Jacob Tingen: Are we live?
Andrew Michael: We are live. The live button is pressed.
Jacob Tingen: We’re not going to have the same pre-recording conversation about Muppets? We’re not going to do that?
Andrew Michael: I mean if you want to talk about Muppets this Law Talk, feel free.
Jacob Tingen: No.
Andrew Michael: You’re the boss, man.
Jacob Tingen: You can save that for a copyright conversation or something fun.
Andrew Michael: I mean we could make it like a Muppet business. Wait, that’s trademark infringement. Never mind.
Jacob Tingen: Yeah. No, that would be trademark infringement.
Andrew Michael: But, yeah. So, it’s Wednesday again. This is take two of Law Talk because apparently a single switch was messed up on our sound board, so-
Jacob Tingen: Oh, it’s too bad.
Andrew Michael: It’s too bad. I mean we get to do it better this time though.
Jacob Tingen: Well, let’s do it better.
Andrew Michael: Let’s do it better.
Jacob Tingen: Let’s do it better. We’re talking business. Small business.
Andrew Michael: We’re talking small businesses, specifically small businesses in Virginia.
Jacob Tingen: Yeah.
Andrew Michael: So, I guess the first thing to cover is what’s the point of registering a small business in Virginia? Registering gives you protections. It gives you all of these other kind of things. What is step one, recognizing should I register my business?
Jacob Tingen: Yeah. I mean, so registration is step one, but how do you know when you got there? So, we get clients in one of two general ways. Either somebody’s already making money, and they’ve started doing business. Or, before they start a business officially, they plan to make money, and they come see us. So, one of the things that I think is interesting about how the law works is that people interact with the law all the time even though they don’t realize it. And so, one of the ways in business that you interact with the law is once you begin a business, once you start selling something and making money, the law applies certain legal definitions to you.
Andrew Michael: Automatically.
Jacob Tingen: Yeah. So, there are tax and legal implications that are imposed on you automatically, without you even knowing. It just happens invisibly. So, if you start a business, and 10 minutes ago we used the example of if you, for example, started a lemonade stand, then that’s a sole proprietorship, even if you’re a kid. And, of course, there are licensure requirements, too, on lemonade stands. There shouldn’t be for kid lemonade stands, but if you’re an adult with a lemonade stand, maybe we should license that.
Jacob Tingen: But anyway, yeah. So, once you begin doing business, you’re a sole proprietor. If you’re doing it with more than one person, you’re a partnership. So, like I said, there are legal and tax implications for just the concept of doing business generally has certain consequences that result from that activity. And so, lawyers can advise on what you’ve done, and how that affects your business moving forward. And then, how to also start from scratch and register a business the right things and do things legit and above board in the right way.
Andrew Michael: Yeah. So, basically what you’re saying is from the moment you make your first sale, a legal definition automatically applies to you-
Jacob Tingen: Oh, yeah.
Andrew Michael: … based on how and what you’re doing.
Jacob Tingen: Yep.
Andrew Michael: And then, again step one, recognizing how that definition affects you moving forward is critical to setting up a small business. So, talking with a lawyer of like, “Hey. I’m a partnership. What does the law say about this?” seems to be a critical first step.
Jacob Tingen: Yeah. Yeah. I mean and in addition to a lawyer, I’d say accountants also have a big say in what you should do and how you should structure different tax implications of how you’re running your business. There are some pretty standard good practices that any good business lawyer would know and be able to advise you on how to set up a company and make sure that you’re not at a tax disadvantage. But, yeah. No, I mean definitely get professionals involved, and you’d be surprised at the money that they could save you.
Andrew Michael: Yeah. Oh, definitely.
Jacob Tingen: Yeah.
Andrew Michael: Sort of on that note, so we’ve talked about the automatic definitions which apply to you like from your first sale, but there’s also you can register as a certain business with Virginia.
Jacob Tingen: Right.
