000% comfortable with them and clearly define their scope (i.e., the number of hours they are allowed to burn on each topic you request their input on). Also note, your Legal Counsel does NOT run your business. Their guidance is for your consideration only. You must consider their input and weigh the potential risks (or not) that could result by not following that guidance. To be clear, I’m not suggesting that you play in gray areas where you may be “legal” or not. Always remain compliant with law! What I am indicating is that your Legal Counsel may suggest adding “extra weight” to the language to protect you and/or try to remove your client’s contractual language for the same reason – when it simply may not matter. The decision to take their guidance, or not, rests on you!
The firm I have worked with since my business launched is: Innovative Business Law Group, which I would highly recommend. If you contact them, tell them I sent you.
A final piece of advice regarding your legal counsel. Don’t let them take you out to lunch 🙂
Some time ago I went to lunch with my legal counsel from IBLG and he asked me some very good questions which identified potential risks / blind spots that I had not considered. The result: indigestion 🙂 Thankfully, we promptly closed those gaps and my indigestion has subsided…
In a future post we’ll continue covering the “boring stuff” that must be in place (i.e., accounting, insurance, etc.) to properly manage the business and mitigate the inherent risks.
DISCLOSURE: I am not qualified to provide legal, accounting or insurance-related advice. What I am suggesting here is: you must get some!