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Lesson 5: Three Simple Rules
You made it to the end of the Master Class — congratulations! You mean business and you’re absorbing legal information like a sponge.
This edition of our Show Notes is going to be a little different. Instead of diving into boring legal topics, we’ll explore what our 3 simple rules for legal domination mean for you as a business owner, and how you can put them into practice to start saving money, time, and stress.
Rule 1: Start Early
If you tallied up how many times we’ve said the phrase “start early” (or some version of that) over the course of this Master Class, we’d be well into double digits! Hopefully, instead of annoying you, you have to come realize that it is truly important.
Opening your own business or founding a start-up requires more than just a good idea and a positive attitude. Once the initial excitement of a venture simmers down, most founding teams and entrepreneurs will be faced with the daunting realization that there is a mountain of logistical, administrative, and legal hurdles they’ll have to overcome.
It’s kind of like signing up for a marathon... the more work you put into your training early, the better you’ll perform in the long run! Get it? Because a marathon is a long run? Anyway, much like early training, the legal decisions you make at the outset of your business will have resounding impacts down the road when it matters most.
The smart business owners at Ice Cream Co. know this concept. They’ve done their research, brushed up on their legal understanding, and thought about the future goals of their company. They realize their business has a propensity towards risk and their long-term business goal is to expand operations nationwide, so they incorporated their company right from the very start, instead of operating as a sole proprietorship or partnership.
They also face tough legal decisions head-on, recognizing that brushing them aside only delays and multiplies the cost of dealing with them later. They decide to start early, have an uncomfortable conversation with the founding team about equity splits and founder proofing the company, and apportion shares in a way that is conducive to long-term corporate sustainability. All using a well-drafted Shareholders’ Agreement.
On the flip-side, the ill-informed entrepreneur doesn’t address legal issues early, often skirting responsibilities and legally required tasks as there aren’t any “serious” repercussions (on the surface). Sure enough, months go by without any major issue! Bullet dodged right? Let’s say the responsibilities our entrepreneur pushed aside were minute book requirements, founder proofing, and annual corporate maintenance for their company. Let’s say they’re looking for funding from angel investors to get some more runway to keep the business afloat in a capital intensive stage of the business. The very realistic outcome is that an angel investor takes one look at the state of their corporate affairs and gets out of there as fast as they came in! They don’t have the right kind of shares to take investment, their minute books are in disarray, and there are no mechanisms in place to save the company if a founder leaves.
Even if the angel really wants to invest, a total overhaul of the inner workings of the corporation has to be undertaken, costing potential thousands of dollars and countless hours better spent developing the business instead. And that doesn’t even consider the fact that annual corporate maintenance is required by Canadian law and your company can be formally dissolved by the government if you don’t file your corporate returns. Talk about a whoopsie!
Rule 2: Get the Right Help
This is a rule that has its applications beyond the legal context or even in the business world. Talking to a lot of clients and lawyers, the same characteristic that separates the ones who find long-term stability and success are those that have gotten there with the help of others. You might be an expert in developing computer software, but no single person can be an expert in everything that it takes to build a thriving business. That’s why the best leaders know how to delegate tasks to those who are in the best position to achieve successful results. As a business owner, knowing that other people have the expertise to help you more than you can help yourself is important. Especially when we talk about legal.
A big part of this rule stems from something we’ve been touching throughout our lessons as well: recognize that you don’t know what you don’t know. Spending some time and taking stock of your own limitations isn’t meant to demean or discourage you, but instead provide an opportunity for growth in an area that you aren’t familiar with. This can even apply to areas that you may actually consider yourself an expert in too!
Let’s come back to our smart business owners at Ice Cream co. They are extremely well-versed in the culinary arts having gone to one of the finest ice cream universities in the world. Even though they know the ins and outs of the ice cream they’ve created, they have the wisdom to understand that creating their intellectual property (the ice cream in this example) is not the same as protecting their intellectual property.
Instead, they realize that things like intellectual property assignment agreements, licensing and royalty agreements, and patent or trademark registration processes are all required to protect the business. Instead of bankrolling the entire value driver of their company on an (at best) educated guess or doing it themselves, the well-informed founding team recognizes that they are out of their depth, so they contact a respected intellectual property lawyer to get their secret sauce protected. Additionally, they are in regular communication with their lawyer and never hesitate to ask them for help!
