Someone needs to figure out a way so we can clone ourselves and attend all of the Giant Steps workshops and panel discussions. There are so many interesting people, advice, resources and tools that are valuable, it makes it very difficult to choose which break-out sessions to miss which ones to attend. In desiring to learn as much as I can from this experience, I decided to share what I learned during my two break out sessions and share my experience with those who went to other workshops. Didn’t attend Giant Steps, then I can guarantee you can get something out of this synopsis too.
Summary of: (At Least) Ten Legal Things Every Giant Stepper Should Know
taught by Davis at Davis Law Office, LLC and Kenneth Kunkle of Kunkle Law PLC
This breakout session was a summary of the most common questions that Kunkle Law and Davis Law Office get from their clients. One major point was liability. Essentially, liability is risk. In determining which business entity you are (sole proprietor, LLC, Corp, Partnership) there are different levels of liability and some protect you more than others. Corporations and LLCs do their best to protect you against liability when compared to sole proprietorship. Consult a lawyer to help decide which business entity best fits your business and to best suit the money and finances you expect to have in your business. You can always start as one type of business and switch to another.
Another important aspect of liability is the indemnification clauses found in contracts. Davis and Kunkle said that this is usually the bold section of any contract. This is what you need to locate in the contact and read because this discusses the money that is at risk. These areas dictate how liability is created or lost through entering such contacts. Read and understand this area of contracts!
We also learned that there are three components to a contract: offer, acceptance and consideration. You do not need a formal contract to have these three components. This session taught me that I have a contract with these three components even if they are just written in an email. One attendees’s question was how to have that uncomfortable conversation when you ask a client or partner to have a contract. This was my favorite piece of advice, Davis said to blame it on your lawyer. When someone hesitates to working with you because you have asked for a contact, say that your lawyer requires that you have a contract. I will definitely be using that one!
We also learned that it is important to discern specific money aspects of your business. When you put money into your business, what is that? Is it a loan, is it a contribution? Just because you put money into a business doesn’t mean its going to come back out, so decide early what that money is and if or when you are getting it back. Documentation is crucial with this. Also decide how you are going to pay yourself. You need income but what is a reasonable wage for that you are doing.
Seeking a lawyer is important and so is asking good questions. Before choosing an attorney ask their rates, their focus and how long they have practiced. Kunkle stressed the importance of being comfortable with your lawyer.
Summary of: Beth and Taxes: Tax Talk for the Young(ish) and the Receipt-less
taught by Beth Franklin of Fox Tax
Taxes seem quite daunting and I have struggled a bit myself navigating the world of running my creative business while absorbing the necessities of law and tax. From what I have learned, consulting lawyers and tax people are your best source for support. Beth from Fox Tax did a great presentation that covered many aspects that us creatives and business entrepreneurs have.
We started with how to decide if your a business or a hobby. The hot news article is currently regarding Venus de Mars. MN State Revenue Department disagrees with De Mars who claims shes is a professional artist. Why this is a hot topic is that this ruling will most likely set a precedent for other creative entrepreneurs who deal with this issue too. We learned a few tips to help make us act more like a business rather than a hobbies. Its important to carry your business like a business, meaning keeping records, register as a business and pay your taxes. Other important records to keep are mileage logs, your calendars and promotional materials from events (such as your ticket and program from the Giant Steps conference). Demonstrate that you spend time on methods including promotion, research, improving your education and consulting advisers (such as accountants and lawyers). While there are other ways to help demonstrate you are a business rather than a hobbiest the most crucial aspect is to be organized. Beth stressed the importance of organization.
Sales tax was another discussion topic. While quite daunting, there are facts sheets that the state provides to help you navigate sales tax. You can find various fact sheets here. In July of 2013, there was a change in taxes which means digital products are now taxed. This is the sale of music and video. Sales tax should not be included in your total income amount. Separate it on your income and expense sheets when you calculate your finances. As a business, you are merely collecting the tax that is the ownership of the state.
Essentially your goal is to show a profit in your business 3 out of 5 consecutive years. Although this can be hard when you are starting up a business you want to carry on professional activities and write off only your essential business activities. One workshop attendee asked about writing off all business expenses. You can keep writing off and writing off but there comes a point where the state is going to look into all of these write offs and ask why you are not making a profit. If a large expense is going to be questionable, like a large mileage write off, consider taking the risk of not writing off that expense if it is going to hurt you down the road. Talk to your tax accountant for help.
Keeping track of your receipts are difficult, but its even more difficult when the receipt fades with in a year and your are suppose to keep records for seven years. Consider scanning receipts or using an app or software product to manage all of the papers.