JUSTLAW

The best advice you’ll ever get for starting a business

                                                 About the Author

Dov S. Rosen is a JUSTLAW network attorney who represents private and publicly-traded companies in negotiating mergers, acquisitions, private placements,  IPOs, and commercial contracts.  He also has an active practice negotiating commercial real estate loans,  property acquisitions, and commercial leases.                   

Dov graduated from Georgetown University Law Center in 2011 and, in 2020, founded The Law Offices of Dov S. Rosen. 

He can be reached at [email protected]

(This article is the first in a multi-part series. Stay tuned to The Verdict for the next installments!)

 

You’ve got a winning idea. You have a business plan set up. Maybe you even have some investors lined up.

Congratulations – you’re on your way to starting your own business.

What’s next?

Part I: Cash 101

Cash is the lifeline of any business. And the key question for your business is how that cash flows in and how it may be expected to flow out. This leads us to the first big choices your business will make: how to raise money, whom to raise it from, and what to give up in return.

 

Early-stage startup investors will often include family and friends, “angel” investors (generally, high-net-worth individuals who are willing to invest in early-stage companies in exchange for preferred equity), and – for particularly promising new companies – venture capital firms. Nowadays, crowdfunding platforms like GoFundMe are also becoming increasingly popular for early-stage companies (we will explore the advantages and limitations of crowdfunding in a later installment). For startups later in their business lifecycle, institutional investors may play a greater role, and for more advanced companies the public equity markets may become relevant.

 

Each of these investors will have different expectations about what they will receive in return for their money. Typical forms of startup capital include common equity, preferred equity (often with the right to convert to common at a later time), and convertible debt (debt with a right to convert to equity at a later time). Other equity structures like simple agreements for future equity, or “SAFEs”, offer distinct advantages and disadvantages and are becoming more common. And for many businesses, business loans (including SBA loans for qualified borrowers) are a good option for providing initial capital – but with their own advantages and disadvantages. We will discuss these various types of startup capital later in our series.

 

A note on securities laws:

Our focus is on early-stage startups engaging in private offerings that are exempt from registration with the SEC or other state regulatory commissions. Securities laws are not just for public companies – any company that issues equity to raise money is potentially subject to them and must fall within an exemption avoid registration and reporting requirements. In later parts of this series, we will speak about the various exemptions from securities laws and

how to make sure you stay within the rules throughout your business lifecycle.

Trade-Offs

Cash will almost always come at a cost. To make your idea a reality, you will inevitably have to trade a piece of ownership over the idea you have created and often a degree of control over the business you are building. But that does not mean all equity raises will have the same impact on the future of your business. The choices you make early on can determine the evolution of your business for years to come, preserving your flexibility and a large degree of your control. Conversely, a sub-optimal equity structure, poor entity choice, or improperly drafted company agreement can hamstring your ability to raise cash, leave you stuck with a bad partner, and even cost you the control you need to make your business grow.

 

But making necessary trade-offs is a natural part of the growth cycle of every business. The key is to establish clear expectations and to structure investments in a way that respects the needs of investors while preserving your ability to grow the business. The trade-offs you will have to make will generally come in the following areas: keeping cash in the business, keeping the flexibility to raise more cash, and keeping control over business decisions

9 Steps to Start Freelancing the Right Way

June 30, 2021
New York, New York

In a recent podcast from the Wall Street Journal, a different kind of outbreak was featured in the episode “Why is everyone quitting? Workers, especially young ones, are leaving their full-time jobs in droves in search of more satisfying, more flexible and often more lucrative work. In fact, 2.7% of workers quit their job in April 2021, according to the podcast.  And freelancers are more in demand than ever before, as everyone from small businesses to large corporations hires freelancers for a variety of projects, ranging from copywriting and web development to catalog design and consulting.

Working as a freelancer typically means working your own hours ( remember, if you’re successful, you’re going to have a new boss: your clients) on your own terms. But it also means sourcing your own clients and managing an entire business yourself. 

