May 10, 2022 • 12 mins
Business attorney, Asha Wilkerson, returns to solve the top 5 common mistakes people make when starting a business. Then, she shares how to avoid them and how they will help your new business.
Guest IG: @ashawilkersonesq
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Episode Transcript
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Speaker 1 (00:00):
Hey, money Movers, Welcome back to Money Moves, the daily
podcast determined to give you the keys to the Kingdom
of financial stability, wealth and abundance. Hey money Movers, Welcome
back to the Money Moves podcast powered by Greenwood. People
(00:22):
always aspire to be entrepreneurs. It's a thing, and it's
incredibly inspiring to so many of us to see so
many people of color who are starting successful in scalable businesses,
no matter what industry they're in. And here on the
Money Moves Podcast, we are invested in helping all of
you fulfill your dreams and be successful in whatever industry
(00:43):
you are building. Each one, teach one, and who better
to help us out than our passionate business attorney, Asha Wilkerson.
Money Movers, Welcome to Business Moves with Asha Wilkinson. Hiosha,
Welcome to the podcast. Hi, thank you so much. Well,
we're going to dive right in because we love having
you on Business Moves and you are the lawyer that
(01:06):
we all go to for all of the information on
how to be successful and how not to get into
trouble that part. So today I want to dive into
some common mistakes that new business owners make when they're
forming their businesses, companies, etcetera. So can you help walk
us through some of the pitfalls that we need to avoid. Yeah. Absolutely.
(01:30):
The first thing that I come across is people not
starting in LLC or a corporation. So it's one thing
to have your business out there, and there's a lot
of growth that can happen before you officially formal form
formalize it. There's a lot of growth that can happen
before you officially formalize it. But thinking about starting an
LLC or a corporation is really that next boss move
(01:52):
that is so necessary for you for a handful of reasons. One,
you get liability protection, to you get the benefit of
the i R S, the Internal Revenue Code so every
year and we file taxes. And if you're wondering how
Amazon doesn't pay taxes any year, it's because they're a
corporation and they can take advantage of all the tax ritoups.
Now I'm not going to tell you can get the
(02:13):
same advantages of an if you're looking for them, you
want to start with forming a business entity. And also
number three, I really find that in our communities as
black and brown folks, we don't really think about selling
our businesses. Like I know tons of older folks in
my community who have just worked in their businesses until
(02:34):
the day that they retired, or you know, to generations
expected their kids to work in them. But there's an
access that. Absolutely, there's an opportunity that if your business
is successful and you need a little bit cash or
you just don't want to do it anymore, you have
the opportunity to sell. But you cannot sell a sole proprietorship.
It has to be an LLC or corporation. So form
(02:57):
one of those businesses and set yourself up or success.
I love that. Wow, I mean I feel like that
was its own segment right there, you know, by avoiding
liabilities and how to you know really, I mean the
interesting thing too is you even likened it to Amazon.
And we always hear all these rumors, you know from
people who get away with not paying taxes, But you know,
(03:17):
part of it is not getting away with not paying taxes.
It's just they have the right legal team and accountants
behind them that they managed to and it's not illegal.
They managed to divert funds to different places. But it's
just being skilled and knowledgeable knowledgeable about it. Yeah, absolutely,
and so you definitely want to go to an expert
for that. But just with the whole tax thing, I mean,
(03:39):
the reason why corporations benefit the most is because the
theory is that businesses create jobs. Right, you to run
a business, the goal is to hire people to help
you out. That helps the economy, and so our government
tax structure is set up to reward job creation and
those businesses that create jobs. I love that, and you
know this is what we're about here. We'll be about
(04:02):
creating businesses that create jobs that put money back into
our communities. Um, that's a beautiful thing, and I think
like we're doing more of it, and we're happy to
help and I'm happy to have you here. But let's
move on to tip number two. Yes, So another respect
that people make is mixing personal and business finances. So
they call it commingling. In the law, you cannot should not,
(04:24):
please do not com mingle your business funds and your
personal funds. And that's something that's really easy to do,
especially if you're starting a side hustle or you know,
a part time business and you think I'm just doing
this just to see what happens, and before you know it,
you have something viable that's making you money. When you
have a business, pay for your business expenses from your
(04:45):
business account and separate your personal expenses and pay those
out of your personal account. Do not mix the two,
especially after starting an LLC or a corporation, because if
you mix the two and there's an issue with it,
you lose the protection that you took the time to
set up with four or corporation. Oh that's a major
(05:06):
land mind. Oh that's a good one. I like that absolutely,
all right. What's our next one? Number three is not
using contracts and not putting agreements in writing. So a
lot of people, I mean even just like a year ago,
someone told me I've got really good relationships. You know,
they're not gonna they're not going to do anything to me,
(05:27):
Like I just I trust them, and I'm like, I'm
glad that you believe so much in your people. But
the reality of it is things happen that aren't always voluntary.
