1 00:00:00,640 --> 00:00:05,080 Hello and welcome to episode 162 of Design Curious Podcast. 2 00:00:05,720 --> 00:00:07,760 I'm your host and mentor of Rebecca Ward. 3 00:00:08,320 --> 00:00:14,160 Today on the podcast, I have Jonathan Feniak as a LLC 4 00:00:14,160 --> 00:00:17,160 attorney and he has some really good information. 5 00:00:17,160 --> 00:00:19,080 Let me tell you a little bit more about him. 6 00:00:19,720 --> 00:00:23,320 Lead Attorney Jonathan Feniak is a driving force behind LLC 7 00:00:23,320 --> 00:00:27,760 attorney.com with a mission to make quality legal guidance 8 00:00:27,760 --> 00:00:31,160 accessible to business owners and individuals across the 9 00:00:31,160 --> 00:00:33,520 United States. Specializing in asset 10 00:00:33,520 --> 00:00:37,320 protection, estate planning, and business formation, he provides 11 00:00:37,320 --> 00:00:40,640 practical solutions that empower clients to protect their assets 12 00:00:40,640 --> 00:00:42,640 and build strong legal foundation. 13 00:00:43,240 --> 00:00:46,160 Before becoming an attorney, Jonathan built a dynamic career 14 00:00:46,160 --> 00:00:48,760 spanning operations and financial services. 15 00:00:49,200 --> 00:00:52,800 As a leader at DHL in Manhattan, he managed daily operations 16 00:00:52,800 --> 00:00:56,200 through the challenges of 911. Later, he transitioned to 17 00:00:56,200 --> 00:00:59,680 finance, gaining expertise in deal structuring and asset 18 00:00:59,680 --> 00:01:02,440 management with Wells Fargo Advisors and boutique investment 19 00:01:02,440 --> 00:01:04,959 firms. Admitted to practice law in 20 00:01:04,959 --> 00:01:08,320 Colorado and Wyoming, Jonathan combines this rich experience 21 00:01:08,320 --> 00:01:11,040 with legal expertise to help entrepreneurs in diverse 22 00:01:11,040 --> 00:01:14,200 industries and activists protecting their causes. 23 00:01:14,760 --> 00:01:18,520 He previously worked with legal tech startup Term Scout and the 24 00:01:18,520 --> 00:01:20,960 law firm Louis Best Williams and Weiss. 25 00:01:21,440 --> 00:01:27,720 We have a great discussion about LLC incorporations or sole 26 00:01:27,720 --> 00:01:31,960 proprietorship and how to form your business, what you should 27 00:01:31,960 --> 00:01:34,840 be doing when you start out, if, when you should change it. 28 00:01:34,840 --> 00:01:36,920 So you're going to want to listen in. 29 00:01:37,040 --> 00:01:43,040 Let's get into it. You're now listening to Design 30 00:01:43,040 --> 00:01:47,160 Curious, a place where you creative one, are here to learn 31 00:01:47,160 --> 00:01:50,200 about what it really is like to be an interior designer. 32 00:01:50,640 --> 00:01:53,440 And I'm your host and mentor, Rebecca Ward. 33 00:01:54,080 --> 00:01:58,120 If you're worried about how to succeed in a creative career, if 34 00:01:58,120 --> 00:02:01,000 you're ready to learn your next steps to become an interior 35 00:02:01,000 --> 00:02:05,360 designer, and if you want the satisfaction of doing something 36 00:02:05,360 --> 00:02:08,800 you love every day, you are in the right place. 37 00:02:09,199 --> 00:02:13,240 Grab a coffee, a notebook, and let's dig into today's episode. 38 00:02:14,600 --> 00:02:17,160 Hi Jonathan, welcome to Design Curious podcast. 39 00:02:17,160 --> 00:02:18,440 It's great to have you here today. 40 00:02:18,960 --> 00:02:22,800 Thank you very much. I am super excited to be here. 41 00:02:23,120 --> 00:02:26,600 Design is near and dear to my heart, so I'm looking to really 42 00:02:26,600 --> 00:02:29,760 helping your listeners understand the the legal parts 43 00:02:29,760 --> 00:02:32,400 of running starting a business. Right. 44 00:02:32,400 --> 00:02:37,240 Yeah, we were talking offline about how really close you are 45 00:02:37,240 --> 00:02:41,760 to the creative industry and interior design in general. 46 00:02:41,760 --> 00:02:44,320 Do you want to share a little bit about all your what you're 47 00:02:44,320 --> 00:02:46,720 surrounded by? Yeah, yeah, this is this is 48 00:02:46,720 --> 00:02:48,080 true. So my sister-in-law is an 49 00:02:48,080 --> 00:02:51,720 interior designer in Denver, Co. My brother-in-law is an 50 00:02:51,720 --> 00:02:55,880 architect in Denver. My sister is an architect in DC. 51 00:02:56,120 --> 00:02:57,720 My father-in-law is an architect. 52 00:02:57,760 --> 00:03:00,960 He doesn't practice anymore. My wife is an artist, Meredith 53 00:03:00,960 --> 00:03:02,480 Finiak. She works with interior 54 00:03:02,480 --> 00:03:07,480 designers as well as architects to do sort of large scale mural 55 00:03:07,480 --> 00:03:09,880 installations is her focus. But she was a botanical 56 00:03:09,880 --> 00:03:11,640 illustrator. So she's actually working on a 57 00:03:11,640 --> 00:03:16,120 project in just about a month in Denver for a sort of a remodel 58 00:03:16,120 --> 00:03:19,120 of a public building. And then my son is an artist as 59 00:03:19,120 --> 00:03:22,120 well, Nathan Finiak. He graduated from Cooper Union. 60 00:03:22,360 --> 00:03:25,840 And so artists and designers and creators are all around me. 61 00:03:25,880 --> 00:03:28,520 I'm a lawyer. I don't have a creative bone in 62 00:03:28,520 --> 00:03:30,560 my body. I think about things creatively, 63 00:03:30,560 --> 00:03:33,080 but I can't put pen to paper on anything. 64 00:03:33,320 --> 00:03:36,640 Yeah, well, I guess some people would say lawyers have to be 65 00:03:36,640 --> 00:03:40,000 creative too. You know, not too creative. 66 00:03:40,520 --> 00:03:44,760 Our arguments and yeah, but why don't you tell us then your 67 00:03:44,760 --> 00:03:48,960 journey about the non necessarily non creative side of 68 00:03:49,120 --> 00:03:51,880 becoming an attorney? Yeah, and she started out 69 00:03:51,880 --> 00:03:54,880 English major undergrad was in transportation and logistics, 70 00:03:54,880 --> 00:03:59,160 UPSDHL, got an MBA, worked in finance, was a financial 71 00:03:59,160 --> 00:04:02,640 advisor, a securities broker, stockbroker, as well as working 72 00:04:02,640 --> 00:04:04,640 with high net worth. Didn't graduate law school till 73 00:04:04,640 --> 00:04:06,440 2019. So I'm 50. 74 00:04:06,440 --> 00:04:09,360 You can't see the Gray up here, but I'm 50, two or three. 75 00:04:09,560 --> 00:04:12,480 It's always hard to remember. Maybe I don't want to remember. 76 00:04:12,720 --> 00:04:16,760 I became a lawyer much later in life and focused on, you know, 77 00:04:16,760 --> 00:04:18,600 how can I do something different? 78 00:04:18,760 --> 00:04:20,839 Did not want to be the standard attorney. 79 00:04:20,839 --> 00:04:25,400 And so me and a group of other entrepreneurs, lawyers, those 80 00:04:25,400 --> 00:04:28,480 were the business spirit. We created LLC Attorney LLC 81 00:04:28,480 --> 00:04:33,680 attorney.com to make it easy to form LLC or corporations but get 82 00:04:33,680 --> 00:04:35,560 the guidance and advice you need. 83 00:04:35,800 --> 00:04:40,680 We're not a law firm, but we do everything is has been created 84 00:04:40,680 --> 00:04:43,760 by attorneys. Our website has an amazing 85 00:04:43,760 --> 00:04:46,240 amount of information. We've got our LLC Attorney 86 00:04:46,240 --> 00:04:50,360 official YouTube channel where I do videos for folks like your 87 00:04:50,360 --> 00:04:52,920 listeners as well As for others, whether you're in real estate or 88 00:04:52,920 --> 00:04:55,080 whatever else. And so trying to really, really 89 00:04:55,080 --> 00:04:59,920 democratize legal services in a way that make it easy to access 90 00:04:59,920 --> 00:05:02,040 and you're getting what you need. 91 00:05:02,320 --> 00:05:06,640 It's really hard to tell. Is it something that I need or 92 00:05:06,640 --> 00:05:08,880 is this being just sort of sold to me right. 93 00:05:08,880 --> 00:05:12,160 When I go to a mechanic, I don't know, I'm not, I'm not 94 00:05:12,160 --> 00:05:15,320 mechanically inclined, you know, not not good with my hands. 