Andrew Michael: And this is sort of going into what you were just talking about with saving money because by applying for this certain definition like as in LLC, a limited liability corporation or company.
Jacob Tingen: Limited liability company.
Andrew Michael: I always get that wrong. But, yeah, so by applying for this, you gain other sort of protections and sort of have different rules apply to you. So, you want to sort of speak a little bit to the different types of registered companies?
Jacob Tingen: Yeah.
Andrew Michael: How to register, what benefits there are. I know the LLC is your favorite type. Sort of talk to that a little bit.
Jacob Tingen: Yeah. So, I always tell people the limited liability company or the LLC is my go-to business entity for most people, and we can talk about corporations, too. What the LLC or the limited liability company does is it gives you limited liability protection. So, in the event that your business activities harm someone in some way, you personally would not typically be liable for liabilities that your business incurs, or that you incur through the operation of your business.
Jacob Tingen: Now, a lot of people register as an LLC, and then they try to take out a bank load or sign a lease, and they’re like, “Well, I don’t need to sign the lease. My business is the only thing on the hook.” You’re going to find as a new business that you’re still going to have to personally be on the hook for a lot of those expenses and loans and debts and that kind of thing. So, that’s not where the LLC really helps you, especially as you get started.
Jacob Tingen: Where the LLC is going to help you is in the event that you get sued. So, it’s going to protect you, again, personally. You personally should not go bankrupt if you’ve set things up well in the event that somebody comes after your business. And so, that’s one. I mean its litigation risk is, frankly, a very important reason to set up limited liability protection for yourself.
Andrew Michael: I mean if that was the only reason, it’s still worth it.
Jacob Tingen: Oh, yeah. And it’s super cheap.
Andrew Michael: And it’s good for personal injury, for like anything, having that extra protection. Yeah. You said, “It’s super cheap.” It’s like, what? $100 or something?
Jacob Tingen: Yeah. To register in Virginia, it’s 100 bucks.
Andrew Michael: Yeah.
Jacob Tingen: I know that in other states, just for example, New York and California I believe, it’s a little pricier to set up an LLC. And I think in New York, there’s probably even a publishing requirement, so you have to publish the fact that you have a business. I think you take out a newspaper ad or something to that effect. So, check with your local state, but in general, across most of the United States, registering an LLC is going to be 100 bucks or less, annual renewal fee of 100 bucks or less, and it’s a quick way to get limited liability protection and be official as a business. It’s a good idea to do.
Andrew Michael: Yeah. So, do you want to speak, well, maybe a little bit more to what the LLC specifically does? What benefits it offers, or maybe what are the other first steps in addition to registering your business that a small business might take?
Jacob Tingen: Well, so, okay. Well, so those are two different things.
Andrew Michael: Yeah.
Jacob Tingen: So, let me talk quickly about considerations on formalities when you register a business.
Andrew Michael: Yeah.
Jacob Tingen: So, we already mentioned there’s the sole proprietorship and the partnership. These are just non-formal entities that just happen. The law applies those definitions to you. Then, there’s the limited liability company, and then I’m even going to at the far end, there’s also limited partnerships or limited liability partnerships. So, you’ll see LP or LLP or whatever. And then, on the far end, there’s also corporations, and they’re fancy because they separate ownership and the control. The reason that we have a viable economy and capitalism and the stock market and all of that stuff. Corporations are wonderful entities, but the require a lot more formalities and-
Andrew Michael: You have to do things.
Jacob Tingen: … bureaucratic work and oversight that you wouldn’t have to do with say an LLC.
Andrew Michael: Yeah. You have to do things a very specific way to keep your corporation kind of running.
Jacob Tingen: Yeah. And corporations can be small companies, and a lot of people elect S corporation status, and that is a tax election. We can talk about that some other day.
Andrew Michael: Yeah.
