E38: Creating Contracts to Protect Your Business

EPISODE 38

[INTRODUCTION]

[00:00:03] AW: You’re listening to the Transcend Podcast. I’m your host, Asha Wilkerson, an attorney by training and an educator at heart. This podcast is all about empowering you to build a business and leave a legacy. Here’s the thing, the wealth gap in America is consistently increasing. While full-time entrepreneurship is not for everyone, even a side hustle could change your financial landscape if you’re intentional about using your business to build wealth. I’ve run my own law firm for over 10 years. In that time, I’ve helped countless California businesses go from idea to six figures. On this podcast, we talk about what it truly takes to build a sustainable business and find financial freedom. Let’s dive in!

[EPISODE]

[00:00:49] AW: Hey, there. Welcome back to another episode of Transcend the Podcast. Again, like always, I’m super happy to have you here. Now, this week, I already told you last week, I hope you’re listening to all the episodes. This month of March, we are doing a series of workshops to get you ready, so that you can build a business that is capable of leaving a legacy. I’ll say it again, because I don’t think I can say it enough. We, as people of color in the United States, have had a turbulent history that has led to financial strife in hard times.

We have generational poverty by design. Not because we don’t want to work hard, because I think that brown people in the United States are some of the hardest working people, are the hardest working people in the United States. I can go into the history, but I think you already know what that is. The point is, is that it is time for us as Black and Latinx entrepreneurs or entrepreneurs of color to build businesses that are really truly capable of leaving a financial legacy. Now we think of legacy often is what we leave behind once we are no longer on this earth. Legacy can also be built as you’re going.

I was thinking about, flashing back to this time right after high school, I think I was a freshman in college. I came home, maybe I was a junior in college. I came home back to Portland, Oregon. I had seen one of my friends from high school. I went to a private high school. She and her mom were in Sears. Remember Sears? I don’t know if they still exist anymore. Looking for washers and dryers. They were like, “Oh, okay.”

I’m 21, maybe at this time. She said, “Yeah, I’m getting married next year,” a year in advance. I already knew. “I’m getting married next year, and my parents are giving me a down payment for the house, and so I’m picking out washers and dryers.” I’m like, “What?” That hadn’t even like – What? First of all, I wasn’t thinking about getting married at that point in time. Also, it just had never occurred to me that parents would be able to or expected to give a down payment on a house.

Then, it just stayed with me, and I was like, “Wow, that must be nice.” Then, as I got older and was thinking about legacy and thinking about generational poverty and thinking about student loan debt, which I have a ton of, how would things be different if I had a down payment to get into a house when I was 25, back when the housing prices in Oakland weren’t as ridiculous as they are now? What if my parents had saved enough money that I could go to college or to grad school and not have to take out student loans?

I mean the educated right now are the new working poor, because we have so much in loans to pay back. All of that to say, these are the experiences that I went through that I thought about, it made me really start thinking about what is possible in terms of legacy building for people of color, and how can we not just leave money when we pass on, but how can we build wealth to assist our families and our communities right now? What can we do now?

One of those things, in my opinion, is to have a business. Not just to have a business to say that you have a business or to say that you’re done working for 9 to 5 and tired of the man. To really be intentional with your business, so that you are using it to actually build wealth. Now, a lot of us don’t know how to do it. We don’t know, because we haven’t seen it done and there’s no shame in that at all. I have some keys for you, so that you can use your business to get the maximum benefit from it.

Not just to have it, again, to say that it’s like, “Oh, good job.” I want to teach you how you can take advantage of the tax code. I want to teach you how you can hire your children and pay them and not pay taxes. I want to teach you how you can purchase vehicles through your car. I want to teach you how you can write off your cellphone use when you use it for your business. I want to teach you how you can spread this wealth and this knowledge to your children and to your nieces and nephews and to your community at large. I want you to know that you, as a business owner, are in a powerful position to change your life and the lives of those around you.

Now, the first step and was the workshop last week was to create an LLC or corporation to house your business. That gives you legal protection. This week, we’re talking about contracts. How to use contracts to protect your business? Now, you can create an oral contract, but I definitely don’t recommend it. Because the idea with contracts is that – this is how you start, right? This is what people don’t tell you. This is what we learned in law school. The contract really matters when there’s something that goes wrong.