95 00:05:15,320 --> 00:05:17,760 My mind is pretty good, but not good with my hands or, or a 96 00:05:17,880 --> 00:05:19,920 creative thing. But when they say, oh, you're 97 00:05:19,920 --> 00:05:22,840 going to need new brakes or you need a new air filter or 98 00:05:22,840 --> 00:05:25,320 whatever, I don't know if I actually do or they're trying to 99 00:05:25,320 --> 00:05:27,520 sell me something. So we want it to be with LLC 100 00:05:27,520 --> 00:05:29,880 Attorney Calm. If it's there, if it's offered, 101 00:05:29,880 --> 00:05:32,520 it's something you probably need now or are going to need in the 102 00:05:32,520 --> 00:05:34,600 future. So try to really focus on 103 00:05:34,600 --> 00:05:38,760 delivering real value to the customers. 104 00:05:38,760 --> 00:05:41,240 For LLC attorney, I also do consultations. 105 00:05:41,240 --> 00:05:43,640 I have a law firm and do consultations with folks who 106 00:05:43,640 --> 00:05:46,520 need some more guidance on more complex topics. 107 00:05:46,520 --> 00:05:48,880 We have a bunch of different attorneys can help, whether it's 108 00:05:48,880 --> 00:05:52,440 intellectual property or trade marking or tax and so on and so 109 00:05:52,440 --> 00:05:54,560 forth. So tried to really democratize 110 00:05:54,680 --> 00:05:57,520 LLC's and legal services. OK, Yeah. 111 00:05:57,520 --> 00:06:00,360 So you are pretty much an entrepreneur yourself and 112 00:06:00,360 --> 00:06:04,520 surrounded by entrepreneurs. So that's kind of the focus then 113 00:06:04,520 --> 00:06:07,400 of your services for. Yeah, it is. 114 00:06:07,480 --> 00:06:11,000 Yeah. It is over 100,000 companies 115 00:06:11,040 --> 00:06:14,920 formed and you know over the course of a year I talked to 116 00:06:14,920 --> 00:06:19,240 one-on-one, the last year is over 1000 individuals or 117 00:06:19,240 --> 00:06:22,040 business partners, helping them understand what it is they need 118 00:06:22,040 --> 00:06:24,680 to do, when they should start their company, what they should 119 00:06:24,680 --> 00:06:28,480 do with it once they do form it. So I really have my ear to the 120 00:06:28,480 --> 00:06:32,120 ground and our company is trying to meet that need, forming 121 00:06:32,120 --> 00:06:35,040 several thousand LL CS a month for our customers. 122 00:06:36,120 --> 00:06:38,760 OK, well, let's talk about the journey and kind of what 123 00:06:38,760 --> 00:06:42,160 typically happens and what should be happening maybe when 124 00:06:42,160 --> 00:06:44,960 you're forming a business. Like my story. 125 00:06:44,960 --> 00:06:48,440 I like so many designers who have their own business. 126 00:06:48,800 --> 00:06:51,960 Had a friend asked if I can help, you know, with their 127 00:06:51,960 --> 00:06:53,600 living room. And so I said, yeah, let's do 128 00:06:53,600 --> 00:06:54,920 this. And then I was like, well, I 129 00:06:54,920 --> 00:06:57,760 want to do it legitimately because I was interested in 130 00:06:57,760 --> 00:07:00,240 starting my business. And so I went and got a business 131 00:07:00,240 --> 00:07:02,480 license and set up as a sole proprietor. 132 00:07:03,000 --> 00:07:07,280 I didn't even really think about consulting an attorney for 133 00:07:07,280 --> 00:07:10,880 setting up my business. I knew I needed ACPA, but I was 134 00:07:10,880 --> 00:07:12,680 a sole proprietor for a long time. 135 00:07:13,520 --> 00:07:15,480 Maybe you get. CPM We're not on video, so I'm 136 00:07:15,480 --> 00:07:17,800 making faces. I'm saying yeah, you know, 137 00:07:17,800 --> 00:07:20,400 whatever else, but. It's like, yeah, maybe, maybe. 138 00:07:22,120 --> 00:07:23,960 But yeah, I'm, I'm sorry to interrupt. 139 00:07:23,960 --> 00:07:26,280 Yeah, no problems. Well, I was going to turn it to 140 00:07:26,280 --> 00:07:29,680 you because I think a lot of designers do set up as sole 141 00:07:29,680 --> 00:07:34,280 proprietor first thing. What are maybe is that OK or 142 00:07:34,280 --> 00:07:37,680 should should we really just go to LLC and now I'm set up as an 143 00:07:37,680 --> 00:07:40,080 S Corp. I never did an LLC. 144 00:07:40,600 --> 00:07:43,920 Awesome. So tell me then, what what would 145 00:07:43,920 --> 00:07:47,920 you recommend if I was starting way back again all over, What 146 00:07:47,920 --> 00:07:50,880 would you say to me? This is the typical path, right? 147 00:07:50,880 --> 00:07:53,560 And I was listening to one of your other podcasts with, I 148 00:07:53,560 --> 00:07:55,520 think it's Bree Hance with Enhance. 149 00:07:55,880 --> 00:07:59,000 Her path was the same. You get asked by someone, hey, 150 00:07:59,000 --> 00:08:00,360 could you do this? I know you've Got Talent. 151 00:08:00,360 --> 00:08:01,680 You did your own house. I admire your house. 152 00:08:01,840 --> 00:08:03,320 Can you do this for me? It's a friend. 153 00:08:03,640 --> 00:08:06,880 In that case, you're like, sure, what's your risk, right? 154 00:08:06,880 --> 00:08:08,800 That's really where the what this comes down to. 155 00:08:08,800 --> 00:08:10,880 What type of protection do you need? 156 00:08:11,320 --> 00:08:15,000 A friend, You know, you're not hiring subcontractors, you're 157 00:08:15,000 --> 00:08:18,160 not going to be doing anything where there's a danger that it's 158 00:08:18,160 --> 00:08:20,720 a load bearing wall or so you know, something to that effect. 159 00:08:20,880 --> 00:08:25,160 The downside is really low. There's always some way that you 160 00:08:25,160 --> 00:08:27,680 could get sued, right? But when it's a friendly person 161 00:08:27,680 --> 00:08:30,040 and you're doing it for, you know, sort of a just to get your 162 00:08:30,040 --> 00:08:32,679 feet under you, I don't think you need an LLC at that point in 163 00:08:32,679 --> 00:08:34,760 time. Your protection that you need is 164 00:08:34,880 --> 00:08:37,720 there's almost no risk. I want people to match the 165 00:08:37,880 --> 00:08:41,960 complexity of their structure with really what the real world 166 00:08:41,960 --> 00:08:44,680 risks are of them engaging in this business. 167 00:08:44,680 --> 00:08:46,920 And as long as you're not stepping over those, those sort 168 00:08:46,920 --> 00:08:48,480 of bounds, you're not getting into construction. 169 00:08:48,480 --> 00:08:50,920 If you got a design build firm right or you're working with 170 00:08:50,920 --> 00:08:54,480 contractors, there is more liability associated with that. 171 00:08:54,480 --> 00:08:57,000 If you're working with an architect, the architect has the 172 00:08:57,000 --> 00:09:00,000 majority or the engineer has the majority of the risk there. 173 00:09:00,000 --> 00:09:03,840 You you pick out a wrong color, you pick out something that 174 00:09:03,840 --> 00:09:05,880 they're not happy with or they decide. 175 00:09:05,880 --> 00:09:09,000 A lot of times that I've seen with my family members, they 176 00:09:09,000 --> 00:09:11,720 enter into the agreement and then their financial situation 177 00:09:11,720 --> 00:09:13,920 changes and then they don't want to pay, right? 178 00:09:13,920 --> 00:09:15,640 Not because they don't like what you did, but they come up with 179 00:09:15,640 --> 00:09:18,760 reasons not to pay. And so most of the risk though, 180 00:09:18,760 --> 00:09:20,880 in this business is really contract risk. 181 00:09:21,160 --> 00:09:23,720 You've got contract risk that they don't perform on the 182 00:09:23,720 --> 00:09:25,760 contract. They accuse you of not 183 00:09:25,760 --> 00:09:28,040 performing on the contract. And when you're starting out 184 00:09:28,040 --> 00:09:31,560 with friendly small dollar deals where you don't really have any 185 00:09:31,560 --> 00:09:35,080 money on the line, you're not going and buying the furniture 186 00:09:35,080 --> 00:09:37,720 and those things fronting it and then looking to charge and 187 00:09:37,720 --> 00:09:39,920 collect from them, the risk is super low. 188 00:09:40,280 --> 00:09:43,080 And in those cases, I think a a structure where it's just you. 189 00:09:43,360 --> 00:09:45,440 Hi, I'm Jonathan. Hi, I'm Rebecca. 