Whether you are venturing off on your own or working with a group, one of the first decisions a business must make is when it should officially form an entity. This post provides some guidance on when to make this decision.
Today, we are launching a five-part Blog Post Series covering the questions that should be asked by anyone who is thinking about starting a business or who has already started a business but has not officially formed an entity with the Texas Secretary of State.
The first goal of this Series is to make potential business owners aware of some of the issues that they should be considering when first starting a business. The second goal is to equip potential business owners with information that will allow them to better navigate some of these initial issues concerning entity formation. The Posts are written in a general nature so that the Series will be applicable to a wide range of business types and are intended to be helpful even for those who are new to the world of entity formation.
Often in my talks I am asked for advice or tips about running a startup. Invariably, I come back to a principal that I implemented close to a decade ago, and it has saved me more times than I can count. And when I became a lawyer, I really began to understand how powerful it can be.
Simply put, whenever you have a verbal interaction where any kind of deal is made, follow up ASAP with a written email. Sounds simple, right?
Here’s an example. Often I am on the phone with a client or business associate, and we strike some kind of deal. To give a real life case, let’s say that I have chosen to sell a picture, and the client and I have settled on a price of $2500 for a matted and framed image in the size of 24x36. I’m excited, they are excited, and I start making the image. BUT…
Before I go any further, I immediately send an email to the client (who, remember, I just got off the phone with) and say the following:
Great to talk to you today. As we agreed over the phone, I am making the image you requested in a size of 24x36, and I will be delivering it matted and framed. The price we agreed upon is $2500, payable 50% up front, and 50% on delivery. Excited to work with you!
Short, clear, and takes 60 seconds. Look, however, at what occurred. We now have a written record that: a) the client and I spoke today via phone; b) we settled on a certain price and payment schedule; and, c) the payment is for a certain piece in a certain size and finish.
Just trust me. It works. Not only do you get all the benefits above, but you have put psychological pressure on the person not to change the terms or reneg on any of the parts of the deal.
Finally, and this is important, this email is what is known as a “contemporaneous writing.” That is, something that occurred at the same moment in time as the verbal agreement. Even if the client doesn’t reply, the mere fact you sent the email the same day shows a deal was made. While it is not bulletproof evidence, it is SOME evidence, and I have used emails like this as the basis for demand letters for payment and other reasons.
All in all, start making this one change to the way you do business and you will see the number of “misunderstandings” go down precipitously.
Welcome to Creative Business Law, a blog that has been developed to discuss the areas of art law, creative law, social media law, and startup and entrepreneur law (among other odds and ends).
This blog is a new avenue to continue the conversation I have been having with artists, photographers, and business owners for the past decade. It is my hope that what we write, as well as what our guests convey, helps you grow your business and “demystify” the sometimes obscure topic of law.
But why should you listen to me?