Jacob Tingen: But you can have small, privately held corporations, or you can have large, public corporations. The dynamics of how a corporation is run can vary greatly. The same is true of an LLC. An LLC can function and be taxed very similar to a partnership in that you say, “Okay. It’s me and one partner. We’re 50/50,” or, “We’re 60/40,” or whatever. And the LLC can operate very informally like that, but an LLC could also be structured very formally and be very similar to a corporation. It could issue units to members, and instead of just a portion equity in terms of percentages. It can do that in terms of units. An LLC could have a board. It could be member managed or manager managed, so there are all sorts of interesting ways that LLCs can be structured, too, and we could literally talk for hours about that.
Andrew Michael: Oh, yeah. There’s a broad sliding scale between super informal and all the way to major corporation with LLC.
Jacob Tingen: Right. Right. And so, depending on the kind of business you have, these are conversations to have with your lawyer.
Andrew Michael: Yeah.
Jacob Tingen: Now, a lot of people start businesses. A lot of businesses fail. It’s true. But, if you plan right, and you want to do things right and dot your Is and cross your Ts, you can have success. And so, a lot of these legal controls and business planning that a lawyer can help you do, those things are going to increase your chances of success.
Jacob Tingen: I know when I meet with people who are starting a new business, a lot of them are very excited. But, what it really comes down to is take a deep breath, you and all of your partners, and take it one step at a time and agree to do things the right way. Be wise, baby steps. You’re going to make this work, and you’re going to have the lifestyle that you want and the business that you want, but let’s make sure we do it one step at a time, and like I said, dot your Is and cross your Ts.
Andrew Michael: I mean, yeah. Starting a business is a very calculated risk, so you definitely don’t want to just sort of shake the dice and throw it into the middle of a lake. You want to have a plan for what you’re doing.
Jacob Tingen: Yeah. No, I mean, so, on that though, on the dice shaking and throwing it into the pond. So, if somebody that I’ve never done business with before comes to me and says, “Let’s start an LLC, and let’s do this. And let’s do that. Let’s start a business, and let’s register as an LLC,” and maybe you just kind of get used to this. But, if I’ve never done business with them before, and they’ve never done a business before, there are some conversations that I’m going to want to have with that person before we even get started.
Jacob Tingen: But, if I’ve done business with people who have done business, if I’m doing business who have done business before, or if I’m going into business with somebody I’ve done business with in the past, I might be a little more willing to just go ahead and get started without a formal presentation or business plan or anything just because I trust that person. And we both have common experience doing the business thing, right?
Jacob Tingen: So, your experience level matters. Something like one out of every five businesses succeeds, every new business. But interestingly enough, those who start new businesses that are over the age of 50, so they’re say, retired and starting a second career or close to retirement and decide to start a second career, those businesses succeed I think closer to like 60 or 70% of the time. So, there’s a lot to be said for experience.
Jacob Tingen: So, if you’re young, and you want to start a business, and you’ve been reading that 80% of the 1% has their own business, stuff like that, then it’s helpful as a young person to find mentors and talk to people who are older and have more experience and just acknowledge that fact. That if I’m going to increase my chances of success, I should talk to somebody who’s been down this road before. I actually have a buddy who works with a mentorship project here locally, and maybe we can talk about that in the show notes or put it on the website. So, that’s just outside of the law legal advice, but it’s just good advice. And lawyers are one of those experts you could talk to.
Andrew Michael: Yeah. I mean, I feel like talking to an expert is very important for starting a business just because looking at the law, there’s so many specific things that you need to take account of, or take into account I mean. And finding out what exactly you need to do, just submitting one small form or getting to can have a major effect, stuff like that.