190 00:09:45,720 --> 00:09:48,320 I can do this for you. You're just going to cut a check 191 00:09:48,320 --> 00:09:50,960 to me, right? That that's fine then when you 192 00:09:50,960 --> 00:09:53,760 start taking on you bigger projects, you've got contractual 193 00:09:53,760 --> 00:09:56,720 risk, you are hiring subcontractors, you have 194 00:09:56,920 --> 00:09:59,760 potential where you're working with designers or or I should 195 00:09:59,760 --> 00:10:03,160 say architects or engineers where they are going to look to 196 00:10:03,160 --> 00:10:05,640 come after you in some way if something goes wrong right every 197 00:10:05,640 --> 00:10:09,480 the blame tends to run downhill. And so in those cases, we think 198 00:10:09,480 --> 00:10:12,400 about it from the perspective of how much risk am I taking on? 199 00:10:12,680 --> 00:10:14,680 And then like, what could go horribly wrong? 200 00:10:14,680 --> 00:10:17,040 And I have to say, I'm maybe I'm fun at parties, depending on who 201 00:10:17,080 --> 00:10:19,640 who you're with, but people are always dying, getting injured, 202 00:10:19,640 --> 00:10:21,320 getting sued, and every the conversation I have. 203 00:10:21,320 --> 00:10:22,720 And that's the way my mind works. 204 00:10:22,960 --> 00:10:26,160 Maybe not fun for my family, but for, you know, my people I'm 205 00:10:26,160 --> 00:10:28,200 talking to as a lawyer, they appreciate that, right? 206 00:10:28,200 --> 00:10:30,560 And it's up to you as the business owner to evaluate the 207 00:10:30,560 --> 00:10:32,200 risk. But those first couple of 208 00:10:32,200 --> 00:10:34,560 projects, getting your legs under you, does this thing work? 209 00:10:34,720 --> 00:10:35,840 I think you could do that in your name. 210 00:10:35,960 --> 00:10:37,720 You don't even need, don't even do a DBA. 211 00:10:37,880 --> 00:10:40,320 Don't worry about an EIN number, just doing your personal name. 212 00:10:40,880 --> 00:10:43,360 Then you start saying, all right, these are larger 213 00:10:43,360 --> 00:10:44,640 projects. I've got more risk. 214 00:10:44,640 --> 00:10:47,200 And if you're working with a in anything that's commercial, 215 00:10:47,200 --> 00:10:49,560 they're likely going to require you to have insurance of some 216 00:10:49,560 --> 00:10:51,680 sort for your, your subcontractors, for the 217 00:10:51,680 --> 00:10:53,840 independent contractors you bring on the purse, who's going 218 00:10:53,840 --> 00:10:56,680 to hang the wallpaper or, you know, be doing some woodwork, 219 00:10:56,680 --> 00:10:59,440 insulation or something else. In that case, insurance is 220 00:10:59,440 --> 00:11:01,200 great. Insurance is the first thing and 221 00:11:01,200 --> 00:11:04,680 it should be even before an LLC. If you're working in as an 222 00:11:04,680 --> 00:11:07,200 individual, get insurance. There's a company out there. 223 00:11:07,200 --> 00:11:09,360 I, I like, I don't have any affiliation with them. 224 00:11:09,360 --> 00:11:12,040 They're called Thimble and Thimble is really cool because 225 00:11:12,040 --> 00:11:15,240 what they allow you to do is get insurance for a specific 226 00:11:15,240 --> 00:11:17,160 project. You're doing 1 project a month 227 00:11:17,160 --> 00:11:19,200 or one project 1/4 when you're first starting out. 228 00:11:19,400 --> 00:11:24,120 You can get it for just, I need the insurance for this, right? 229 00:11:24,400 --> 00:11:26,480 Very cool. And they also, they do it in all 230 00:11:26,480 --> 00:11:28,640 sort of funky industries and so on and so forth. 231 00:11:28,640 --> 00:11:31,520 I, I recommend checking out Thimble and, and my wife, I had 232 00:11:31,520 --> 00:11:34,240 said she's an artist. She's working on this project in 233 00:11:34,280 --> 00:11:36,560 Denver within the next couple of months. 234 00:11:36,880 --> 00:11:39,600 She does very one project every year or so. 235 00:11:39,760 --> 00:11:41,640 And so for her get that insurance. 236 00:11:41,640 --> 00:11:43,360 She doesn't need insurance over the entire term. 237 00:11:43,360 --> 00:11:45,400 She needs it during the period that she's there on site. 238 00:11:45,560 --> 00:11:48,400 So think about where your risk is and then definitely 239 00:11:48,400 --> 00:11:50,440 insurance. And then we start saying, OK, 240 00:11:50,440 --> 00:11:53,040 when does an LLC make sense? Well, when you're getting into 241 00:11:53,040 --> 00:11:56,880 these contractual relationships where the liability potential 242 00:11:57,000 --> 00:11:59,680 outstrips your insurance potentially, or there's 243 00:11:59,680 --> 00:12:02,640 something that's not covered by insurance, insurance is 244 00:12:02,640 --> 00:12:04,280 typically going to cover things like liabilities. 245 00:12:04,280 --> 00:12:05,800 Someone gets hurt, they slip, they fall. 246 00:12:05,800 --> 00:12:09,720 But to have like you made a mistake on picking out something 247 00:12:09,720 --> 00:12:11,680 or something fell down and hurt someone. 248 00:12:11,680 --> 00:12:13,640 You installed a bookshelf, had a bookshelf install it fell on 249 00:12:13,640 --> 00:12:16,000 someone, something like, again, the terrible world I live in, 250 00:12:16,000 --> 00:12:18,440 someone's always getting hurt. So in that case, you say, OK, 251 00:12:18,440 --> 00:12:21,640 LLC makes sense when this is becoming something substantial, 252 00:12:21,640 --> 00:12:24,120 substantial of your time, substantial amount of liability 253 00:12:24,200 --> 00:12:30,000 and forming a business entity. And I say LLC because 95% of the 254 00:12:30,000 --> 00:12:32,600 time and in this space, I would say almost 100% of the time, an 255 00:12:32,600 --> 00:12:34,840 LLC is the appropriate business entity. 256 00:12:35,080 --> 00:12:38,880 Having that LLC where the LLC is the one that's taking on that 257 00:12:38,880 --> 00:12:42,120 business risk. It enters into the contract with 258 00:12:42,320 --> 00:12:45,080 the homeowner, with the business owner, with the architect, with 259 00:12:45,080 --> 00:12:48,080 the engineer, and it is the one that gets sued. 260 00:12:48,640 --> 00:12:52,000 That is what we want to happen. That's what LLCS or business 261 00:12:52,000 --> 00:12:54,080 entities do. They limit your liability. 262 00:12:54,080 --> 00:12:57,840 Now, whatever's in the LLC, if you take $100,000 and put it 263 00:12:57,840 --> 00:13:01,440 into your LLC or it has $100,000 sitting in the bank account, if 264 00:13:01,440 --> 00:13:04,440 that company gets sued, that $100,000 is subject to those 265 00:13:04,440 --> 00:13:05,720 claims. But that's it. 266 00:13:05,760 --> 00:13:08,840 If you do it right, you respect the entity, then they can't say 267 00:13:08,960 --> 00:13:11,680 we're going to go after Rebecca as well. 268 00:13:11,920 --> 00:13:14,320 We're we're going to limit our liability to that business 269 00:13:14,320 --> 00:13:16,560 entity and it's an agreement with the state. 270 00:13:16,720 --> 00:13:21,280 The state says we'll let you to foster entrepreneurship, to 271 00:13:21,280 --> 00:13:23,680 foster businesses. We'll let you limit your 272 00:13:23,680 --> 00:13:26,800 liability, but we need to make it easy to sue you. 273 00:13:27,120 --> 00:13:29,880 And that's where your registered agent comes in. 274 00:13:29,880 --> 00:13:32,480 That's where the filing with the Secretary of State, you say, OK, 275 00:13:32,480 --> 00:13:35,120 anyone who wants to sue this company, you can look at the 276 00:13:35,120 --> 00:13:38,400 Secretary of State's site and it says serve the legal papers here 277 00:13:38,840 --> 00:13:40,800 makes it very easy. That's the trade off. 278 00:13:41,240 --> 00:13:43,800 If someone wants to sue Rebecca and then you just showed up, 279 00:13:43,800 --> 00:13:45,520 they don't know where you live or whatever else. 280 00:13:45,520 --> 00:13:47,400 Maybe you're, you've kept your information private. 281 00:13:47,600 --> 00:13:50,800 It's hard to sue you, right? You have to we, we watch movies 282 00:13:50,800 --> 00:13:53,120 like you've been served, right? They come in and they, you know 283 00:13:53,120 --> 00:13:55,160 what, wherever it is at your workplace or whatever. 284 00:13:55,160 --> 00:13:57,440 So that's the role of the registered agent. 