So if you have agreed to, I don't know, design
a new website for somebody, and your power goes out
for three days because there's some storm, and now you're
late that you want that issue to be with your business,
(05:48):
not with you personally. You want to make sure that
in your contracts it's very clear exactly what you were
expecting of the other party with the other party can
expect for you, when the payment's going to occur, what
have things. If the payment is late, how can it
be delivered? Right? You want to put those liability protections
in your contracts as well, and it's one thing to
talk about them, that's fine, but then make sure that
(06:10):
you write down those agreements that you have with folks
and put them on paper that both people have signed,
and make sure that it actually reflects what the ultimate
agreement is, because any conversation that happens beforehand is not
allowed in a court of law to explain. It can't
contradict a term. It can make something more clear, I'm sorry.
(06:31):
You can explain, it can make something more clear, but
it cannot contradict something that is already written down. So
you know, especially if you're doing the same thing over
and over again, hire someone hiring an attorney to get
that customized contract for you, you you tailored to each person
or business you're working with. But at least now you
know that those clauses are there to protect you in
(06:51):
the event that something goes wrong, we don't want it
to which you definitely want to be prepared in case
it does. Literally the expression covering your basis. I do
have a good question on that because I think that's
really important, you know, using contracts because a lot of
times we think, you know, people build businesses, they're using
family members and they're just kind of like the sailing along,
(07:11):
but they're making revenue, etcetera. Is there How do you
feel about using those contracts that you find on the internet. Yeah,
so I think that they are a good place to start,
but I think it was Reagan who said trust but verify, right,
you want to make sure it's it's a good place
to start, but you definitely want to make sure that
the clauses are appropriate for the kind of work that
(07:32):
you're doing. And now, if you download a contract from
an attorney, that's one thing, right, But if you just
find something random out there, you don't know why it was,
why it was created, who created it, what their intention
was behind it. So I recommend if you're going to download,
download from an attorney who has customized contracts for a
particular purpose. And what would be even better than that
(07:53):
is meeting with an attorney to help you create your
own template contract that then you know how to tailor
for what you are doing, because everything is specific and
individual to your business and to how it operates. Oh. Perfect, brilliant.
I love that we're talking about common mistakes that new
business owners make um when they're establishing a company. And
(08:15):
we started with not starting LLCs, mixing up personal and
business finance, not using contracts. What do you have for us? Next?
The next one is not getting a bookkeeper. And now
this is one of those things. You know. Bookkeepers aren't cheap,
They're not as expensive as hiring an accountant to file
your taxes at the end of the year. But if
(08:35):
you don't know how to keep the books for your business,
hire someone to get you set up. And I'll tell
you what the mistake was that I made in my
first year of business. I thought, oh, I'm an attorney,
I can figure it out and uh. And it wasn't
because I thought that I was so much smarter and
could do it. It was really because I didn't feel
like I had the money to hire somebody, so I
download quick books that was back in the day when
(08:57):
it was a download instead of like using it online
and I'm changing the categories to fit what I'm doing
a bit. So I have retainer clients, I have flat
feet clients, I have pro bono clients, and then I
send all my stuff to an accountant at the end
of the year and she's like, a should what did
you do? I was like, masterminded, right, I had no
idea that the categories in quick books or with a
(09:19):
bookkeeper are they translate right to the tax returns. And
so if you do it correctly, it's a really easy
transfer from your books to the tax returns. So not
only did I have to pay the accountant to file
the taxes, but I had to pay her to go
back through and recategorize everything that I had done for
the whole previous year. So please, I'm telling you from
(09:41):
personal experience, don't just go I can do it. Get
get somebody, get set up. Yeah, absolutely, absolutely, yeah absolutely yeah.
That could be a very costily lesson to be learned.
