If you’ve been laid off, you might be considering becoming a consultant full time or while you look for your next employment. For the purposes of this article, we’re assuming you will be a solo consultant. There are a lot of additional considerations to take into account if you’re planning on partnering with someone.
Here’s a little checklist for you to get you going!
Review Your Severance Agreement
If you were laid off, hopefully you have some sort of severance agreement or unemployment available to you. Your first step is to review your severance agreement or get your unemployment application put in right away.
In a severance agreement, you’re looking at the following:
- How much you’re getting paid.
- What liability is your former employer having you waive?
- Is there a nondisclosure or non-compete?
- Is there anything that worries you or you don’t understand?
You don’t necessarily need a lawyer to look over these, but if you don’t understand what you’re signing, it’s best to get someone to go over it with you.
Double Check Non-competes
If your employment included restrictive covenants like non-compete or non-solicitation agreements, you need to review what those are and if they get in the way of your consulting plans.
Now, not all non-competes are enforceable, so if yours seems like something that is too broad or too restrictive, you should talk with a qualified attorney like Law Plus Plus. Non-competes are a very strict area of law, so an attorney not experienced in that area cannot provide you with good advice.
Consultant Company Setup
Next up, it’s time to set up your consulting company. Does this mean filing for an LLC or Corporation? Maybe. Ultimately, that decision is up to you. In my opinion, having and LLC or corporation is a cheap way to limit your overall liability. However, that’s both a personal decision, and one that depends on your business.
For example, if you’re running a law firm, 99% of your liability comes from the practice of law. In North Carolina, a lawyer cannot limit her own personal liability through the use of contracts or a separate legal entity for the practice of law she does personally.
In some other industries, like software development, you can put in your contracts a limitation of liability where your customers can only sue your LLC and not you personally, even if you’re the one who did something wrong.
Beyond the “I did it personally” issue, you also have insurance. If your insurance is sufficient to cover any legal problems that come up, you may feel comfortable foregoing the LLC or corporation. I personally recommend having both insurance and a separate legal entity to cover more eventualities. However, I have to admit that’s a personal preference that depends on your risk aversion level.
Get Your Consultant Contracts In Place
After you’ve got your company structure in place, it’s time to get your contracts ready. There’s a lot that goes into a service contract, but here are the main items.
How much are you paid, when, and how? These are probably the most important considerations for you. No sense working if your clients don’t pay you.
What is expected of you? In this section, make sure you’re as specific as you can be, but also make a point to say that anything outside this scope is extra. Scope creep is a common problem for independent consultants.
How are disputes handled? Contracts are most important if/when things go wrong. Therefore, outlining the dispute resolution procedures is important.
Your legal ducks aren’t the only things you need in-a-row. There are many other aspects of running a business that aren’t the actual consultancy. For example, you need to get a bank account, software access, accounting systems in place, state and federal withholding accounts, a place to work, and much more!
Get Some Clients
There’s only so much I can do to help with this one. You can get everything set up nicely, but you still have to get some clients. How you find these depends on your industry, who you are, and your area. In my case, and a lot of B2B cases, networking is a good start.