285 00:13:57,720 --> 00:14:00,560 And you have to, under state law, you have to identify how 286 00:14:00,560 --> 00:14:03,760 can this company be sued? It's our business part of LLC 287 00:14:03,760 --> 00:14:06,040 attorney forming the business entities is also serving as a 288 00:14:06,040 --> 00:14:08,320 registered agent. And some people have list 289 00:14:08,320 --> 00:14:10,440 themselves as the registered agents to save a couple of 290 00:14:10,440 --> 00:14:12,200 bucks. The problem is if you have an 291 00:14:12,200 --> 00:14:14,640 office, then you have someone potentially suing you. 292 00:14:14,960 --> 00:14:17,320 All your employees know that you're being sued now and that 293 00:14:17,320 --> 00:14:20,400 can be negative or someone could show up at your house, right? 294 00:14:20,400 --> 00:14:22,280 If you're only your registered agent, you don't have a 295 00:14:22,280 --> 00:14:24,880 business, an office location, then they show up at your house 296 00:14:25,200 --> 00:14:27,440 and you're having a dinner party and you know you've been sued 297 00:14:27,440 --> 00:14:28,760 kind of thing, which can be problematic. 298 00:14:28,760 --> 00:14:32,360 So small price to pay for that professional registered agent to 299 00:14:32,360 --> 00:14:34,880 provide that service. So then we've got the LLC or the 300 00:14:34,880 --> 00:14:37,880 business entity. I keep saying LLC, but it is we, 301 00:14:37,880 --> 00:14:40,720 there are two choices. The two choices at the state 302 00:14:40,720 --> 00:14:42,960 level for the overwhelm, majority of people are going to 303 00:14:42,960 --> 00:14:46,960 be an LLC or a corporation that's at the state level entity 304 00:14:46,960 --> 00:14:48,440 type. And the way I like to imagine 305 00:14:48,440 --> 00:14:50,800 this or like people to the way I recommend imagining it. 306 00:14:51,000 --> 00:14:53,520 If you go to a restaurant and they say it's like a fixed price 307 00:14:53,560 --> 00:14:56,960 menu, and maybe this is elitist to say fixed price menu, but 308 00:14:58,120 --> 00:14:59,760 we'll go with that. And they say pick one item from 309 00:14:59,760 --> 00:15:02,400 column A and one item from column B, right, Column A, 310 00:15:02,840 --> 00:15:06,080 business entity type at the state level, corporation or LLC, 311 00:15:06,080 --> 00:15:08,360 there's other ones, professional corporations, there's all sorts 312 00:15:08,360 --> 00:15:11,480 of other ones that's not going to apply to someone in the, 313 00:15:11,880 --> 00:15:14,760 usually in this business. Now, if you're an architect or 314 00:15:14,760 --> 00:15:18,080 an engineer, there may be professional entity requirements 315 00:15:18,080 --> 00:15:22,760 where APC or sometimes you'll see PLLC, those are professional 316 00:15:22,760 --> 00:15:25,720 Corp, professional, limited liability company. 317 00:15:26,160 --> 00:15:29,320 So in most cases though, we're talking LLC or corporation at 318 00:15:29,320 --> 00:15:31,680 the state level. And then there's tax 319 00:15:31,680 --> 00:15:33,760 classification at the federal level. 320 00:15:33,760 --> 00:15:39,240 When you get your EIN, it's going to be issued by the IRS as 321 00:15:39,320 --> 00:15:42,480 either a, if it's a single member LLC, it's going to be 322 00:15:42,480 --> 00:15:46,240 issued as a disregarded entity. A disregarded entity 323 00:15:46,240 --> 00:15:49,640 classification means that the IRS is not expecting any 324 00:15:49,640 --> 00:15:51,520 separate filing from this business. 325 00:15:51,520 --> 00:15:54,240 It's saying you're just going to report the income of that 326 00:15:54,240 --> 00:15:57,920 business on your personal tax return, your 10:40 or your joint 327 00:15:57,920 --> 00:15:59,800 10:40. There's no separate reporting. 328 00:15:59,920 --> 00:16:03,760 It's disregarded for tax purposes, but it's highly 329 00:16:03,760 --> 00:16:06,000 regarded for legal purposes, and that's the distinction we need 330 00:16:06,000 --> 00:16:08,240 to make here. No matter what, we need to treat 331 00:16:08,240 --> 00:16:10,960 the business entity as separate and distinct from us. 332 00:16:10,960 --> 00:16:14,360 It's not our legal entity. In businesses where it's a 333 00:16:14,360 --> 00:16:17,480 services business, personal services business like this, 334 00:16:17,760 --> 00:16:20,080 that's an important thing to make sure you're making that 335 00:16:20,080 --> 00:16:24,280 distinction from tax purposes. Disregarded for legal purposes. 336 00:16:24,280 --> 00:16:29,560 It's not Rebecca you're working with it is XYZRW designs, you 337 00:16:29,560 --> 00:16:32,200 know, whatever it is. And so you're the lead, you're 338 00:16:32,200 --> 00:16:34,840 the owner, but all the services are provided through Rebecca's 339 00:16:34,840 --> 00:16:37,560 LLC. So at the tax level, I, I 340 00:16:37,560 --> 00:16:42,800 digress there state level LLC or Corp tax disregarded entity. 341 00:16:42,800 --> 00:16:45,440 And then if it's more than one member, you're starting up a 342 00:16:45,440 --> 00:16:47,960 business with your friend, then by default it's a partnership. 343 00:16:48,160 --> 00:16:51,600 Partnership has a filing requirement, but there's no tax 344 00:16:51,600 --> 00:16:54,120 paying requirement. It basically splits the income 345 00:16:54,120 --> 00:16:56,160 into the percentages of the owners. 346 00:16:56,960 --> 00:17:00,480 The next thing you can do is called an S Corp tax election. 347 00:17:00,480 --> 00:17:03,440 And I believe, Rebecca, you said that you have elected to treat 348 00:17:03,440 --> 00:17:08,440 your business as an S Corp. An S Corp is a special type of 349 00:17:08,480 --> 00:17:11,119 tax classification. It can be an LLC or a 350 00:17:11,119 --> 00:17:12,839 corporation. This is one of the things that 351 00:17:12,839 --> 00:17:17,160 many people miss is that you can have an LLC which elects to be 352 00:17:17,240 --> 00:17:19,240 taxed as an S Corp. You don't need to be a 353 00:17:19,240 --> 00:17:23,280 corporation in order to receive S Corp tax classification. 354 00:17:23,400 --> 00:17:26,839 S Corps are great when you start to really make some money 355 00:17:27,000 --> 00:17:29,760 because they allow you to split your income from that business 356 00:17:29,760 --> 00:17:33,600 into two parts. 1 is a reasonable salary or reasonable 357 00:17:33,600 --> 00:17:37,040 compensation that is subject to FICA taxes. 358 00:17:37,040 --> 00:17:39,080 FICA taxes are your taxes from earning. 359 00:17:39,240 --> 00:17:41,920 That's your Social Security and Medicare when if you work for 360 00:17:41,920 --> 00:17:44,560 someone else's AW2 you see it come out of your check. 361 00:17:44,600 --> 00:17:48,040 FICA tax or SSI, whatever it is and then the rest of it though 362 00:17:48,040 --> 00:17:53,560 is not subject to the FICA tax. FICA taxes are 15.3% in 2025 up 363 00:17:53,560 --> 00:17:59,280 to the 1st $175,100 of income. You pay 15.3% on it all the way 364 00:17:59,280 --> 00:18:01,480 up and then above that you're going to pay somewhere between 365 00:18:01,680 --> 00:18:04,520 2.9 and 3.8% all the way to Infinity. 366 00:18:04,960 --> 00:18:07,840 So if you're making good money with your business, making that 367 00:18:07,840 --> 00:18:11,080 S Corp election, choosing the right reasonable compensation or 368 00:18:11,080 --> 00:18:14,160 reasonable salary, then it allows you to save for every 369 00:18:14,160 --> 00:18:19,160 $10,000 you're saving $1500 in taxes, which is not a bad deal 370 00:18:19,200 --> 00:18:22,040 right now. Did you form a corporation at 371 00:18:22,040 --> 00:18:24,200 the state level or an LLC at the state level? 372 00:18:24,760 --> 00:18:27,000 Corporation. A corporation mistake? 373 00:18:27,000 --> 00:18:31,480 You messed up. Why do I say that Well cuz a lot 374 00:18:31,480 --> 00:18:34,720 of times and accountants will say yeah you form an S Corp, 375 00:18:34,960 --> 00:18:36,720 right? There is no S Corp S Corp 376 00:18:36,720 --> 00:18:38,600 doesn't exist, right? It's either an LLC or 377 00:18:38,600 --> 00:18:41,200 corporation. But people here Corp and they 378 00:18:41,200 --> 00:18:43,800 think they need to form a corporation to obtain that 379 00:18:43,800 --> 00:18:46,320 benefit. No, it's actually the default. 