Episode 009: 3 of the Worst Pieces of Legal Advice I Have Seen in Facebook Groups

biz entities solo show Nov 06, 2019

There’s a lot of garbage advice on the internet. On this episode, I chat about some of the biggest piles of garbage I have seen.

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Episode Transcript

Braden: (00:01)
Hello and welcome to episode nine of the unfuck your biz podcast. My name is Brayden. I am your host and I am super excited to have you here today on the podcast. I am going to be talking about the three or three of the worst pieces of legal advice I have seen in Facebook groups. So we've all been there. If you're in any small business Facebook groups, you've probably seen some of the garbage heaps that I'm going to talk about. But before we dig in, I want to let you know that coming up in a couple of weeks on November 20th and 22nd those are a Wednesday and a Friday. I'm going to have a few small business legal masterclasses. We're gonna talk about the different layers of legal protection for your business. We'll dig into LLCs, business licenses, even do some Q. And. A. I'm super excited and would love for you to join me.

Braden: (00:52)
So just go over to my website, [inaudible] dot com you'll see it right there and the header. You can click on masterclass to get signed up and hopefully I'll see you there. So to get started. I'll give you a little bit of intro here. Whenever I personally see someone pose a legal or tax question in a Facebook group, I take a deep breath and then I prepare myself for the inevitable dumpster fire of answers below. I always hit the little follow button as well. If you guys don't know that tip top tip for you, you do not have to comment following on a Facebook post. You can click the button in the top right and follow the posts so you get notifications when people comment. Anyhow, that's a personal pet peeve of mine. Got off on a tangent, but I get when people post these questions and when people give answers, everyone wants to be helpful.

Braden: (01:45)
It feels nice to provide valuable insight. It's just problematic when that insight is not grounded in expertise or at least a basic understanding of the issue. I'm not saying the only attorney should be giving feedback on contracts. You all have personal experience you can draw from. I am not an email marketing expert, but I've done talks on it and I answer questions in groups about it, but we all should know our limitations and that's kind of where the frustration ensues. So I don't personally have time to police the internet for garbage advice. Instead, I've combined compiled this list of worst pieces of legal advice I have found in Facebook groups and hopes that at a minimum it will make you second guess what information you get on social media. Now I'm going to go through three on this podcast. I have a few more. If you guys liked this episode, let me know.

Braden: (02:36)
Send me a message because I'm kind of stockpiling these questions, that answers and that I can do more episodes if you enjoy it. So the first piece of advice I got or not that I got, and it's not even really advice, it's an answer to a question, is one individual said, I know LLCs helped protect you, but why do you need one? If you have a super great contract that covers everything, so this was good. You know, this person wasn't telling people that they didn't need an LLC, they were just inquiring if you really do need one, if you have a great contract. So I thought it would be worth sharing my input on this post contracts are awesome. I love them. Can't get enough of them. They're bitching, but they should not, um, be the only thing to consider in your business. I often talk about the six layers of legal protection or seven layers of legal protection for your business.

Braden: (03:32)
For more information on that, you can go back and check out episode six where I talk more about those layers. But contracts are just one of them. Uh, I've used the analogy before that contracts should be considered the moat to your castle or to the castle is your business. Sure you can limit liability, uh, like indemnity. A concept I won't fully bore you with on this podcast, but ultimately the contract is there to help you iron out the understanding between the parties so it can keep some of the riffraff and bullshit away from your castle. But it's not going to protect you from everything. They are not there to protect you from stupid lawsuits. Those are going to come regardless and you can't contract your way out of all of them. But they are there to help protect you from some things. So there are very good first step, but they don't take the place of LLCs.

Braden: (04:30)
LLCs can help shows your personal assets if you are ever sued. So the purpose is so that if someone sues you for, let's say breach of contract, that person can't get a lien against your home, your retirement account, you get the picture in order to solve it. So the contract is one layer of protection. It's the first layer, but you still need to have the other layers intact. I'm not going to be the attorney either. The tells you that you have to have an LLC right out of the gate. That's not the case. It's an amazing thing to do. If you're in a state where it's affordable, many States are only like 100 bucks, then definitely do it. If you're in California, let's look at the risks involved in your business to make that decision. So that was the first piece of advice. We'll say number two, this is a quote my tax person told me not to worry about forming an LLC until I'm making more than $8,000 per year because the LLC fees don't make sense until I hit that threshold.

