Legal Know-How for Small Biz Newbies with Braden Drake Law
Yesterday on #desIGnLIVE (my weekly instagram live show) I got to talk to Braden Drake of Braden Drake Law all about small business legal, small business tax, contracts, entity formation, Small Biz Start Up Guide, and enneagram personality types.
Here’s some of the highlights from my interview with Braden!
Q: What kind of law do you practice, who is your ideal client?
A: I practice small business law and specifically, start up law which means I do mostly entity formation, trademarks and copyrights, contracts, and taxes (planning, prep and consultations).
My ideal client are small business creatives: photographers, designers, event planners, and other creative service based businesses.
Q: How does your branding and marketing help appeal to your ideal client?
A: In the legal field, if you give an ounce of a shit about your personal branding, you’ve already got a leg up on your competition. I think that when people see my brand they can tell that I care, and that helps me appeal to my audience. All of the blues and greens are consistent and inspired by a coastal aesthetic (but not earth tones). Black, gray, ocean-colors, blues, and greens are really on-brand for me. I never wear a suit, but my personal style aesthetic (black, gray and navy) are in line with my brand.
Q: How does sharing what you do on social media help illustrate your process (without giving away confidential info)?
A: I have started doing direct client shout-outs on instagram, and it’s something I want to add to my contracts, but right now, I get their verbal approval before posting anything about my clients.
Since most of my clients are just getting started, they are happy to have me share their handle on social and give updates because it is free advertising for them. Always best to ask for permission first.
Q: It was your idea to write the Small Biz Start Up Guide… What prompted this idea, and what inspired you to bring Lauren and I on board?
A: It was really a huge evolution. It was really coming from me needing better content for my website and I thought it would be great to create a timeline of everything you need to start your business. But really before you decide if you’re and LLC or Corporation, you need business planning advice, which I am not qualified to advise on. Then in talking to you and hearing that you were working with newbie business owners, I figured it would be best for all of us to work together to create one giant resource on planning, legal and branding for our small business owner clients that outlines the whole ‘start up process’ start to finish.
It ended up becoming a whole second business, we developed a website for it, email list, blogs, content marketing, etc. I’ve actually started offering a service called DIY Business Formation where I give you information on how to build your business yourself, and the first step is purchasing the start up guide.
Q: Sole Proprietor vs. LLC as creative small biz owner?
How are these different from S Corp?
A: So, the answer is always LLC. The whole point of an LLC is that it protects your personal assets from liability if your business is sued. Someone does not have to have a liable asset or claim to sue you, it is your responsibility to defend yourself in a lawsuit, should one occur. Your LLC will protect your car, your house, your 401k against any kind of lawsuit. It also looks much more professional to have LLC at the end of your name. A lot of people think there is a tax benefit to becoming an LLC, and there is not. You’re still filing the same taxes.
An S Corp can safe you self-employment taxes. I did an hour long podcast on this so it is a little difficult to condense to something simple. S Corp is a tax status not an entity. The way it saves you taxes is that you can to consider tax vs personal income tax. Self-employment tax rate is 15.3%. When you form an S Corp, what you do is put yourself on payroll & you’re the sole share holder. Therefore, you take a salary subject to income and self-employment tax. If you pay yourself a distribution or bonus, that is not subject to self-employment tax. Read more: LLC, CORPORATION, OR S CORPORATION? CHOOSING THE RIGHT ENTITY FOR YOUR BIZ *benefits aren’t really apparent until the $70-$80k per year mark
Q: Tell us more about Digital Nomad Tax Guide
A: If anyones watching an interested you can get on my email list, and I have one chapter finished on FEIE (Foreign Earnings Income Exclusion). Braden’s Email List here.
If you’re out of the country you can exclude up to $104,000 from Federal Income Tax. What a lot of people get confused on though is that it is service based income, not product based or rental income. Also does not exclude you from 15.3% self-employment tax. In reality, it can save you up to $15k (if you’re making over $100k and abiding by FEIE rules).
Congress can’t keep up with the evolution of how we all operate, so there is a lot of gray area on nomads and how they file and pay taxes.
Q: How does a small start up business go about setting up contracts?
A: There are different types of contracts, but the main one most creative service professionals need is what I call a Client Service Agreement. It will usually have a laundry list of legal terms, but other than that it needs to cover the who, what, where, how, and sometimes why of the work agreement. This includes payment terms, what the deliverables are, and scope of services (as specific as possible). I do a lot of photography contracts for example, and photographers usually don’t give out RAW files. They may also have terms like you must tag me on social media, and you can’t edit the filters or coloring.
Always think about issues you’ve run into in the past: late payment, missed meetings, etc.
Q: What do you do when a client doesn’t pay your invoice?
A: Obviously the best preventative measure is to make sure this doesn’t happen by taking 100% up front. I try not to be passive aggressive about it, but if I notice a client hasn’t paid before a meeting I will email them and give them the option to postpone until after invoice is paid.
If you are past that point, you can write a demand letter, which comes from a lawyer and says essentially, if you don’t pay my client the amount due per your contract, we will be taking you to small claims court.
Know the personality of the person you’re confronting, as some people may send you back a whole packet from their attorney with a “Game On” attitude, which you probably want to avoid.
Q: What is your legal obligation when reposting images that don’t belong to you for your own marketing?
A: Yeah, you can’t do that. That is a copyright violation. A lot of people don’t realize that as a creator, when you create something you have an inherent copyright to that content. To be official you have to register with the PTO. You own the intellectual property, it is your work. People cannot copy or monetize it.
The trick is obviously, people know that when you’re making instagram posts, you should use free stock photography websites because you have approval to be using those images, where it says credit is appreciated, but not required.