But I'm glad not that it happened to you, but
that you're sharing it with us so that we can
also avoid that. I have learned from experience, that is
(10:03):
the lesson in the opportunity right there. Perfect, Okay, as
we close out. Do you have any last parting words
on some advice for new new business owners. Yeah, I
will say the last thing is to make sure you
find a mentor. You know, there's especially in our communities
right like we we have been told we got to
pull ourselves up by our bootstraps. And you know, there's
(10:24):
some vulnerability in telling someone that you don't know, but
find a mentor, find somebody who's running a business how
you want to run a business, who can give you
some advice and you know, who can help you, hopefully
from making the mistakes that they made, or who can
mentor you as you grow and make decisions for your business.
(10:45):
There's no shame in getting that guidance and it will
save you like it would have saved me from having
to read my books if I had a mentor. This
is a popular popular question that I think comes up
on the podcast or just on Instagram. People leave in
comments that like where do I and a mentor? How
do I find a mentor? And you know, I always
am surprised when I actually ask people where they found
(11:06):
their mentors and they're just saying networking. We've talked about this,
you know, asking a friend, social media is actually really helpful.
But you know, I think you know from my own
personal experience, where I've been really successful is finding someone
who is in the industry that you're in because they
have a wealth of knowledge. You know, don't go looking,
you know, if you're a cattle farmer, you don't go
(11:28):
looking to someone who's you know, I don't know. I'm
trying to think of like something completely someone who runs
a music somewhere. Yes, yes, because it's a really natural synergy.
And just be helpful, be available and nurture it. It
takes time. It takes time. Absolutely. Yeah, well I love that. Actually,
(11:50):
you've been a mentor to all of us. Can you
tell our Money Moves audience where they can find you
on social media? Sure? Come hang out with me on Instagram.
Asha Wilkerson e s Q You alright, Money Movers, that's
all the time we have for today, But tune into
another episode of Business Moves on the Money Moves podcast
and make sure you follow Asha on oli our social
(12:11):
media handles, and make sure to tune in every Monday
to Friday and subscribe to the Money Moves Podcast powered
by Greenwood, so that you two can have the keys
to financial freedom that you so rightly deserve. Thank you
so much for tuning in Money Moves audience. If you
want more or a recap of this episode, please go
(12:31):
to the bank Greenwood dot com and check out the
Money Moves podcast blog. Money Moves is an I Heart
Radio podcast powered by Greenwood Executive produced by Sunwise Media, Inc.
For more podcast on I heart Radio, visit the i
heart Radio app, Apple Podcasts, or wherever you get your
(12:52):
podcasts from.
Hey, money Movers, Welcome back to Money Moves, the daily
podcast determined to give you the keys to the Kingdom
of financial stability, wealth and abundance. Hey money Movers, Welcome
back to the Money Moves podcast powered by Greenwood. People
(00:22):
always aspire to be entrepreneurs. It's a thing, and it's
incredibly inspiring to so many of us to see so
many people of color who are starting successful in scalable businesses,
no matter what industry they're in. And here on the
Money Moves Podcast, we are invested in helping all of
you fulfill your dreams and be successful in whatever industry
(00:43):
you are building. Each one, teach one, and who better
to help us out than our passionate business attorney, Asha Wilkerson.
Money Movers, Welcome to Business Moves with Asha Wilkinson. Hiosha,
Welcome to the podcast. Hi, thank you so much. Well,
we're going to dive right in because we love having
you on Business Moves and you are the lawyer that
(01:06):
we all go to for all of the information on
how to be successful and how not to get into
trouble that part. So today I want to dive into
some common mistakes that new business owners make when they're
forming their businesses, companies, etcetera. So can you help walk
us through some of the pitfalls that we need to avoid. Yeah. Absolutely.
(01:30):
The first thing that I come across is people not
starting in LLC or a corporation. So it's one thing
to have your business out there, and there's a lot
of growth that can happen before you officially formal form
formalize it. There's a lot of growth that can happen
before you officially formalize it. But thinking about starting an
LLC or a corporation is really that next boss move
(01:52):
that is so necessary for you for a handful of reasons. One,
you get liability protection, to you get the benefit of
the i R S, the Internal Revenue Code so every
year and we file taxes. And if you're wondering how
Amazon doesn't pay taxes any year, it's because they're a
corporation and they can take advantage of all the tax ritoups.
Now I'm not going to tell you can get the
(02:13):
same advantages of an if you're looking for them, you
want to start with forming a business entity. And also
number three, I really find that in our communities as
black and brown folks, we don't really think about selling
our businesses. Like I know tons of older folks in
my community who have just worked in their businesses until
(02:34):
the day that they retired, or you know, to generations
expected their kids to work in them. But there's an
access that. Absolutely, there's an opportunity that if your business
is successful and you need a little bit cash or
you just don't want to do it anymore, you have
the opportunity to sell. But you cannot sell a sole proprietorship.