Jacob Tingen: Yeah. I mean, today, you asked me earlier to talk about how to register, and I’ll do that here in a bit. But, there are a lot of famously, infamously I guess for us, we operated for a while without talking to an accountant about how we had structured our business and payroll and those kinds of things. But after we had that conversation, I mean that saved me and my partners thousands of dollars a year in our taxes, so we should have had that conversation earlier. So, even lawyers and even accountants and other professionals just because you kind of can read about things, doesn’t mean that there’s not more for you to learn, and it doesn’t mean that there aren’t professionals or people who have been down the road before who can’t teach you certain things as well. So, get people on your side who are going to help you out. Attorneys, accountants, and other professionals, mentors, that kind of thing.
Jacob Tingen: But, as far as registration requirements and paper filing requirements, particularly like payroll and insurance and those kind of things, there are a lot of really great tools that are available to people that will file a lot of that paperwork for you. But then, as far as registration of your company, states like to make that simple. They want to encourage economic activity, so, yeah, filing an LLC is easy in Virginia. You log onto the State Corporation Commission website, and you file online the Articles of Organization of your LLC, and then you have an LLC. I mean it literally takes five to 10 minutes.
Andrew Michael: Cool.
Jacob Tingen: Corporations are a little more complex because you have to make a couple more choices about stock and how much stock you’re going to have and those kinds of things. And then, also, non-profit, non-stock corporations and professional corporations, there are certain kinds of entity types that can’t be registered online, but, again, it’s not complicated. It normally takes a very short turnaround time.
Andrew Michael: Okay.
Jacob Tingen: Yeah.
Andrew Michael: So, you mentioned earlier sort of the mentorship thing. Let’s take you as a mentor. What are some common things that you say to your clients of like, “Hey. These are the mistakes most people either make or sort of get tripped up at”? What are some broad, general advice for someone for starting their small business that you either see people commonly asking or that come up a lot? Besides just sort of the register of PLLC because it’s so much easier now.
Jacob Tingen: Yeah. I mean, I would say, “Be a doer and not a talker.” A lot of time when I talk to people who are starting a new business, they do meeting after meeting after meeting after meeting, but they never actually assign tasks and accomplish them. You don’t have a business until you have a client, and they’re giving you money in exchange for goods or services. So, get to that point as quickly as possible.
Jacob Tingen: There’s a concept that I’ve read about, The Lean Startup. There’s a really great book, but the idea is you want to create your minimum, viable product as cheaply as possible. So, you want to get to that minimum point that the viable product, the minimum viable product, the MVP, and you want to see how the market responds to that product at the lowest cost possible and then iterate. You want to change a little bit, and make sure that the next time you make a sale, it’s bigger and better and more awesome than the last time, that way you’re constantly improving it. So, that’s a good business culture.
Jacob Tingen: I would say that on the legal planning side, you want to create the environment where that kind of iteration is possible. The way to do that is to know that you’re on solid legal footing. So, getting set up right, getting those pieces in place, many times, again, because of technology and computers, those are set them up and forget it kinds of things.
Andrew Michael: You want to be selling things. You don’t want to be stuck in the courtroom or doing legal stuff.
Jacob Tingen: Yeah. And a great example of this right now is Tesla. Tesla right now doesn’t need legal problems. They just got up to 5,000 vehicles a week, and then Tesla’s CEO, Elon Musk, starts texting about things he probably shouldn’t be texting about. I mean, I’m a big Elon Musk fan, and I hope Tesla’s around forever. But, Tweeting about stock price valuations just seems generally like a bad idea when you’re the CEO of a company, and especially when it’s pretty well documented that your Tweets can impact the stock price.
Jacob Tingen: So, that has put Tesla in legal battles right now. Legal battles that they don’t need, and I was just reading that members of their board have put on retainer two very large, powerhouse law firms. And those are expenses that Tesla doesn’t need. That’s only going to devalue the stock even more.
Andrew Michael: I mean even more than that, it takes away from the product you’re trying to sell because everyone’s reading about your legal battles rather than Tesla did this cool new thing or whatever.
Jacob Tingen: Yeah.
Andrew Michael: I mean it just detracts from everything you’re trying to do.