380 00:18:46,320 --> 00:18:49,880 If you formed a corporation at the state level and went for an 381 00:18:50,040 --> 00:18:52,480 EIN number, employer identification number from the 382 00:18:52,480 --> 00:18:54,760 Internal Revenue Service, they would issue it. 383 00:18:54,760 --> 00:18:57,800 Default classification would be AC Corp, which you definitely 384 00:18:57,800 --> 00:18:59,160 don't want, almost definitely don't want. 385 00:18:59,640 --> 00:19:03,120 So you could have formed an LLC and then gotten the S Corp tax 386 00:19:03,120 --> 00:19:05,400 election 'cause it's a separate they call the check the box 387 00:19:05,400 --> 00:19:07,240 election. You have to file this form. 388 00:19:07,400 --> 00:19:09,120 I like throwing the the form numbers out there. 389 00:19:09,120 --> 00:19:10,400 I chose what I'm talking about, right? 390 00:19:11,480 --> 00:19:13,400 It's like if you know, as an interior designer, you see it, 391 00:19:13,600 --> 00:19:17,440 see something and you're like, oh, that's a Roche boubois couch 392 00:19:17,440 --> 00:19:19,920 with this, you know, and I I'm throwing up my high end design 393 00:19:19,920 --> 00:19:22,040 here. You know, Roche Boubouis couch 394 00:19:22,040 --> 00:19:24,560 that came out in 2022. Like you know those things and 395 00:19:24,560 --> 00:19:26,240 it shows your expertise and authority. 396 00:19:26,400 --> 00:19:29,720 So there's it's form 2553 is what you file to make an S Corp 397 00:19:29,720 --> 00:19:32,320 tax election. You can do that with an LLC. 398 00:19:32,360 --> 00:19:34,680 Why have an LLC over a corporation? 399 00:19:34,760 --> 00:19:36,720 OK, this is the heart of this thing. 400 00:19:37,360 --> 00:19:41,320 LLCS are just easier to administer and they have 401 00:19:41,320 --> 00:19:46,080 superior asset protection. So a corporation has 402 00:19:46,080 --> 00:19:51,000 shareholders, it has a board of directors and it has officers. 403 00:19:51,040 --> 00:19:54,040 And each of those you have to the shareholders need to vote 404 00:19:54,040 --> 00:19:56,520 for the board. The board then needs to appoint 405 00:19:56,520 --> 00:19:59,040 the officers. The officers have the authority 406 00:19:59,040 --> 00:20:02,080 to take action on behalf of the corporation. 407 00:20:02,600 --> 00:20:06,280 So you have these 3 levels. There's also the corporate laws 408 00:20:06,560 --> 00:20:08,960 are structured in such a way because the, the idea from the 409 00:20:08,960 --> 00:20:11,120 state level is corporations, we want to protect the 410 00:20:11,120 --> 00:20:13,040 shareholders, right? We really want to protect those 411 00:20:13,040 --> 00:20:14,600 shareholders. So there's you got the, when are 412 00:20:14,600 --> 00:20:16,640 the meetings called? What's a quorum, blah, blah, 413 00:20:16,640 --> 00:20:20,400 blah, all these different things that come into play with an LLC. 414 00:20:20,520 --> 00:20:24,200 The simplest version of an LLC is called a member managed LLC. 415 00:20:24,280 --> 00:20:25,920 There's just you, it's just Rebecca. 416 00:20:26,120 --> 00:20:29,040 Rebecca gets to make all the decisions and there's no 417 00:20:29,320 --> 00:20:32,760 shareholders or board or you are the owner and you are the one 418 00:20:32,760 --> 00:20:35,800 who runs the company. And so the ability or the the 419 00:20:35,800 --> 00:20:39,280 opportunity to potentially screw up and miss some record keeping 420 00:20:39,440 --> 00:20:42,400 is very low. You can have informal meetings 421 00:20:42,400 --> 00:20:46,160 when you just have your member managed LLC and Rebecca. 422 00:20:46,280 --> 00:20:48,960 Most cases you don't have actually any record keeping 423 00:20:48,960 --> 00:20:51,120 requirement. I highly recommend you keep 424 00:20:51,120 --> 00:20:54,480 records, keep records of contributions to the company, 425 00:20:54,480 --> 00:20:57,960 putting money in distributions, money coming out or when you 426 00:20:57,960 --> 00:21:00,400 make a decision that could potentially get you sued. 427 00:21:00,920 --> 00:21:03,280 And those are, you know, special meeting minutes. 428 00:21:03,280 --> 00:21:05,080 We call them. You can do all of these things, 429 00:21:05,080 --> 00:21:06,840 by the way, in the LLC attorney.com. 430 00:21:06,840 --> 00:21:09,920 We want you to be compliant. I don't want anyone, anyone's 431 00:21:09,920 --> 00:21:13,760 LLC to get sued and it does not deliver on that promise of 432 00:21:13,760 --> 00:21:17,000 limited liability protection. So really easy meeting minutes 433 00:21:17,000 --> 00:21:19,200 go in, I'm putting money in, I'm taking money out or making an 434 00:21:19,200 --> 00:21:21,240 important decision. I'm going to do meeting minutes 435 00:21:21,240 --> 00:21:22,680 for it. Put it on your calendar once a 436 00:21:22,680 --> 00:21:23,520 month. It doesn't need to be 437 00:21:23,520 --> 00:21:25,360 contemporaneous. It could be, you know, once a 438 00:21:25,360 --> 00:21:27,400 month you do that boom and you've got 12 meeting minutes. 439 00:21:27,560 --> 00:21:31,600 That is great protection for you, but it's very easy to stay 440 00:21:31,600 --> 00:21:37,240 compliant with an LLC, a corporation lot more complexity 441 00:21:37,240 --> 00:21:40,960 in the business structure. So I recommend an LLC. 442 00:21:41,000 --> 00:21:43,000 Well, let's start the path here, right? 443 00:21:43,120 --> 00:21:45,840 The path is do you need an LLC at all? 444 00:21:46,040 --> 00:21:48,400 Almost no risk, probably not right? 445 00:21:48,880 --> 00:21:51,840 You start having a some more risk, get insurance you can get 446 00:21:51,840 --> 00:21:56,400 in your personal name. The LLC itself is it offers 447 00:21:56,400 --> 00:21:59,600 other benefits than just the asset protection. 448 00:21:59,600 --> 00:22:03,040 It shows that you are serious. This is not a family by night 449 00:22:03,040 --> 00:22:04,840 operation. I've got a business I took the 450 00:22:04,840 --> 00:22:10,560 time to form XYZLLC, Rebecca's Interior Design LLC and it shows 451 00:22:10,560 --> 00:22:12,640 the other party like in a business setting, if it's just 452 00:22:12,640 --> 00:22:14,840 an individual saying how serious are they? 453 00:22:14,840 --> 00:22:17,640 Are they going to be able to deliver on this and LLC actually 454 00:22:17,640 --> 00:22:20,280 limits your risk. What makes you seem more 455 00:22:20,280 --> 00:22:23,120 professional and then use that to go, you know, you get your 456 00:22:23,120 --> 00:22:27,880 website and all those things. A lot of people really focus on 457 00:22:27,880 --> 00:22:31,520 the name of the LLC and it's not that important. 458 00:22:32,480 --> 00:22:34,920 That's the whisper. What is important is the LLC 459 00:22:34,920 --> 00:22:37,200 exists and it could be a fairly generic name. 460 00:22:37,200 --> 00:22:40,280 Again, you know Rebecca Ward Designs LLC, but you want to 461 00:22:40,280 --> 00:22:42,600 call it something else in the public space. 462 00:22:42,600 --> 00:22:46,160 You want to present yourself in some some other way, then you 463 00:22:46,160 --> 00:22:48,640 can do what's called the DBA or trade name. 464 00:22:48,640 --> 00:22:51,040 And many people's sole proprietors start out by doing 465 00:22:51,040 --> 00:22:53,480 just a trade name. They don't actually form an LLC, 466 00:22:53,520 --> 00:22:57,080 which is fine. You can have that trade name and 467 00:22:57,080 --> 00:22:59,640 sometimes you'll, you, you may want to have more than one trade 468 00:22:59,640 --> 00:23:02,720 name depending on what market you're focusing on. 469 00:23:02,840 --> 00:23:05,800 One of the trade names could be Rebecca's Residential Interiors 470 00:23:05,800 --> 00:23:09,440 and the other one could be RW Corporate Design. 471 00:23:09,880 --> 00:23:11,520 And this way you can have two different websites, right? 