It has to be an LLC or corporation. So form
(02:57):
one of those businesses and set yourself up or success.
I love that. Wow, I mean I feel like that
was its own segment right there, you know, by avoiding
liabilities and how to you know really, I mean the
interesting thing too is you even likened it to Amazon.
And we always hear all these rumors, you know from
people who get away with not paying taxes, But you know,
(03:17):
part of it is not getting away with not paying taxes.
It's just they have the right legal team and accountants
behind them that they managed to and it's not illegal.
They managed to divert funds to different places. But it's
just being skilled and knowledgeable knowledgeable about it. Yeah, absolutely,
and so you definitely want to go to an expert
for that. But just with the whole tax thing, I mean,
(03:39):
the reason why corporations benefit the most is because the
theory is that businesses create jobs. Right, you to run
a business, the goal is to hire people to help
you out. That helps the economy, and so our government
tax structure is set up to reward job creation and
those businesses that create jobs. I love that, and you
know this is what we're about here. We'll be about
(04:02):
creating businesses that create jobs that put money back into
our communities. Um, that's a beautiful thing, and I think
like we're doing more of it, and we're happy to
help and I'm happy to have you here. But let's
move on to tip number two. Yes, So another respect
that people make is mixing personal and business finances. So
they call it commingling. In the law, you cannot should not,
(04:24):
please do not com mingle your business funds and your
personal funds. And that's something that's really easy to do,
especially if you're starting a side hustle or you know,
a part time business and you think I'm just doing
this just to see what happens, and before you know it,
you have something viable that's making you money. When you
have a business, pay for your business expenses from your
(04:45):
business account and separate your personal expenses and pay those
out of your personal account. Do not mix the two,
especially after starting an LLC or a corporation, because if
you mix the two and there's an issue with it,
you lose the protection that you took the time to
set up with four or corporation. Oh that's a major
(05:06):
land mind. Oh that's a good one. I like that absolutely,
all right. What's our next one? Number three is not
using contracts and not putting agreements in writing. So a
lot of people, I mean even just like a year ago,
someone told me I've got really good relationships. You know,
they're not gonna they're not going to do anything to me,
(05:27):
Like I just I trust them, and I'm like, I'm
glad that you believe so much in your people. But
the reality of it is things happen that aren't always voluntary.
So if you have agreed to, I don't know, design
a new website for somebody, and your power goes out
for three days because there's some storm, and now you're
late that you want that issue to be with your business,
(05:48):
not with you personally. You want to make sure that
in your contracts it's very clear exactly what you were
expecting of the other party with the other party can
expect for you, when the payment's going to occur, what
have things. If the payment is late, how can it
be delivered? Right? You want to put those liability protections
in your contracts as well, and it's one thing to
talk about them, that's fine, but then make sure that
(06:10):
you write down those agreements that you have with folks
and put them on paper that both people have signed,
and make sure that it actually reflects what the ultimate
agreement is, because any conversation that happens beforehand is not
allowed in a court of law to explain. It can't
contradict a term. It can make something more clear, I'm sorry.
(06:31):
You can explain, it can make something more clear, but
it cannot contradict something that is already written down. So
you know, especially if you're doing the same thing over
and over again, hire someone hiring an attorney to get
that customized contract for you, you you tailored to each person
or business you're working with. But at least now you
know that those clauses are there to protect you in
(06:51):
the event that something goes wrong, we don't want it
to which you definitely want to be prepared in case
it does. Literally the expression covering your basis. I do
have a good question on that because I think that's
really important, you know, using contracts because a lot of
times we think, you know, people build businesses, they're using
family members and they're just kind of like the sailing along,
(07:11):
but they're making revenue, etcetera. Is there How do you
feel about using those contracts that you find on the internet. Yeah,
so I think that they are a good place to start,
but I think it was Reagan who said trust but verify, right,
you want to make sure it's it's a good place
to start, but you definitely want to make sure that
the clauses are appropriate for the kind of work that
(07:32):
you're doing. And now, if you download a contract from
an attorney, that's one thing, right, But if you just
find something random out there, you don't know why it was,
why it was created, who created it, what their intention
was behind it. So I recommend if you're going to download,
download from an attorney who has customized contracts for a
particular purpose. And what would be even better than that
(07:53):
is meeting with an attorney to help you create your
own template contract that then you know how to tailor
for what you are doing, because everything is specific and
individual to your business and to how it operates. Oh. Perfect, brilliant.
