Home Business

Clear Up Outstanding Legal Issues

Is there a student loan that you “forgot” about? Do you need to attend traffic school—but haven’t, even though the ticket was five years ago? Are you in the middle of a divorce, or waiting for the divorce to be finalized? Are you aware of any outstanding arrest warrants? Is the IRS trying to collect money from you? Do you have a lien against your house or other property? Do you owe property, state, or local taxes? These issues will come back to haunt you, especially when you begin the process of launching a home business.

Starting a business means that you will be filling out paperwork – and that paperwork will enable many government entities to find you. What’s more, your marketing efforts will be telling everyone about you and your new business. The entire world will know about you, so if you have to clean up some neglected legal or tax issues, now is the time to do it. When you take care of the problem, be sure that you know how long any such delinquency will appear on your credit report or criminal record. Credit problems, once fixed, might remain on your record for as long as 7 to 10 years. Criminal matters might stay on your record indefinitely.

Be sure that you know what consequences are likely as a result of tax or legal issues. Most problems won’t necessarily prohibit you from owning a business, but you will need to know, for example, that a bankruptcy on your credit report means that you won’t be able to get a business loan for quite some time.

For criminal matters, enlist the help of an attorney. (You can usually obtain a referral from your local bar association.) Tax and financial matters can be resolved with the help of an accountant or credit counselor. If you need a credit counselor, be sure to use a nonprofit agency. Avoid scams that offer to clean up your credit for a price.

Tomorrow we will talk about health insurance for work at home businesses!

Review Your Employment Contract

Before you put the first word on your business plan, take out your current employment contract and read it carefully, word for word. If you have emails, letters, or other documents instead of, or in addition to, a formal contract, read those, too. Don’t assume that stipulations agreed to in email are not binding because you “didn’t sign anything.” In many instances, such emails can be considered evidence of what is called an oral contract, and therefore legally binding.

If you are unsure whether you would be held to the terms, consult an attorney. Did you agree not to contact customers about your impending departure from the company or for a given period of time after leaving the company’s employment? Are you required to provide a certain amount of notice? Are you allowed to pursue a business that competes with your current employer? Employment contracts often include language that restricts or prohibits direct competition, taking customers, and similar activities. Be sure that you know what limitations you must abide by prior to starting your business. But what do these limitations mean, in terms of your business? It depends:

• If you are planning to start a business in direct competition with your employer, and your employment contract forbids it, your home business plans might be thwarted. However, if the non competition language seems broad, you might want to have an attorney review it to determine whether it is enforceable. But bear in mind that you might have to fight your employer in court to prove how unenforceable it is.

• If you are not allowed to take current customers with you, you might have to allow for a higher marketing budget. Check whether your contract allows you to have any contact with these customers at all – even if they cannot be your customers, perhaps they would be willing to refer others, thus partially circumventing this restriction. As your excitement about your business escalates, you will want to tell the world. Don’t do it (not yet, anyway).

Although you might be very excited about your new venture, your co-workers might have very different feelings. They might be jealous, longing for the courage you have and envying your ability to make such a transition. Meanwhile, your boss could become suspicious, wondering if you are stealing supplies or customers, wooing other employees to be part of your new venture, or just not being as loyal as he expects you to be. Depending on your company’s policy and your current job, you could even be escorted out the door as soon as you announce your plans. Keep quiet until you give notice with a specific plan in mind.