472 00:23:11,520 --> 00:23:13,320 You've got two different websites, two different sort of 473 00:23:13,320 --> 00:23:15,400 brands that you're putting out to the world. 474 00:23:15,400 --> 00:23:18,200 And maybe if someone's, if you're doing business, they want 475 00:23:18,200 --> 00:23:21,320 you to do corporate interiors, it may be a Ding against you if 476 00:23:21,320 --> 00:23:24,160 they see that you also have this website with residential stuff 477 00:23:24,160 --> 00:23:26,200 and it may be residential that may see because you're dealing 478 00:23:26,200 --> 00:23:30,200 with different markets. So I recommend that LLC name is 479 00:23:30,560 --> 00:23:34,880 fairly generic, still on brand, but then you've got these Dbas 480 00:23:34,880 --> 00:23:37,720 or trade names, super easy to file at the state level. 481 00:23:37,920 --> 00:23:41,400 And you can then hold yourself out to the public in different 482 00:23:41,400 --> 00:23:44,360 ways to capture different sort of segments of the market, 483 00:23:44,360 --> 00:23:46,160 different websites and so on and so forth. 484 00:23:46,160 --> 00:23:48,520 And you don't have the complexity of I need multiple 485 00:23:48,520 --> 00:23:51,160 companies here. It's still from the perspective 486 00:23:51,160 --> 00:23:53,560 of the for the taxes and otherwise, everything still goes 487 00:23:53,560 --> 00:23:57,280 into the LLC name, bank account, but it helps with that branding 488 00:23:57,280 --> 00:23:59,840 angle, which is incredibly important in your business. 489 00:24:00,200 --> 00:24:02,760 A question on that because I think I've been on the receiving 490 00:24:02,760 --> 00:24:05,880 end of this. So when you have the one bank 491 00:24:05,880 --> 00:24:10,120 account, is it the name of the LLC that's on the check, right? 492 00:24:10,400 --> 00:24:13,040 So when it goes to. It is right the LLC. 493 00:24:13,040 --> 00:24:16,240 So the LLC should enter into the contracts and you get the 494 00:24:16,240 --> 00:24:18,960 contract you enter in with that, that other person or that other 495 00:24:18,960 --> 00:24:25,000 company would be XYZLLC comma DBA Rebecca's Design. 496 00:24:25,320 --> 00:24:28,440 And that's how you word it. But if someone gives you a check 497 00:24:28,440 --> 00:24:31,680 for Rebecca Design, it's OK because you'll notify your bank, 498 00:24:31,680 --> 00:24:35,080 hey, I got this trade name. And the bank will accept checks 499 00:24:35,080 --> 00:24:39,560 that are made out to the LLC or to the Rebecca Designs or 500 00:24:39,560 --> 00:24:42,480 whatever your trade names are. So the bank will accept them and 501 00:24:42,480 --> 00:24:44,400 you are fine. Just you're holding yourself at 502 00:24:44,480 --> 00:24:47,360 ADBA or trade name really can't enter into a contract. 503 00:24:47,360 --> 00:24:49,040 It has to be the the company name. 504 00:24:49,040 --> 00:24:51,720 And then on those contracts. The other thing is a lot of 505 00:24:51,720 --> 00:24:54,240 times, you know, so someone says I'll send you over a contract. 506 00:24:54,240 --> 00:24:57,640 They only know you as Rebecca and they send over the contract 507 00:24:57,640 --> 00:25:01,640 where it just has Rebecca Ward as the person who's entering or 508 00:25:01,640 --> 00:25:03,640 the The Who they're entering the contract with. 509 00:25:03,840 --> 00:25:07,840 Don't sign that send that back. Hey, it's going to be under my 510 00:25:07,840 --> 00:25:11,840 LLCDBA, blah, blah, blah. And then in your signature line 511 00:25:11,840 --> 00:25:16,080 it says Rebecca Ward Designs LLCDBA and then Rebecca Ward 512 00:25:16,080 --> 00:25:18,760 manager or member or whatever your title is. 513 00:25:18,760 --> 00:25:22,080 So you're setting it out. If they send that over, you sign 514 00:25:22,080 --> 00:25:23,520 the contract with your name on it. 515 00:25:24,000 --> 00:25:26,920 You are on the hook right that that is going to be the best 516 00:25:26,920 --> 00:25:29,200 evidence of you being personally liable. 517 00:25:29,640 --> 00:25:30,920 Right. And so it's in the name of the 518 00:25:30,920 --> 00:25:34,360 limited liability is like putting that name, that 519 00:25:34,360 --> 00:25:38,200 corporation on the contract limits your liability. 520 00:25:38,760 --> 00:25:40,600 Exactly. Otherwise you, you entered into 521 00:25:40,600 --> 00:25:44,840 it with them and you are the brand and it it's with Realtors 522 00:25:44,840 --> 00:25:47,240 and with designers and people lawyers as well. 523 00:25:47,400 --> 00:25:49,120 Who are you entering into this agreement with? 524 00:25:49,120 --> 00:25:51,040 Make sure you're clear it's not Rebecca. 525 00:25:51,360 --> 00:25:53,840 I am behind the company, but you're entering an agreement 526 00:25:53,840 --> 00:25:56,520 with Rebecca as the Rebecca's LLC. 527 00:25:57,560 --> 00:25:58,960 Really good recommendations there. 528 00:26:00,160 --> 00:26:03,000 So that respect the business entity a lot of times as well 529 00:26:03,000 --> 00:26:06,000 people want to pay you through, you know, I'm just going to 530 00:26:06,000 --> 00:26:08,640 Venmo you what's your Venmo and they send it to Rebecca Ward's 531 00:26:08,640 --> 00:26:09,760 Venmo. You should not do that. 532 00:26:09,760 --> 00:26:13,280 The income from the business should go into the business bank 533 00:26:13,280 --> 00:26:15,360 account. Expenses of the business you're 534 00:26:15,360 --> 00:26:17,760 paying subcontractors or otherwise should come out of the 535 00:26:17,760 --> 00:26:20,960 business bank account. And there's also this concept of 536 00:26:21,200 --> 00:26:24,840 undercapitalized company that if the company has no assets in its 537 00:26:24,840 --> 00:26:27,920 bank account, there's nothing in its bank account, then someone's 538 00:26:27,920 --> 00:26:29,920 suing says, well, the company's just a shell. 539 00:26:30,000 --> 00:26:32,400 This company then therefore we should hold Rebecca responsible 540 00:26:32,400 --> 00:26:34,000 because she takes every last penny out. 541 00:26:34,360 --> 00:26:36,600 You should have what I call reasonable working capital 542 00:26:36,600 --> 00:26:38,520 reserves in the business bank account. 543 00:26:38,520 --> 00:26:40,360 What is that? Three to six months worth of 544 00:26:40,360 --> 00:26:42,280 expenses. So if you get, you know, your 545 00:26:42,280 --> 00:26:44,560 first check comes in and I know you want to, you know, your 5000 546 00:26:44,560 --> 00:26:47,560 dollars, $10,000 comes in. I'm not saying keep all 10,000 547 00:26:47,560 --> 00:26:49,360 in there, right? But don't take out every last 548 00:26:49,360 --> 00:26:51,280 penny. Keep a portion of it in. 549 00:26:51,840 --> 00:26:52,880 You know, I've got my own businesses. 550 00:26:52,880 --> 00:26:55,320 I've got a bunch of different credit cards and debit cards and 551 00:26:55,320 --> 00:26:56,920 bank accounts for a bunch of different businesses. 552 00:26:56,920 --> 00:26:59,160 We actually have a special relationship LLC attorney with a 553 00:26:59,160 --> 00:27:02,400 bank called Relay Financial. And Relay is like they call it a 554 00:27:02,400 --> 00:27:06,160 profit first is their focus. And one of the things that I do 555 00:27:06,160 --> 00:27:08,960 when I do my banking with that is that all the money comes in 556 00:27:09,120 --> 00:27:12,160 to my main operating account and I've set a threshold. 557 00:27:12,360 --> 00:27:15,520 What is my minimum working capital reserve X dollars? 558 00:27:15,720 --> 00:27:19,240 Anything above that it automatically I set the rules. 559 00:27:19,240 --> 00:27:22,240 So that automatically takes a portion, puts it towards my FICA 560 00:27:22,240 --> 00:27:25,640 tax, takes a portion and puts it towards my federal tax. 561 00:27:25,640 --> 00:27:27,440 And then the rest goes into my profit account. 562 00:27:27,440 --> 00:27:29,640 And I know that profit account, I can take whatever I want out 563 00:27:29,640 --> 00:27:32,120 of the profit account. The other accounts, I've got 564 00:27:32,120 --> 00:27:36,480 them ring fenced and identified as being these already have a 565 00:27:36,480 --> 00:27:39,240 purpose. This working capital, the main 566 00:27:39,240 --> 00:27:41,680 operating account is also one that I'm not going to let get to 567 00:27:41,680 --> 00:27:42,840 0. You know, I'm going to have 568 00:27:42,840 --> 00:27:44,640 proper capitalization of the company. 