I love that we're talking about common mistakes that new
business owners make um when they're establishing a company. And
(08:15):
we started with not starting LLCs, mixing up personal and
business finance, not using contracts. What do you have for us? Next?
The next one is not getting a bookkeeper. And now
this is one of those things. You know. Bookkeepers aren't cheap,
They're not as expensive as hiring an accountant to file
your taxes at the end of the year. But if
(08:35):
you don't know how to keep the books for your business,
hire someone to get you set up. And I'll tell
you what the mistake was that I made in my
first year of business. I thought, oh, I'm an attorney,
I can figure it out and uh. And it wasn't
because I thought that I was so much smarter and
could do it. It was really because I didn't feel
like I had the money to hire somebody, so I
download quick books that was back in the day when
(08:57):
it was a download instead of like using it online
and I'm changing the categories to fit what I'm doing
a bit. So I have retainer clients, I have flat
feet clients, I have pro bono clients, and then I
send all my stuff to an accountant at the end
of the year and she's like, a should what did
you do? I was like, masterminded, right, I had no
idea that the categories in quick books or with a
(09:19):
bookkeeper are they translate right to the tax returns. And
so if you do it correctly, it's a really easy
transfer from your books to the tax returns. So not
only did I have to pay the accountant to file
the taxes, but I had to pay her to go
back through and recategorize everything that I had done for
the whole previous year. So please, I'm telling you from
(09:41):
personal experience, don't just go I can do it. Get
get somebody, get set up. Yeah, absolutely, absolutely, yeah absolutely yeah.
That could be a very costily lesson to be learned.
But I'm glad not that it happened to you, but
that you're sharing it with us so that we can
also avoid that. I have learned from experience, that is
(10:03):
the lesson in the opportunity right there. Perfect, Okay, as
we close out. Do you have any last parting words
on some advice for new new business owners. Yeah, I
will say the last thing is to make sure you
find a mentor. You know, there's especially in our communities
right like we we have been told we got to
pull ourselves up by our bootstraps. And you know, there's
(10:24):
some vulnerability in telling someone that you don't know, but
find a mentor, find somebody who's running a business how
you want to run a business, who can give you
some advice and you know, who can help you, hopefully
from making the mistakes that they made, or who can
mentor you as you grow and make decisions for your business.
(10:45):
There's no shame in getting that guidance and it will
save you like it would have saved me from having
to read my books if I had a mentor. This
is a popular popular question that I think comes up
on the podcast or just on Instagram. People leave in
comments that like where do I and a mentor? How
do I find a mentor? And you know, I always
am surprised when I actually ask people where they found
(11:06):
their mentors and they're just saying networking. We've talked about this,
you know, asking a friend, social media is actually really helpful.
But you know, I think you know from my own
personal experience, where I've been really successful is finding someone
who is in the industry that you're in because they
have a wealth of knowledge. You know, don't go looking,
you know, if you're a cattle farmer, you don't go
(11:28):
looking to someone who's you know, I don't know. I'm
trying to think of like something completely someone who runs
a music somewhere. Yes, yes, because it's a really natural synergy.
And just be helpful, be available and nurture it. It
takes time. It takes time. Absolutely. Yeah, well I love that. Actually,
(11:50):
you've been a mentor to all of us. Can you
tell our Money Moves audience where they can find you
on social media? Sure? Come hang out with me on Instagram.
Asha Wilkerson e s Q You alright, Money Movers, that's
all the time we have for today, But tune into
another episode of Business Moves on the Money Moves podcast
and make sure you follow Asha on oli our social
(12:11):
media handles, and make sure to tune in every Monday
to Friday and subscribe to the Money Moves Podcast powered
by Greenwood, so that you two can have the keys
to financial freedom that you so rightly deserve. Thank you
so much for tuning in Money Moves audience. If you
want more or a recap of this episode, please go
(12:31):
to the bank Greenwood dot com and check out the
Money Moves podcast blog. Money Moves is an I Heart
Radio podcast powered by Greenwood Executive produced by Sunwise Media, Inc.
For more podcast on I heart Radio, visit the i
heart Radio app, Apple Podcasts, or wherever you get your
(12:52):
podcasts from.
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