…with attorney at law and founding partner of Metal Law Group, John Fagerholm.
Are you an entrepreneur embarking on a first venture?
Are you looking for business advice as you decide what to do with your idea?
Have an idea for a brand or project but don’t know what to do next?
Curious what it takes to move from idea to execution?
We’ve been getting a lot of great questions (email us! firstname.lastname@example.org) from folks who have been inspired by the men and women on PRSUIT who are chasing their passions by launching their own brands, services, products, etc. Questions like: should I create an LLC? How do I create a contract? What should I know legally when launching my product? How do I hire someone?
No one gets through their entrepreneurial journey unscathed but if you are prepared and learn to expect the unexpected, you’ll be ready to handle anything thrown your way.
In launching something as simple as a blog there are many legal and logistical considerations to keep in mind, so to help you guys out with whatever venture you’re working on, we went to a man who has first-hand experience with both launching his own brands as well as advising those embarking on their own entrepreneurial journeys.
That man is attorney John Fagerholm, aka The Entrepreneur’s Lawyer, founding partner of Metal Law Group in Los Angeles.
We chatted with John for Episode 44 of The Hustle Sold Separately where he gave us the lowdown on what to pay attention to as a young entrepreneur, but we wanted more! So we sat down with John again to help young and first time entrepreneurs avoid common pitfalls, make the most out of their journeys and become successful millennial entrepreneurs.
Before we get to legal considerations, what business advice would you give young entrepreneurs?
First, before you do anything, make sure you really are an entrepreneur. Not everyone is born an entrepreneur but it also something you can learn. Regardless, what it boils down to, though, is fear. It is all a matter of fear. You can talk to someone who wants to do something and the only thing stopping them is money, etc. all the usual excuses that are a result of fear.
When I speak to law students about starting their own law firm (more practical considering the hiring environment), I always bring up Aesop’s Fable of the wolf and the dog. I am paraphrasing here but in the fable, the wolf comes out of the woods looking for food and runs into a chained up dog . The two get into a discussion about whose life is better. The dog says his is better because even though he is chained up, he gets three meals a day. The wolf says his life is better because even though he is hungry, he can still howl at the moon and run whenever he wants.
Point being…it’s all a matter of the way you think.
Are you willing to go hungry to have freedom? Or do you prefer to have 3 meals a day?
I don’t see one as better. Some are born entrepreneurs, some learn along way, some fall into it.
The difference between ones who do it and ones who don’t is FEAR.
Know who you are and what you want!
Second, learn. Do your own research and find mentors . You don’t have to walk up to someone and say, be my mentor! Anyone can be your mentor nowadays. It can be online, Youtube, podcasts etc. Learn your craft.
Third, surround yourself with great people. It only takes one guy to ruin a great thing so make sure you surround yourself with people you trust and who lift you up.
Fourth. Work hard. Simple
At what point do I need to create an LLC, S Corp, or some kind of legal entity?
If you’re just tinkering away in your basement working on ideas and sketches, its probably okay to not create a legal entity. But anytime you’re going to enter into an agreement with someone, hire someone, put something in writing, shake hands… you’re going to what to have a legal structure.
How do I know if my idea is already copyrighted, trademarked, branded, taken, etc.?
First, know the difference between a patent, trademark and copyright and how it might apply to your business. Do a patent search at the USPTO. If you’re serious, look online for someone to do a patent search for you. This is a very particular skill set and takes an additional legal license to be a patent attorney. The average attorney won’t be able to handle.
I want to hire someone. What should I consider from a legal standpoint?
First, look up your state laws. There are lots of things to consider based on your state’s respective laws. Be aware of the little things. In California, for example, always have an agreement policy and procedures in place to handle overtime, workers comp, etc. These are all the little things that can come back and bite you later.
What about using services like Legal Zoom for young entrepreneurs who might not have the funds to afford an attorney in the beginning?
If it’s something very simple, these type of services are fine. These are fine for the type of person (usually a sole proprietor) who is okay with just downloading a template, not really looking at it and hoping that it will help them in the event that there is a problem. If there are multiple people in your LLC, you probably need to go to an attorney and discuss scenarios that need more custom legal work. What happens in the event of decision deadlock? What does the LLC do if one member wants to leave? Wants to sell? These scenarios need to be addressed and simple templates and boiler plates would not handle these types of services. Again, different states have different laws so always be aware of that. Always, always, always make sure you use a qualified attorney.
How do I make contracts? Can I use online contracts?
You can use a service like Rocketlawyer, Pandadoc, etc., but keep in mind that these templates usually cover 2/3 of what you need to consider when creating simple legal docs. All it takes is one word to make a HUGE difference. This stuff is important so I’ve always been of the opinion that if you can’t afford to create a solid and tight agreement, then you probably need to step back and re-evaluate your approach.
When discussing my idea with others, do I need an NDA?
I think NDAs are fairly worthless. I had a discussion with a friend about this the other day. He wanted to tell me an idea and sign an NDA before. I said listen, if after all these years you think I need to sign an NDA for you to trust me, we shouldn’t be in business anyway. No point in signing or you even telling me about this.
When starting a business, how should a first-time entrepreneur seek out and secure legal advice?
Ask your mentors, ask people in similar businesses. Heck, just ask them who they use and as long as there is not a conflict, you can get them to represent you. If they are out of your price-range, they can refer you to someone else. Start with a business lawyer to handle general matters and he/she can refer out for more specific requests like trademarks.
How should I approach finding partners and help with initial product/business design and testing initial MVPs before you have funding and legal structure of the business?
Even before you arrive at this stage, you are going to run into legal issues. Friends and family are the best for initial startup capital and for testing.
Have more questions for John? Email email@example.com and we will have him answer!
Don’t forget to tune-into Episode 44 of The Hustle Sold Separately..