There’s an old saying that business owners refuse to work a 40-hour-per-week job for someone else, so instead, they work 80+ hours for themselves. We see this play out time and time again with many entrepreneurs. Entrepreneurs are by nature problem solvers and take great pride in being able to solve challenges themselves. But as the world faces the challenges of the pandemic, entrepreneurs are feeling the increasing weight of the world on their shoulders, which can lead to risky shortcuts to “save” a few dollars; a price that can end up have detrimental effects on their business later down the line.

Speak to an entrepreneur and they would likely have several examples illustrating how their business is unique and innovative. They know their business model inside and out and can tell you exactly what sets them apart from their competition. But more often than not, their contracts and agreements do not reflect this. Many end up using an internet “template” agreement they have been using since forming their company, only to learn it does not apply in the manner they think it applies or, worse yet, does not say what they think it says. Often times, these self-made templates are missing vast areas of important information, such as a license grant in a software agreement, or third-party disclosures in a privacy policy.

Preparing a set of contract templates for a company may not be nearly as costly as the owner thought it would be, especially in light of the risk to the business in the event the company needs to enforce the agreement. This seems to be the primary reason early entrepreneurs go at it alone: fear of spending too much capital on anything but product development or marketing. Although not a scientific analysis, the tendency to prepare documents themselves favors entrepreneurs who bootstrapped their companies, rather than those who had seed or angel funding. Once a bootstrapped company reaches a level of runway in its owners’ minds, they tend to be more willing to seek assistance from legal professionals.

The risk in preparing legal documents yourself is not worth the reward of saving a few dollars in the company’s early stages. There are occasions in which companies are too new, and their business models/product development is still evolving, and we recommend they wait to have any documents prepared (e.g., EULA, terms of services, privacy policy, etc.). That is part of having a trusted relationship with a third-party professional who genuinely takes into account their clients’ needs and best interests.

Before spending hours of your time misdirected from your product or service, have a conversation to find out what the cost really would be to have legal services performed by a professional. It might not be nearly as costly as you imagined, you might appreciate the extra hours in the day to devote to expanding your business, and you might feel a weight being lifted off your shoulders.

ABOUT DANIEL D. WHITEHOUSE, ESQ.
WHITEHOUSE & COOPER, PLLC

Daniel D. Whitehouse entered the legal profession with more than a decade of experience in the information technology (IT) industry and managed the IT infrastructures of some of the world’s largest companies.  Mr. Whitehouse brings his unique blend of technology, law, and business experience to his clients of his firm, Whitehouse & Cooper. He is a member of The Florida Bar, the Orange County Bar Association, and a past board member of the Lake County Bar Association. He participates in numerous sections and committees within these associations and serves as the OCBA Technology Committee chair. He is admitted to practice in all Florida state courts and the Middle District of Florida. He is available for speaking presentations adaptable to in-person or virtual seminars, college courses, webinars, panel discussions or podcasts. Visit his website for more information at https://www.whitehouse-cooper.com/.

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The technical term for “gig worker” is an independent contractor. The Bureau of Labor Statistics reported in 2017 that 55 million people in the U.S. are gig workers. This accounts for approximately 34 percent of the U.S. workforce and was projected to increase to 43 percent in 2020. COVID-19 has created an enormous economic disruption across the globe sending many newly unemployed workers into the gig economy industry to make ends meet. There are pros to being an independent contractor, such as controlling where you work, what hours you work, how you do the work, and what work you are willing to perform. While being an independent contractor gives you flexibility and control, it may also set you up for personal liability if you have not planned to mitigate your risks.

Many gig workers unknowingly operate as sole proprietors. Doing so, unfortunately, subjects those individuals to personal liability for their actions or inactions. Forming and operating as a company (such as a limited liability company, or LLC) creates liability protection from personal assets. Provided you operate the company properly, you will not be personally liable in the event your company is sued or incurs business debt. This includes protecting personal assets such as your home, car, and bank account from company creditors. You may also be entitled to deduct expenses related to your company that you may otherwise not be eligible to deduct or claim as business expenses.

An LLC is one of the easiest types of entities to form and maintain for a gig-economy worker. You will be considered a “disregarded entity” for tax purposes (unless you elect S-Corp taxation, noted below), and you will have no board of directors or other equity owners with whom to contend. The formation process is relatively straightforward, and the maintenance costs are minimal in comparison to the liability protection you are afforded.

The default taxation for a single-member LLC is that of a disregarded entity, meaning the owner may file the company’s taxes on his or her own personal taxes each year. Depending on the revenue of the business, however, it may be advisable for an LLC to elect taxation as a corporation under Subchapter S (S-Corp). The election allows the owner to pay him/herself a reasonable salary as a W-2 employee, with the company contributing a portion of the federal taxes. The owner will not have to estimate quarterly self-employment taxes, nor keep a nest egg aside to pay Uncle Sam each quarter or at the end of the year. Those who have dealt with this before will know how arduous it can be.

While the gig economy provides an important opportunity for income and employment during a time of economic crisis, understanding the legal aspects can minimize personal risk and liability for a growing number of gig workers. Retaining legal services on the different business structures before entering the field as a gig economy worker is a recommended approach; because what you don’t know, could hurt you.

ABOUT DANIEL D. WHITEHOUSE, ESQ.
WHITEHOUSE & COOPER, PLLC

Daniel D. Whitehouse entered the legal profession with more than a decade of experience in the information technology (IT) industry and managed the IT infrastructures of some of the world’s largest companies.  Mr. Whitehouse brings his unique blend of technology, law, and business experience to his clients of his firm, Whitehouse & Cooper. He is a member of The Florida Bar, the Orange County Bar Association, and the Lake County Bar Association. He participates in numerous sections and committees within these associations and serves on the OCBA Technology Committee and is past chair. He is admitted to practice in all Florida state courts and the Middle District of Florida. He is available for speaking presentations adaptable to seminars, virtual seminars, college classes, webinars, panel discussions or podcasts. Visit his website for more information at https://www.whitehouse-cooper.com/.

The post The Rise of the Gig Economy Workers: What You Don’t Know, Could Hurt You appeared first on South Lake Tablet.