569 00:27:45,040 --> 00:27:47,840 So when you need the LLC, getting the insurance, getting 570 00:27:47,840 --> 00:27:51,320 the LLC set up, having that professional registered agent, 571 00:27:51,600 --> 00:27:55,760 having your documentation for the LLC, keeping ongoing meeting 572 00:27:55,760 --> 00:27:59,000 minutes, respecting the bank account contracts in the name of 573 00:27:59,000 --> 00:28:03,120 the right party, you're going to be very well protected and maybe 574 00:28:03,120 --> 00:28:06,240 not an issue here. Those special meeting minutes 575 00:28:06,240 --> 00:28:07,720 when you make an important decision. 576 00:28:07,920 --> 00:28:11,000 What I like to think of is, could this decision I'm making 577 00:28:11,000 --> 00:28:13,720 get me sued? If it can, I want to have 578 00:28:13,720 --> 00:28:17,080 meeting minutes that show I'm making this and exercising 579 00:28:17,080 --> 00:28:18,520 something called business judgement. 580 00:28:18,760 --> 00:28:23,120 The business judgement rule protects the owners of business 581 00:28:23,120 --> 00:28:25,720 entities from bad decisions. You make a bad decision, you 582 00:28:25,720 --> 00:28:29,720 hire a contractor and the contractor, you thought they 583 00:28:29,720 --> 00:28:32,040 were licensed and insured, but they pulled the wool over your 584 00:28:32,040 --> 00:28:35,920 eyes and the work then causes a fire right at the person's house 585 00:28:35,920 --> 00:28:37,720 because they did some electrical work. 586 00:28:38,400 --> 00:28:41,120 How did you make that decision? Did you exercise business 587 00:28:41,120 --> 00:28:42,840 judgement? I checked, looked at the Better 588 00:28:42,840 --> 00:28:44,920 Business Bureau. I checked and made sure that 589 00:28:44,920 --> 00:28:47,240 they were licensed and insured as an electrician. 590 00:28:47,320 --> 00:28:49,800 And then I hired them and here's what I did. 591 00:28:49,920 --> 00:28:52,560 Now, if it turns out they weren't licensed, but you had 592 00:28:52,560 --> 00:28:56,200 done your due diligence, you are going to be almost assuredly 593 00:28:56,200 --> 00:28:58,200 protected from that. What turned out to be a bad 594 00:28:58,200 --> 00:29:01,680 decision, the failing to do that, you hire, well, it's a 595 00:29:01,680 --> 00:29:03,280 buddy. I know him from, you know, we 596 00:29:03,320 --> 00:29:05,160 our kids go to the same school and he said he could do 597 00:29:05,160 --> 00:29:06,880 electrical or she said she could do electrical. 598 00:29:06,880 --> 00:29:08,000 So I'm just going to bring him in. 599 00:29:08,400 --> 00:29:09,600 You didn't exercise business judgement. 600 00:29:09,600 --> 00:29:12,000 That was because it helps Rebecca in some way, right That 601 00:29:12,000 --> 00:29:14,600 that's at least what the other side who's suing you would say. 602 00:29:15,080 --> 00:29:18,400 So if you're making a decision, hiring a subcontractor, someone 603 00:29:18,400 --> 00:29:19,960 who's going to be doing something that could get you in 604 00:29:19,960 --> 00:29:21,680 trouble. That's where I meeting minutes 605 00:29:21,680 --> 00:29:23,480 put it in there. Boom, look for a licensed 606 00:29:23,480 --> 00:29:25,840 electricity and found one checked their licensing. 607 00:29:25,840 --> 00:29:27,160 They were good to go. I hired them. 608 00:29:27,160 --> 00:29:28,840 We don't want anything bad to happen. 609 00:29:28,840 --> 00:29:32,080 But if it does, you show you exercise business judgement. 610 00:29:32,080 --> 00:29:35,680 Imagine it's three years from now and you get sued. 611 00:29:36,440 --> 00:29:38,200 Prove that. Prove that you exercise business 612 00:29:38,200 --> 00:29:39,720 judgement. How did you find this person? 613 00:29:39,720 --> 00:29:41,400 I have no idea my Google history. 614 00:29:41,400 --> 00:29:44,120 I delete my Google search history every 90 days. 615 00:29:44,120 --> 00:29:46,680 I have no idea. So that is protective of you. 616 00:29:46,680 --> 00:29:49,760 And that's ultimately what I want and I want LLC attorney to 617 00:29:49,760 --> 00:29:53,960 be able to deliver is you actually get the delivery of the 618 00:29:54,080 --> 00:29:56,080 the promise of limited liability protection. 619 00:29:56,880 --> 00:29:58,880 Wow. Yeah, that's great that I think 620 00:29:58,880 --> 00:30:02,520 that covers all of the steps going from when you're just 621 00:30:02,520 --> 00:30:06,960 starting to being fully covered for all the risks that we can 622 00:30:06,960 --> 00:30:09,440 have as interior designers. There can be a lot of risk as 623 00:30:09,440 --> 00:30:12,960 you really increase your project size and scope. 624 00:30:13,280 --> 00:30:15,800 So yeah. It isn't and and then, you know, 625 00:30:15,800 --> 00:30:18,680 the, the contractors talk about that being one of the big issues 626 00:30:18,680 --> 00:30:21,920 here with interior designers that I've seen is that people 627 00:30:21,920 --> 00:30:25,160 that get cold feet, they back out their financial position 628 00:30:25,160 --> 00:30:28,560 change if there's one partner who's really for it. 629 00:30:28,560 --> 00:30:30,520 And then they signed the agreement and the other partners 630 00:30:30,520 --> 00:30:32,640 like how much are you spending? You know, I'm sure you have 631 00:30:32,720 --> 00:30:36,640 horror stories, right, of these strong contracts. 632 00:30:36,640 --> 00:30:41,240 And as you are growing and the project size is getting bigger, 633 00:30:41,920 --> 00:30:44,080 I don't think you need a an attorney right off the bat. 634 00:30:44,080 --> 00:30:46,440 I don't think you need an attorney to form your LLC and 635 00:30:46,600 --> 00:30:48,960 those sorts of things. But as your projects are getting 636 00:30:48,960 --> 00:30:52,200 bigger, I think it makes sense at that point to reinvest some 637 00:30:52,200 --> 00:30:55,760 money, spend a couple of grand probably to get that contract 638 00:30:55,760 --> 00:30:58,600 that is going to protect you. There's a lot of remedies 639 00:30:58,600 --> 00:30:59,760 available depending on what you're doing. 640 00:30:59,760 --> 00:31:02,320 Is the mechanics liens, right? If you're doing that, something 641 00:31:02,320 --> 00:31:05,120 becomes a fixture is installed, you get a lien against the 642 00:31:05,120 --> 00:31:06,080 property. All right, don't pay me. 643 00:31:06,080 --> 00:31:07,920 I got a lien. The government wants to protect 644 00:31:08,040 --> 00:31:11,320 a licensed professionals who once you put in the electrical 645 00:31:11,320 --> 00:31:14,240 or put in the plumbing or put in, you know, some fixture, what 646 00:31:14,240 --> 00:31:16,000 are you going to do? Tear it out like that doesn't 647 00:31:16,000 --> 00:31:17,720 make sense. So they they, they give you a 648 00:31:17,720 --> 00:31:21,000 mechanism to do it. But having a lawyer draft those 649 00:31:21,000 --> 00:31:23,560 agreements to protect you from that contract risk. 650 00:31:23,560 --> 00:31:26,040 What are the interim payments they need to make? 651 00:31:26,040 --> 00:31:29,920 So the progress payments, what are the payment terms on it? 652 00:31:29,920 --> 00:31:32,480 You know, interest accruing and so on and so forth. 653 00:31:32,480 --> 00:31:36,320 And having that strong contract protects you on the business 654 00:31:36,320 --> 00:31:37,360 side. It protects you if you're 655 00:31:37,360 --> 00:31:40,080 getting sued too. Limitations of liability, right? 656 00:31:40,080 --> 00:31:41,800 What's the most they come after you for? 657 00:31:42,000 --> 00:31:44,200 No incidental or consequential damages. 658 00:31:44,320 --> 00:31:46,280 The only thing they could come after you for is the amount they 659 00:31:46,280 --> 00:31:47,120 paid you. Nothing. 660 00:31:47,120 --> 00:31:50,240 Even if the plumbing breaks and it causes $100,000 of damage. 