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GETTING STARTED Tips for Survival © Jay E. Simpson 2001.

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Presentation on theme: "GETTING STARTED Tips for Survival © Jay E. Simpson 2001."— Presentation transcript:

1 GETTING STARTED Tips for Survival © Jay E. Simpson 2001

2 Jay E.Simpson Office: Fax: Business Law Specialist & General Counsel Providing Solutions for the Life of Your Business Who am I? © Jay E. Simpson 2001

3 What Is My Story? 2000-Present JAY SIMPSON, LLC Senior Counsel, Jostens, Inc., Bloomington, MN Contract General Counsel, American Chiropractic Network, Inc., Minnetonka, MN General Counsel Zeos International, Ltd., Minneapolis, MN Of Counsel Contract Attorney with OConnor & Hannon, Minneapolis, MN Assistant General Counsel and Assistant Secretary, DataServ, Inc., Eden Prairie, MN Corporate Counsel and Corporate Secretary, Keith- Stevens Incorporated, Eden Prairie, MN © Jay E. Simpson 2001

4 Todays Presentation Five Common Legal Structures Practical TIPS Contracts 101 Questions © Jay E. Simpson 2001

5 CHOOSE YOUR TEAM People in the Business: Experience, Marketplace Academics Lawyers Accountant/Tax Marketing/Sales © Jay E. Simpson 2001

6 A Guide to Starting a Business in Minnesota Minnesota Department of Trade and Economic Development or Updated each January ITS FREE! © Jay E. Simpson 2001

7 Five Common Legal Structures Sole Proprietorship Partnership Regular Corporation (C-Corporation) S-Corporation Limited Liability Company (LLC) © Jay E. Simpson 2001

8 Sole Proprietorship Simplest Form of Legal Structure You and the Business are the Same Business Licenses (if applicable) Register Business Name (if not owners first and last) Federal and State Tax ID Numbers if Employees - Unemployment Comp Tax Number - Workers Comp Insurance Sales/Use Tax (if applicable) Unlimited Personal Liability © Jay E. Simpson 2001

9 Partnerships General Partnership: 2 or More People Share Equally the Right and Responsibility to Manage Each Partner is Responsible for all Debts and Obligations Any Partner Can Legally Bind the Partnership Requires Federal and State Tax ID Numbers Partnership Not Taxed, Must File Annual Federal and State Informational Returns with IRS/MDR Unlimited Personal Liability Partnership Agreements: STRONGLY RECOMMENDED © Jay E. Simpson 2001

10 Regular Corporation (C-Corp) Separate Legal Entity Owned by One or More Shareholders Board of Directors Responsible for Management and Control of the Corporation Limited Personal Liability: Corporation is Responsible for Debts and Obligations Corporation Federal and State Tax ID Numbers and Unemployment Comp ID Number Corporate Formalities - Issue Stock - Corporate Minute Book - Shareholder Records - Books of Account - Initial Meeting of the Board of Directors or Shareholders Must File Corporate Tax Returns for Both Federal and State DOUBLE TAXATION TRAP © Jay E. Simpson 2001

11 S-Corporation S-Corp is a Separate Legal Entity from the Individuals who Own or Operate it Unanimous Shareholder Election to be an S-Corp (IRS Form) Limited Personal Liability NO DOUBLE TAX: Taxed at Individual Shareholder Rates Statutory Animal - Not More than 75 Shareholders - No Non-Individual Shareholders - No Non-Resident Alien Shareholders - Only One Class of Stock © Jay E. Simpson 2001

12 Limited Liability Company (LLC) Limited Personal Liability Like a Corporation Business Income and Loss are passed onto the Owners of the Business Articles of Organization vs. Articles of Incorporation Formalities Similar to a Corporation Many S-Corp Restrictions do NOT apply © Jay E. Simpson 2001

13 Insuring Your Business Required for Most Types of Business Get Property and Liability Coverage to Protect Yourself from Common Claims Errors and Omissions Policy Keep Costs Down with High Deductible Policies Home Insurance Policies MAY NOT Cover Business Property and Liabilities © Jay E. Simpson 2001

14 Elevator Story: What Do You Offer? Write Down Offerings One Minute - Practice References: Who are they? What did they say? © Jay E. Simpson 2001

15 How Can You Be Reached? Be Accessible Return Calls © Jay E. Simpson 2001

16 Getting Clients/Customers Tell Everyone Join Trade Groups Get Connected On-Line Web Page © Jay E. Simpson 2001

17 PRICING: Do Your Homework – Know the Range Identify the Competition Competitor Offerings and Pricing Experience Unique/Special Skills Low, Mid-Range, Upper End Pricing Strategies (know yourself) Be Reasonable © Jay E. Simpson 2001


19 Put It in Writing Good idea to put your deals into writing (cocktail napkin) Read the contract Develop your own Mutual Confidentiality/Non- Disclosure Agreement Develop your own standard agreement Ask for it (Thanks, Mom!) © Jay E. Simpson 2001

20 Warranties I What should you agree to: -That the deliverables will substantially comply with the specifications -That you have the right to perform the services and deliver the goods free from any third party claims Disclaim implied warranties Disclaim warranty of merchantibility Disclaim warranty of fitness for a particular purpose © Jay E. Simpson 2001

21 Warranties II What shouldnt you agree to: -That services, software or deliverables will be error or bug free -That the services, software or deliverables will meet the clients needs or objectives -That the services, software or deliverables will be free from defects in materials and workmanship © Jay E. Simpson 2001

22 Limitation of Liability ABSOLUTELY ESSENTIAL! -Disclaim INCIDENTAL, CONSEQUENTIAL, INDIRECT AND SPECIAL DAMAGES -Limit damages to cost of performing services and/or delivering goods -Make sure that Limitation of Liability is separate from warranty obligations © Jay E. Simpson 2001

23 Audits IRS: Are Personal Expenditures being Claimed as Business Expenses? Separate Checking Account and Credit Card for Business NEVER USE BUSINESS ACCOUNTS FOR PERSONAL EXPENSES Maintain Vehicle Log of Business vs. Personal Use Education Expense is deductible if Related to your Current Business, Trade or Occupation Meals 50% Deductible Maintain Accounting Records for at Least 6 Years No Receipts Required for Items Under $75.00 – Reasonable, Ordinary and Necessary © Jay E. Simpson 2001

24 SUMMARY Assemble Your Team Get Set Up Tell the World Written Contracts are Good Do what you Enjoy, and never Work a Day in your Life © Jay E. Simpson 2001

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