TEllis
Traci Ellis
    Launch Therapy

Traci D. Ellis is a practicing small business law attorney, entrepreneur and speaker with a passion for working with entrepreneurs. Known for telling it like it is, she likes to “keep it real” with new business owners while sharing practical wisdom and refreshing insights on legal and business issues related to starting, running and growing small businesses.  

 




Traci Ellis


So you want to start a non-profit to meet the needs of at-risk youth? Or perhaps you want to begin a non-profit to provide services to at-risk mothers. Whatever your purpose, you have decided that a non-profit organization is the way to fulfill that mission. Now what? Here are three basic things you should know about starting a non-profit.
First, at its core, a non-profit is a corporation or an LLC. But either way, you must form the legal entity just as you would for any for-profit business. For purposes of today, we're going to assume that you choose to form a corporation. Just like any other any corporation, you must file articles of incorporation with the Secretary of State. However, a non-profit corporation's articles of incorporation must contain certain "magic" language that essentially indicates that the corporation's assets will not be used for any non-profit purpose and that if and when the corporation is dissolved, its assets will be distributed to another non-profit and not any person. Without this magic language, your non-profit corporation will fail the basic test for non-profits.
Second, if you plan to do any fundraising in Illinois, then you must register with the Illinois Attorney General's Office before any fundraising or soliciting takes place. You must also file what is commonly referred to as the "Form 1023" application with the IRS, which is the process for obtaining tax-exemption. Your organization is not automatically exempt from payment of taxes solely because you formed a non-profit corporation. The Form 1023 is a fairly detailed account of exactly what the proposed non-profit is, what services it plans to deliver, what its anticipated budget it, who is running it, how it will make money, who is getting paid and how much, and a lot of other things the IRS wants to know before granting tax exemption. Plan on spending a more than a few hours on this application in order to complete it thoroughly enough to stand a reasonable chance of being granted the exemption.
Finally, one common misconception about non-profits is that they can't make a profit. Nothing could be further from the truth. In fact, if the non-profit doesn't make a profit, or at least break even, then, like any for-profit business, it will likely be out of business. Without going into all of the tax issues and detailed law on the subject, just know that there is no prohibition on non-profits making a profit. The main issue is that the profit must be related to the non-profit purpose for which the organization was granted tax exemption. In other words, if the non-profit mission or purpose is to help at-risk youth find employment and train for job-readiness, then the non-profit probably should not be in the business of owning real estate and leasing space to other businesses as a revenue stream. Revenue earned that is incidental to the non-profit purpose is one thing; revenue earned that is a substantial deviation from the non-profit purpose is quite another thing. Not only will the non-profit risk having to pay taxes on that income unrelated to its non-profit purpose (called "Unrelated Business Income Tax" or "UBIT"), but it could also risk loss of the tax exempt status altogether.
So, go ahead. Form your non-profit. Just remember these basic rules.

As a business owner, you may need to hire an independent contractor (or employee). It goes without saying that you should use an independent contractor agreement every time. Two key provisions often found in these agreements are non-competition and non-solicitation clauses. But, in most states, these provisions are traps for the unknowing. They must be carefully drafted and include the right language in order to be enforceable. Otherwise, you just might find yourself holding a worthless piece of paper and clients walking out the door with your former independent contractors.
So what is important to know about these clauses, which are known as "restrictive covenants"? First, is the restrictive covenant geographically limited? Courts generally consider these types of restrictive covenants to be restraints on trade (i.e. limitations on someone's right to earn a living) and therefore, to be valid, they need to be narrowly tailored. So, if your business is solely in Elgin, IL, your non-competition clause should not try to prevent your independent contractor from competing with you over in Springfield, IL. The distance between Elgin and Springfield is too wide for a clause like that to be enforceable. It is not likely that a contractor working for you in Elgin, is a real threat to you way down in Springfield.
Generally speaking, a 50 mile radius should be the outer limit. So, for the Elgin company, the owner should not try to prevent a contractor from competing with her beyond 50 miles in any direction. Based on this discussion, it goes without saying that an attempt to prevent an independent contractor from competing anywhere in the United States would be tossed out quickly by a judge.

