**This information is for educational use only and is not intended as legal advice nor to create an attorney-client relationship. Please contact your legal professional for guidance on your specific matter**
X-Round: Ask a Lawyer (June 2021)
Here we compile our most asked questions for the month and do a short Q&A with a lawyer.
Q. I am interested in forming an LLC, because of the separation of personal and business assets. However, because of all the expenses and work involved in running a business, another option I am considering is working as a freelancer/independent contractor, and NOT forming an LLC.
If I go the freelancer route, would one of the contracts on Startup Dox be sufficient protection for me?
A. We aim for triple protection with the CINC method. Company, Insurance, Contract. Any incorporated Company (LLC, Corporation) can protect your personal assets. Obtaining Commercial Insurance protects your risk of loss on various parts of your business. Using Contracts for every transaction will preserve your mutual understanding of your duties and rights of the agreement.
You can have 1 or 2 or all 3.
But, we strongly recommend that you start with Contracts as a starting point in ALL your transactions.
In your particular situation, having a contract such as the Independent Contractor Agreement (if you hire someone and you PAY THEM as a contractor) or the Client Services Agreement (if you are hired by someone and they PAY YOU) would protect your work relationship but not your personal assets, completely.
Q. Ok, as an independent contractor, am I still potentially liable and could I be sued, since I am not an LLC or Corporation? Could someone go after my personal assets?
A. Unfortunately, as long as you remain unincorporated without a “legal shield” such as a Company, your personal assets are vulnerable and not protected. You could use a Contract and Insurance to limit your liability and risk of loss, but if your business gets sued, your personal assets could be attached as part of the judgment.
Q. For example, if I am working for a design agency designing websites for their clients, could that client hold me liable for something?
A. It depends. (Terrible lawyer answer, we know but bear with us)
It really depends on whether you have a Contract limiting your liability and the situation.
Try this first. Think of all the ways you could delay, fail or completely ruin the website design for the client.
For example: Could you be delayed because of your sub-contractor or another vendor? Or, maybe, your creative design wasn’t to the client’s taste, and they want you to change it, numerous times beyond the scope of the project.
Now, plan for those events in your contract, by limiting your liability or time or cost should those events happen.
Think of having a contract as planning for the present and preparing for the future
Q. If I use the Client Service agreement for the services I provide to my clients, but in the future, I need to modify it for slightly different services, is it still valid?
A. Yes, of course. Every Startup Dox comes with a How-To video that you can watch and tweak your own contract. We still recommend you have an attorney review any changes you hae made.
Q. For example, if I offer a web design package that costs $849 to build a website from a template, but then I have another package that costs $1399 because it is a custom-made design and is significantly more expensive and I provided some add-on services such as copyediting, do I need a different Client Services Agreement for each package?
A. In the Client Service Agreement, you will get the following:
A. Main contract
B. Statement Of Work (SOW)
C. Change Order
When you create your contract, create it as a template for future clients (Insert XXX as placeholders for any Recipient questions).
Your SOW is where the magic really happens – meaning the customization for each specific client.
So, you can create different SOWs for different packages that you can customize per client.
For example: Have your $849 package contract and label it as SOW-Standard1, and your $1399 package contract as SOW-Custom 2 (we will leave the creative naming to you).
The Change Order form to the Contract is when you need to modify an existing contract with a client.
You may elaborate further when you fill out our Document review request, for attorney customization.
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