661 00:31:50,240 --> 00:31:52,560 Sorry, the most out you're going to get from me is the amount 662 00:31:52,560 --> 00:31:55,040 that we committed to. And especially because I 663 00:31:55,040 --> 00:31:58,200 exercise business judgement and that person I hired was actually 664 00:31:58,200 --> 00:31:59,960 licensed, insured, whatever else. 665 00:32:00,720 --> 00:32:05,080 Yeah, that's really good. So if designer listening is 666 00:32:05,080 --> 00:32:08,720 like, well, I feel like I'm getting to that point now of 667 00:32:08,840 --> 00:32:13,560 needing a little bit more, is LLC attorney.com something that 668 00:32:14,000 --> 00:32:16,080 they will find resources at that can help them? 669 00:32:16,720 --> 00:32:19,280 Yeah, better than that. LLC attorney.com, not a law 670 00:32:19,280 --> 00:32:21,080 firm. I've taken my brain in the 671 00:32:21,080 --> 00:32:24,320 brains of other attorneys here and put it into an amazing 672 00:32:24,320 --> 00:32:27,160 knowledge base that I've trained A-Team. 673 00:32:27,200 --> 00:32:31,000 They call them Business Success Advisors and they will answer 674 00:32:31,000 --> 00:32:32,640 the phone. You have questions. 675 00:32:32,640 --> 00:32:35,880 All right, I'm in this state, I'm doing interior design. 676 00:32:35,960 --> 00:32:38,280 What do I need to know? How do I set up the LLC? 677 00:32:38,280 --> 00:32:40,640 How do I get the right tax selection or whatever else? 678 00:32:40,800 --> 00:32:43,480 They don't engage in the practice of law, which is 679 00:32:43,680 --> 00:32:46,720 applying your facts to a particular situation. 680 00:32:46,720 --> 00:32:48,960 But the general that they say things like, you know, generally 681 00:32:48,960 --> 00:32:52,240 speaking, you're going to form your LLC in the state in which 682 00:32:52,240 --> 00:32:53,600 you're operating your business, right? 683 00:32:53,840 --> 00:32:57,760 Generally speaking, the member managed LLC or manager managed 684 00:32:57,760 --> 00:33:02,280 LLC and then form that and then you can make a tax collection 685 00:33:02,280 --> 00:33:04,920 for an S Corp at a later date. If the math is math and didn't 686 00:33:04,920 --> 00:33:07,080 make the S Corp election. When you're just starting out, 687 00:33:07,080 --> 00:33:08,640 typically an S Corp doesn't make sense. 688 00:33:08,800 --> 00:33:10,520 Accountants will tell you to do it on day one. 689 00:33:10,680 --> 00:33:13,160 I recommend against that, but they have great resources. 690 00:33:13,400 --> 00:33:15,640 I filmed a ton of videos on these things. 691 00:33:15,640 --> 00:33:19,520 I've written our articles on our website are fantastic and so 692 00:33:19,520 --> 00:33:21,720 they're information. We're information driven. 693 00:33:22,240 --> 00:33:25,240 We want you to be able to deliver on the, the limited 694 00:33:25,240 --> 00:33:28,080 liability company benefits. And so call the team numbers on 695 00:33:28,080 --> 00:33:31,480 the website and they will help you if you get to the point 696 00:33:31,480 --> 00:33:35,160 like, all right, this is moving into the practice of law. 697 00:33:35,800 --> 00:33:37,480 Then they give you a resource book with an attorney. 698 00:33:37,480 --> 00:33:39,840 You can book with me. I call myself a single serving 699 00:33:39,840 --> 00:33:41,600 attorney. So you can book with 1/2 hour 700 00:33:41,840 --> 00:33:44,440 increment with me. And it's a paid consultation, 701 00:33:44,640 --> 00:33:48,520 but there's no retainer or. And nine times out of 10, you 702 00:33:48,520 --> 00:33:51,160 walk away from that with all the answers to your questions. 703 00:33:51,520 --> 00:33:53,200 But then there's going to be things again when you get to 704 00:33:53,200 --> 00:33:55,680 that point and you're looking for the contract, right? 705 00:33:55,680 --> 00:33:58,560 That's really protective. That would be go to your local, 706 00:33:58,560 --> 00:34:01,080 go in your network, find someone who has a trusted attorney. 707 00:34:01,080 --> 00:34:03,640 And you know, I never want to hire an attorney who it's their 708 00:34:03,640 --> 00:34:06,800 first time doing something. So who have they done a contract 709 00:34:06,800 --> 00:34:09,639 for? Your friends, others in the 710 00:34:09,639 --> 00:34:10,760 place. Hey, do you have an attorney who 711 00:34:10,760 --> 00:34:12,239 did your contract? And they were like, yeah, it's 712 00:34:12,239 --> 00:34:14,560 this guy or this gal. And then you go and he was like, 713 00:34:14,560 --> 00:34:16,239 Hey, I want a contract just like they have. 714 00:34:16,840 --> 00:34:19,199 And, and and that point it's like, all right here, boom. 715 00:34:19,320 --> 00:34:22,239 They get to basically reuse that maybe some slight tweaks or 716 00:34:22,239 --> 00:34:25,120 modifications, but that's a good way to keep the legal expense 717 00:34:25,120 --> 00:34:26,920 down when you are hiring an attorney. 718 00:34:26,920 --> 00:34:29,840 But we have great resources at the website and call the number. 719 00:34:30,080 --> 00:34:30,880 Check this out. Great. 720 00:34:30,960 --> 00:34:32,960 Well, thank you, Jonathan. We're going to put all that 721 00:34:32,960 --> 00:34:36,120 contact information in the show notes too, so people can easily 722 00:34:36,120 --> 00:34:38,560 find it. It's been a pleasure talking 723 00:34:38,560 --> 00:34:41,159 with you today. I think like really eye opening 724 00:34:41,159 --> 00:34:43,880 and some good specifics that we really needed some 725 00:34:43,880 --> 00:34:45,360 clarification. Actually, I haven't had it 726 00:34:45,360 --> 00:34:48,080 explained to me quite so clearly before. 727 00:34:48,080 --> 00:34:49,920 So that was really helpful. Thank you. 728 00:34:50,440 --> 00:34:54,080 I really appreciate that and I am excited to be able to talk to 729 00:34:54,080 --> 00:34:56,040 you. And I mean I did that. 730 00:34:56,040 --> 00:34:58,760 Bree enhances her progress. I was. 731 00:34:59,000 --> 00:35:00,640 Yeah. This is, I mean, this is it. 732 00:35:00,640 --> 00:35:03,840 This is exactly what so many creatives go through. 733 00:35:03,920 --> 00:35:06,080 Yeah. And I wish your audience all the 734 00:35:06,080 --> 00:35:08,040 absolute best. And check us out LLC 735 00:35:08,040 --> 00:35:09,440 attorney.com. Great. 736 00:35:09,440 --> 00:35:10,760 Well, thank you. We will do. 737 00:35:11,200 --> 00:35:20,040 Thank you. So much great information. 738 00:35:20,040 --> 00:35:25,520 Jonathan had a wealth of knowledge and we even discussed 739 00:35:25,520 --> 00:35:28,760 a little bit of my own setup afterwards. 740 00:35:29,120 --> 00:35:30,880 It's just very giving, very generous. 741 00:35:30,880 --> 00:35:35,000 So definitely reach out to him to find out what is the best 742 00:35:35,440 --> 00:35:39,560 setup for your design business you are starting out or even if 743 00:35:39,560 --> 00:35:42,840 you are an established designer, he can answer all those 744 00:35:42,840 --> 00:35:46,280 questions for you. And if you're looking to start 745 00:35:46,280 --> 00:35:48,880 your business, and this kind of goes hand in hand with that, 746 00:35:48,880 --> 00:35:51,520 don't forget we have launched your business boot camp in 747 00:35:51,520 --> 00:35:54,920 January. We do talk about how you set up 748 00:35:54,920 --> 00:35:59,480 your business starting out. And so that is going to be 749 00:35:59,800 --> 00:36:03,080 helpful to have Jonathan's expertise on hand for that as 750 00:36:03,080 --> 00:36:04,840 well. OK, that's all I have for you 751 00:36:04,840 --> 00:36:07,080 this week. Next week we'll have another 752 00:36:07,080 --> 00:36:10,000 great episode. And until then, stay creative. 753 00:36:11,520 --> 00:36:14,560 Thanks for listening. If you love this episode, please 754 00:36:14,560 --> 00:36:17,320 leave a rating and a review. This helps me reach other 755 00:36:17,320 --> 00:36:21,040 curious creatives like you. If you have a topic request or 756 00:36:21,040 --> 00:36:24,400 would like to contact me, simply head over to my website 757 00:36:24,600 --> 00:36:30,720 arworddesign.com or e-mail me at podcast@arworddesign.com.