On the other hand, the not-so-well-informed entrepreneur takes a different approach. They have a team of contractors who are still extremely gifted at making ice cream, but due to a lack of research and information, they assumed that whatever was created in their company belonged to the owner of the company! I mean it makes sense right? If someone paid by the company creates something on the company time and dime, it would be logical to assume that the IP goes to the company owner.
But, there’s a bit to unpack here: if an employee creates IP for the company, there is a presumption that the owner of the IP is the company itself, not whoever founded the company. That’s why there are IP assignment agreements and special clauses in service agreements that would make these clear! Now this business owner might have to spend thousands of dollars and jump through hoops just to ensure they own the IP that their contractors created on the job. It could have all been avoided if they had just talked to a lawyer!
Rule 3: Keep Costs Down
No one in their right mind, particularly when they have a million other things to do, would want to overcomplicate and overpay for their legal work. By following our first two rules, you’re starting to make the law work for you already and turning your legal work from a sunk cost into a long term savings plan. But there’s a third rule you can follow to drive your savings even further: shop around, keep things practical, and don’t overpay for a bunch of bells and whistles.
When you’re keeping it practical, that perspective applies to your legal work and your lawyer! If you’re discussing your problem and they’re constantly using terminology you don’t understand, adding clauses that feel too specific or confusing for your situation, or you generally just get a sinking feeling in your stomach that the service (and the fees) are not what you’re looking for, then chances are you’re right. Listen to your legal spidey sense.
Our well-informed entrepreneurs at Ice Cream Co. know our three legal rules. They start early before their legal questions become legal problems, and recognize that they are not legal experts. And when it comes to hiring a lawyer, they don’t go looking for a partner at the nation’s top firm, and they certainly don’t hire a lawyer who gives them vague answers and won’t give them a price. They use Goodlawyer, where we connect small businesses to solo and small-firm lawyers with the expertise they need, all on a user-friendly platform at prices that are consistently less than half of the national average. Boom.
How do we do it? Goodlawyer is not a law firm, and we don’t follow the same archaic model that most law firms do. Instead of the expensive billable hour where lawyers charge you for every 6 minutes that they spend thinking about your file, Goodlawyer sets out fixed prices for your legal needs upfront. That way you’ll always know what to expect — no surprise fees, just consistent and transparent legal pricing.
Putting It Into All Practice
We truly believe that the best way to exercise these legal rules is to find a trusted legal advisor who understands your business, and have a solid plan for the legal services that you’ll run into during the course of your start-up or small business. At Goodlawyer, we try to make lawyer-client interactions as simple and transparent as possible, facilitating connections between business owners and vetted legal professionals across the country. Plus, we have a ton of free resources that are tailored to the needs of business owners just like you.
So if you’re a business owner looking to get started and learn a bit more about legal before diving into the deep end, you can tap into any of our free resources:
Weekly webinars across a range of legal topics for businesses
Recordings of past webinars on our YouTube page
30+ legal service descriptions with pricing and downloadable info sheets
Podcasts where we interview other start-up founders and influential professionals who are shaping the future of the legal industry
Blog posts explaining nitty-gritty legal concepts in plain language, including a Legal 101 Roadmap
A Legal Concierge™ service that can direct you to the right services, lawyers, and resources for your needs (did we mention it’s free?)
When you run into something that goes beyond the scope of your knowledge or understanding, you can book any one of our affordable micro legal services. Because of the efficiencies, we add to a lawyer’s process, we make these services economically feasible for everybody and you simply can’t find them anywhere else:
15-minute Advice Sessions with any lawyer in our network for $39
Contract Reviews with a mark-up and phone call to explain and advise for $25 per page
If it’s time to pull the trigger on a bigger service, Goodlawyer has upfront prices for over 40 business legal services and can broker custom quotes and bundles for anything else you need, all at prices that are consistently less than half of the national average. Visit our pricing page and see for yourself.
So you see? Listening to your newfound legal spidey sense and putting our three rules into practice means you don’t have to be scared of your legal work anymore. We’re proud of you for making it through this course and you should be proud of yourself too. You just became a smarter business owner.