When you’re looking at your contract, or you’re writing a contract, or reviewing a contract, probably don’t write it unless you really know how, you want to think about what’s the worst-case scenario. If a third party, if a judge has to look at this contract, and determine who followed the rules of the contract and the agreements in the contract and who didn’t, it needs to be really clearly written, so that a third party who knows nothing about the discussions that you had, can look back and see what each side was supposed to do. That’s how you need to look at your contracts.

In the workshop on Friday, which is, I’m going to look at the date again, March 11^th at 11 a.m. Pacific Time, I’m going to cover with you contract essential terms. There are different clauses in contracts and terminology that you need to know and have in your repertoire, so that when you are reviewing contracts or thinking about creating a contract, you know what the vocabulary is. It’s not the same as what you hear on TV. It’s not the same as what you hear in the cop shows or in the lawyer shows. You want to make sure that you actually have the right legal definition, not the definition that you may have been using to operate for the past 15, 20 years.

The other thing I’m going to teach you is how contracts are used in court. I gave a little bit of it away a couple minutes ago, but I really want you to understand what I’m looking for as an attorney, if I’m reviewing a contract and what the judge is going to be looking for. I’m going to tell you what evidence we need, how evidence can be used, so that you are able to understand when you’re reviewing your own contracts whether this thing, this document, is going to be useful to you in the future.

Now, how does this come up? Why is this important? I always give this example of a former client of mine. I didn’t draft his contract, but he had an issue with a designer that he hired or an engineer that he hired, software engineer that he hired to create this point-of-sale system. They did a contract on their own. The engineer got going and gave the client, my client the final product, which was not up to my client’s expectations. My client calls me and he’s like, “Look, I have this contract. The guy is not doing what I asked him to do. What is my recourse?”

I look at the contract with him. The contract is not detailed enough to understand what is the standard. The engineer produced a point-of-sale system, or he did exactly what was asked of him, but there wasn’t enough detail or enough spelled-out expectation. It’s like, I want you to give me a car. Okay, you give me a car. You come up with a Honda. Those are a lot cooler now. Remember Saturns? Let’s say, you give me a Saturn. They don’t even make Saturns anymore, right? You’re like, “Oh, you said you needed a car. Here’s a Saturn.”

I’m thinking that I’m about to get, I don’t know, a Mercedes. The car is the car, but if there aren’t details about what kind of car and how it should run and when it should run and what fuel it takes, then it’s hard to prove that someone has not adhered to the contract, when it just says a car. If the contract just says, you need a point-of-sale system, but you aren’t talking about the bells and whistles that go in that point-of-sale system that you expect from the engineer, you cannot then later expect the engineer to give you the bells and whistles if they weren’t laid out in the contract. I really hope that makes sense to you.

I just got a call from a friend of mine for one of her clients, who had the same issue working with somebody. They want to know what they can do, because there’s a contract. One party is saying, they’ve adhered to the contract, but it’s not the result that my friend’s client wants. You got to go back and look, look at the details, look at what it says. You really want to know and understand your contract terms. You want to understand how contracts are going to be used in court. Then, I’m going to make sure that you understand how to read contracts for yourself, so that you can get the result that you want.

Stop piecing your contracts together off the Internet. Stop doing that. If you’re going to keep doing that, make sure you come to this workshop on Friday at 11 a.m. This is March 11^th. So you can get equipped with the right vocabulary, the right language, so that if you are going to piece your contracts together – but please don’t – that you at least know what you’re piecing together.

Now, here’s the thing. You can certainly get contracts customized and I think that you should absolutely, 100 percent do that. Once you get a customized contract, you can tweak it. If you’re a coach, you’re going to use the same coaching agreement for a number of different people. You’re tweaking the name, maybe you’re tweaking the scope of the service, but the rest of the contract is there and in-line. Do not use somebody else’s contract, especially if you don’t know what state it came from, especially if their business isn’t exactly the same as yours, because you need to make sure that your contract is tailored to you and meets your specific needs.

If it wasn’t written for you, there’s no guarantee that it’s actually going to protect you in the way that you want. Have no fear. I have a solution. Come to my free workshop on Friday at 11 a.m. March 11^th, 11 a.m. Pacific Time.

To get to the workshop, go to transcendthemembership.com/events, and you will see the registration page there. I’m going to save the rest of you for Friday. Come to the workshop. It’ll be more in depth than what I just covered with you now. I also would love it if you would share this podcast with friends, or family members or your co-workers, your co-entrepreneurs. Then also, invite them to come to the workshop on Friday. Yeah, it’ll be a good deal and I promise that you won’t regret it at all. Alright, ciao for now.

[END]