Second, is the restrictive covenant limited in time? For example, you cannot stop your independent contractor from competing with you forever, or some other equally unreasonable period of time. Remember that restraint of trade is against public policy—people are entitled to earn a living in their chosen field, so make sure your non-competition clause has a reasonable time limit. What's reasonable? Well, it depends. It depends on the industry, the nature of the business, the nature of the harm that the business owner would suffer, etc. But, think carefully if you are inclined to try to prevent someone from competing with you for more than 1 year.
Third, is the restrictive covenant limited in scope? You cannot prevent your former independent contractor from competing with you in unrelated areas. So, for example, if you a marketing consultant, and you hire an employee or independent contractor to assist you, a non-compete clause that prevents them from competing with you "in the provision of marketing consulting services" is probably too broad. "Marketing services" is a pretty large field. What if you specialize in writing new product launch marketing plans and your former employee wants to provide marketing services to nonprofits regarding sponsorship deals with companies in the health and beauty industry? Is that really competition to you? You cannot lock down an entire industry that is that broad. You have a much better chance of your contract being enforced if the scope of services you are seeking to protect is narrowly tailored to fit just what you need; not every possibility known to man.
The issues are similar when dealing with a non-solicitation clause that prevents a former employee or contractor from soliciting your clients when they leave your company. The usual exception is that there doesn't have to be geographical limitation. However, there should be a time limitation and a limitation on which clients are off limits. In other words, every client probably can't be protected. However, every client that the former employee met or worked with probably can be protected.
These types of restrictive covenants are important provisions to a business owner. It is well worth your time and money to retain an experienced business law attorney to draft these provisions. You don't want to find yourself with former contractors or employees competing with you and soliciting your clients to leave...and there's nothing you can do to prevent it.

If you're planning to start a business, you need customers. And the key to getting customers is to make sure that they know you exist. So, how do you market your business beyond the obvious social media, BOGO (Buy One Get One) offers, and networking groups (which actually, I don't think are a good way to market your business...but that's another story for another day)?
Here are three perhaps non-obvious, but effective (emphasis on effective) ways to market your business. There are probably dozens more but we'll start with just three.
Become a Thought Leader in Your Field. Submit articles for publication, start your own blog, be a guest blogger for someone else's blog, volunteer to speak at industry-related events, create your own event/workshop/meeting where you are the key presenter, etc. In other words, if you want to be seen as an expert, then act like an expert! Thought leaders tend to be "top of mind" when it comes to your potential customers making buying decisions.
Make Your Website Useful. I'm always surprised by the number of websites I visit that don't ask me to do anything. Nothing. These websites are full of useful (sometimes) information, but if I'm not in the buying mood that day, and click off the website, I may never come back. But, if you provide me something useful in exchange for my email, then even if I don't buy today, you can continue to market to me because you've got my email address. If I give you my email address, then I'm at least interested in what you're selling. And when I receive a periodic email from you reminding me that you have what I'm looking for (but don't be obnoxious), then I'm more likely to buy from you when I'm ready.
In addition to asking for my email address, you should try to keep me on your site as long as possible because the longer I'm there, the more likely I am to buy. So, ask me to something (BUY NOW, CLICK HERE, CALL NOW, etc). Don't just let me walk away.
Get Engaged in the Community. In other words, volunteer your services. First, you expand your network. Additionally, you have the opportunity to showcase your products and services. There's ALWAYS an opportunity to donate product or services to nonprofit organizations. And when you're generous with your time and talents, people notice. Once again, you will often be "top of mind" to that volunteer network when they (or someone they know) is need of what you're selling. You can actually do good (for your community) and do well (for your business' profitability) at the same time.
These aren't the "End All Be All" non-obvious marketing ideas. They are just three possibilities to add to your quiver. What other non-obvious marketing ideas can you share with others? Let me know.