Braden: (05:39)
So $8,000 is totally arbitrary. It makes literally zero sense. Here's a super stream, extreme example to explain this to guys. Let's say though Gates decides to start a base jumping business. When people ask, Hey, bill is the safe, he responds, you know, probably. Okay, so that's terrifying. So only one person pays to go base jumping with bill and that individual breaks their leg bill makes $0 million in his base jumping business. You know, he wasn't very reassuring to the question of whether it was safe. So only one person Tatum, but he had a lot more extensive than that. He's not profitable. If I am a this injured individual's attorney, you can bet your ass we will Sue bill for medical bills, emotional distress, and whatever else we are entitled to under the law. And the fact that Mr. Gates made $0 million in the business is totally irrelevant to the claim.

Braden: (06:38)
We're not going to say, Oh Hey bill, how much money did you make in your business? Oh, you weren't profitable. Okay, we won't Sue you. That's not how any of this operates. Now, where some of this can make sense is if you're not bill Gates, you don't have a lot of assets, then a lot of people are going to say, well maybe I won't Sue you because you don't have any money to pay me, but if something really does go awry, that's not really how it will work. What I'm assuming this tax professional is actually explaining to this person is that the less you make, the fewer clients you have, the fewer clients you have, the less likely you are to have an issue and the less likely you are to have an issue, the less likely you are to get sued. Of course, that's all you know, just a correlation and not super helpful.

Braden: (07:26)
Why they threw out the number $8,000 I have absolutely no idea. I've never heard that from anyone else. Also consider your business model. So most of us are not involved in something as risky as base jumping. However, here is a better example. So let's say you own an event venue. On day one someone falls down the stairs, six months later you get a demand letter from an attorney asking for $50,000 to cover pain and suffering and medical bills for that individual. The LLC seeks to separate you from the business and helps protect your personal assets from a judgment. They're not really going to care how profitable your businesses, that's not relevant. What happens a lot of the time, and we're going to get into this, and the next talking point is that people go to tax professionals who are only advising them on tax savings and not liability.

Braden: (08:17)
And this is why it's helpful to consult those tax pros and attorneys. Okay? So the third piece of advice that, and I see this one all the time, if I have any tax friends who are listening, they might get mad at me for this one. But I always see people say before deciding if you need an LLC, call your tax person, CPA or tax professional. And this is not awful advice, but it's just a personal pet peeve of mine. The point I want to make is that tax pros are there to give you tax advice. It's one factor in determining your business structure. So when I say business structure, we're talking DBHs sole props, LLCs, escorts, business owners, profit shares, all this kind of stuff. And there are tax outcomes of course that are different depending on which legal structure you choose. But there are also liability concerns.

Braden: (09:15)
So as I noted above, uh, or before converting to an LLC has no impact on your income taxes. I may have forgot to mention that, but I met two. When you convert to an LLC from a sole prop, your income taxes do not change. They're the exact same over and over again. I see in Facebook groups, people stating that their tax professional told them there's no reason to get an LLC. And what they don't realize is that the tax person's not an attorney. They're not advising them on a risk or legal structure. Also, uh, when you are ready to form an LLC, you will need to get an operating agreement and some other legal documents that most tax pros cannot provide to you or should not provide to you cause they're legal documents. I advise pretty much anyone netting less than $50,000 in the business to form an LLC if they can swing it.

Braden: (10:09)
And if you're above that threshold, then it's time to go talk to a tax professional about whether an option like an escort is gonna make more sense for you for some more information on the escort. You can go back and check out episode five. I also have a blog on that as well. So in that case, absolutely talk to a tax pro. You can always come to someone like myself. I'm kind of like the mythical unicorn of professionals and that I do both legal and tax work, but you will still want an attorney to actually form your legal entity for you. Also, to give a caveat, a things are more complex than partnerships. So if you have a business partner, things can get a lot more complicated when you contributing cash and property to the business. So that's pretty much all I have for this episode.

Braden: (10:56)
I hope it was helpful. Hope you learned a few things. If you want to learn more about whether it's time for you to form an LLC, go check out my freebie called the small business blueprint. The first part of that is an LLC risk assessment. You can answer, I think it's like 10 questions and you know it's a cosmos style quiz. You add up the points and then it tells you how in need of an LLC you are. So check out that freebie unfuck your [inaudible] dot com click the freebies button, go download it. And then also again I mentioned at the beginning of the episode I have some legal masterclasses that are coming up on the 20th and 22nd this month I'll be talking more about LLCs, how they work, how you form them, the different licenses you need. And then we'll have a Q and a at the end. So I would love for you to sign up for that. Again, you can go to my website and get all the information you need. Hope this was helpful. Uh, would love for you to hop in the Facebook group for Aiden's besties. All the stuff's on my website and subscribe and leave a review and I will be back in your earbuds in a few short days. Have a good one.

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