If freelancing sounds like the right fit for you, this guide can help you. Below we outline 9 simple steps you should take in order to get started in your new career as a freelancer. 

1.  Set up a website. Establishing an online presence for yourself is important. Clients need to be able to look at your work and find you quickly. Maintaining a basic website is fairly simple. Nowadays, no-code platforms like Squarespace allow you to get a professional looking site designed and launched without any particular design or html expertise.

Remember that your website will need a well drafted privacy policy, terms of use and it should be compliant, at minimum, with the ADA’s laws on accessibility, the GDPR if you’re doing business in Europe, and the CCPA if you’re doing business in California. Subscription legal plans for small business sometimes include this legal work at no additional cost.

2.  Get a DBA, sole proprietorship or another entity. For most business entities other than LLCs and corporations, the legal name of the business is the personal name of the business owner(s). If you want to do business as “John Doe”, you can stop reading this section now, as nothing else is required. However, if you plan to do business under a name other than your own, such as ACME Digital Consulting, or if you want to set up a bank account under your business’s name, you’ll likely need a DBA. In this case, you’ll be operating as a “Sole Proprietor” and should become familiar with two tax forms: W-9 and 1099-MISC.

3.  Plan for taxes. Equally important to your choice of business structure (#2 above) is planning to optimize your taxes. Expenses on business meals, home offices, and mileage when you’re driving for business, among other items, can all serve to minimize your income – through deductions – and lower your tax liability. Understanding the tax impacts of these expenses will be important to your finance well-being, so start early. 

4.  Get your permits in place. In addition to a DBA, your state may have specific laws for individuals doing business. Research and obtain any state and local permits or licenses you’ll need for your business. Or check a site like NerdWallet that does some of the research for you.

5.  Order business cards and stationery. A significant challenge as a freelancer will be sourcing clients (more later). Online companies like VistaPrint offer inexpensive solutions for business cards and stationary, to give you a polished and professional look, and to make sure you make a lasting impression as your network grows. 

6.  Think about your future. As a freelancer, you’ll have to sort out your own path for retirement savings, medical insurance, dental, etc. Speak with your accountant or a financial advisor and set up a plan to make sure your needs and goals will be met and review websites like Value Penguin to see and compare health insurance quotes from a variety of insurers.

7.  The infrastructure plan. Without the right tools to perform your trade, your work product and efficiency will suffer. Freelancers will often tell you that while working at your leisure sounds glamorous, there are a few drawbacks. For some, the solitude can get lonely. Freelancers working remotely can’t talk to a co-worker between projects the way employees in an office can. On the other hand, freelancers don’t have to deal with office politics.
For maximum productivity, set up an in-home office, or find another place where you can focus and get work done. The absence of a boss down the hall may be a highlight; however, that just means you have to be the one to manage deadlines and productivity.

8.  Promote and network. Working for yourself means promoting yourself, and getting started as a freelancer can be very time-consuming. Online networks like LinkedIn permit you to publish your goals, ask questions, and network with other professionals.

But don’t stop there. Spread the word to friends and family that you’re venturing into freelancing and ask for referrals where appropriate.Set up a blog. A blog can help you connect with other freelancers and bloggers as well as potential clients. It will also help your website with search engine optimization (SEO) over the long term.

9.  Be an influencer. You don’t need a famous TV show or a massive social media following to be an influencer. You just need to own your lane. So figure out what it is, and get to work. Many times, asking and answering questions is the easiest way to get people involved and invested in what you do, and while you could meet 10 people during a networking event, you could meet 75 online. When you combine a strong digital presence with meaningful personal interactions, you’ll really see your stock rise. So get busy! 

* * * * *

Working as a freelance entrepreneur can be intellectually rewarding and financially lucrative, but you need to build the right foundation from the beginning. Using this article as a guide to start laying that foundation can help you to later focus on your work, your customers and enjoying the flexibility you’ll gain from this important career choice.