1. The 15th and the 30th are just days on the calendar: when you leave regular employment, you can no longer rely on regular wages. You have to rely on your own devices to carve out income. Entrepreneurs don't depend on one source of income—they think in terms of multiple streams of revenue but to make really good money, you've got to risk something...money.
2. Titles are meaningless: But if you like them, guess what? You can have them ALL as a business owner (and the responsibility to go along with them). But trust me, you'll soon get over your fascination with titles.
3. Risk is the name of the game: plenty of people have great ideas; few have the risk tolerance to try to implement/execute on those ideas. You have to be willing to take some risks to make a go of it. There simply are no guarantees about anything when you own your own business.
4. Status Quo is the enemy: The quickest path to "out of business" is to stay static. You've got to be able to dip, dive, jump, reach, move left, shift right, bend and...you get the picture. The demands of running a business require that you keep evolving, changing, refining, reversing, etc. Course correction is a dynamic process and trying to maintain the status quo will take you out...of business.
5. Opportunity Cost of decisions is real: as an employee, you can make decisions about work with little consideration of opportunity cost. You can call in sick because you have sick days, without wondering about the opportunity cost. You can take a full hour for lunch, or take a vacation day. But, these same decisions have trade-offs when you own the business.
6. There's no budget of "magic money": it's yours, it's real, and most likely, there's not enough.
7. Failure is not an option: you can switch departments, companies, and sometimes bosses when you're an employee, but not when you own the business.
8. Freedom...is a myth. Yes, depending on your chosen field and business model, you might find freedom from a traditional 9 to 5, but you are hardly free from the constraints brought on by having to generate cash flow.
9. There's no boss: Oh Baby, you've got it all wrong. Ultimately, you are serving the client, who can be the most demanding, persnickety, finicky and impatient boss around. And presumably you have more than one client, so you've traded in one boss for many. And there's no annual performance review...it's at the end of every month when you check your P&L.
10. It's easier/less stress: there are times you will want to walk away from it all. Feel like running back to a job for a steady paycheck and...less stress!
So, there you have it. 10 shifts you have to make to maximize your chance of success when you shift from an employee to an entrepreneur. There are probably dozens more. Can you think of others?

I meet regularly with people who want to start businesses. So, I hear a lot of new business ideas. Some are great...and some are just okay. But, when I look at who actually launches the business, it's not always the person with the best idea. It's the person who actually did something. Who moved beyond thinking about it, and into action.
The one who didn't get (or stay) stuck. The one who overcame the fear of failure. And sometimes the fear of success. Because they're just two sides of the same coin. The fear of failure always asks these questions:
• What if I run out of money?
• What if I can't find any customers?
• What if the customers don't like my product?
• What if my suppliers raise prices?
The fear of success always asks these questions (or a variation):
• What if I can't handle the demand?
• What if I outgrow this location?
• What if I get a big order I can't fill?
• What if I can't ramp up quickly enough?
I'm not saying that a new entrepreneur shouldn't contemplate these issues. But I am saying that the new entrepreneur shouldn't get STUCK there. But that's what people do. Unfortunately, many folks never move past the point of fear - of failure or success.
So, how do I help clients get un-stuck? What do I say to them? Well, there's a lot I do to help them get over their fears and get moving. Too much to write here. But, here are three questions I always ask:
1. What exactly are you afraid of?
2. If you were guaranteed to succeed, what would you do next?
3. On a scale of 1 to 10, how motivated are you to launch this business?
Additionally, I make these suggestions for overcoming fear:
• Immerse yourself in an environment of successful people. I don't mean just hang out with one or two of them. I mean really maximize opportunities to spend time with other successful people. They don't even have to be doing what you want to do. But it is amazing the energy you can get from just hanging out with other people who are working their "mojo". It will help you find yours.
• Build a support team. This is a small group of people who believe in you and will help propel you forward.
• Everyday, before you go to bed, take the time to write down everything you accomplished that day towards your goals. Anything and Everything. Feelings of accomplishment are powerful motivational tools to keep you moving forward.
Do you have any suggestions for overcoming fears of failure and/or success? I'd love to hear them.
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