Jacob Tingen: Yeah. I mean and so as a business, get the legal stuff set up not so that you can forget about. Get it set up, establish a relationship with a lawyer, so you have somebody you can go to, and then do an audit. Do a review every year, every quarter, every half a year, or whatever and make sure that things are good, so again, you can have that environment where you can move forward and not be worried about other things that don’t matter trip you up.
Andrew Michael: So, I think the last question I sort of want to really delve into is: What services do you offer to small businesses? I know we have a lot of content on the trademarks and stuff. What specifically can you do, like if I’m starting a lemonade stand that I want to register with my little brother? What should I be looking for? What will you do for me in this process?
Jacob Tingen: Okay. Right. Well, so let me also add in addition to just the standard idea of I’m going to start a business. There are lots of reasons to set up different entity types, and so some corporations or other entities may set up multiple businesses for tax purposes or cashflow, legal reasons. So, of course, if you’re that kind of person, you know this already. So, we can help you with that kind of stuff.
Jacob Tingen: We can register businesses. We’ll act as your registered agent in the state of Virginia. There are companies that do that. But the registered agent thing is if somebody’s going to sue you, they can serve your registered agent. And so, you have to have a registered agent in the state, and so we can act as that registered agent. And it’s helpful to have a law firm receive that notice because they’ll know what to do with it.
Jacob Tingen: And then, also, we draft the operating agreement if you’re registering an LLC. We can draft the bylaws for your corporation if you’ve registered a corporation. We can help you make certain business strategies and decisions. Personally, I, in the past, have helped businesses with other kinds of consulting services. I’m not doing it as much anymore just because I’m getting into the management of Tingen & Williams itself a little more. It’s my number one client these days because we’re a growing business, too. But, I mean, I personally designed the website for Tingen & Williams and a couple of other businesses that I own, so I do a lot of web and trademark consulting and branding consulting, which is kind of fun. I really enjoy that side of things. So, that’s part of what we do.
Jacob Tingen: Like I mentioned, we do have a monthly retainer kind of service where you can schedule a couple of hours with me every month and just kind of have me on call for those hours to chit-chat or to talk about different issues that may arise and not have to worry about having me start the clock when you call.
Jacob Tingen: Contract drafting generally.
Andrew Michael: Privacy policies.
Jacob Tingen: Privacy policies, terms of service, mean letters-
Andrew Michael: My favorite thing.
Jacob Tingen: Yeah. So, we can help you with some compliance issues as well. I mean, on the immigration side, we can do I-9 compliance. Again, most payroll providers kind of do that automatically, but if you wanted to have a review where you were concerned about some kind of immigration aspect, we’d be happy to look it over.
Jacob Tingen: Employee manuals, those kinds of things, so, yeah. I mean a wide range of business services. If you need help or have questions, give me a call. I’m happy to discuss it.
Andrew Michael: All right. That’s cool.
Jacob Tingen: Yeah.
Andrew Michael: We are at 21 minutes, so a nice healthy Law Talk. Is there anything else you wanted to add in these closing comments or whatever?
Jacob Tingen: Yeah. No, I mean just if you’re thinking about starting a business, do it. It’s hard, but it’s so worth it. I love it. I love being my own boss. If it’s something you’ve been thinking about, go for it. It’s not for everybody. I mean if everybody owned their own business, there’d be no employees, and we like our employees, too. But, yeah. I think it’s been fun for me, and if you think you’re the right personality for it, go for it. I’d be happy to help mentor you or connect you with the right kind of mentor or help you with the law side or do whatever you need to do.
Andrew Michael: Yeah. It seems really, really fun.
Jacob Tingen: It is. It’s a blast.
Andrew Michael: All right. Cool. I think that’s it for today. We hope to see everybody next Wednesday at 11:00. I hope you all have a nice weekend, and Law Talk out.
Andrew Michael: End live video.