How To Avoid 3 Common Legal Mistakes Small Business Owners Make

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Complete Video Transcript

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Hey, it’s Marie Forleo and you are watching MarieTV, the place to be to create a business
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and life you love, and this is kinda like Q&A Tuesday. I’ll tell you what’s going
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on. There’s a topic that hardly anybody talks about and it is so important. In fact,
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it’s so important that if you don’t get it handled, it’s the kind of thing that
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can take you and your business out. What I’m talking about is how to protect yourself legally,
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especially if you’re an artist, creator, or entrepreneur. Now, y’all know I am not
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a lawyer and nor do I play one on MarieTV. However, I have brought an amazing attorney
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in today who’s gonna help me out, and this woman is incredible. She’s one of our B-School
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grads, she is so smart, and she’s someone that I turn to when I need legal advice and
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council.
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Jo-Na Williams’ story began 15 years ago as a background vocalist for independent artists
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and it took a fortuitous turn when she was not credited or compensated for her work.
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As a result, she’s committed her life to educating and protecting artists and entrepreneurs
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through her work as a lawyer and business adviser through her companies: J. A. Williams
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Law, The Artist Empowerment Firm and The Artist Empowerment Group. Her clients include Grammy
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nominated musicians, award winning coaches, talk show hosts, international speakers, and
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bestselling authors.
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Jo-Na, thank you so much for being here.
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Thank you so much, Marie. It’s so great to be here.
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Well, I’ll tell you, I have wanted to cover this topic for a long time because we get
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a lot of questions about it and I know it’s a very big subject area and, of course, we
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could sit here for days, but we ain’t gonna do that. We’re gonna keep it focused today
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about 3 main areas. Really, the most important areas that we need to get handled legally
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if we want to move ahead and really have a strong legal foundation. So the first is choosing
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the right business structure. What do we need to know, Jo-Na, about choosing the right business
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structure? How do we make that decision?
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Well, first of all, Marie, I’ll just tell you, there are lots of misconceptions about
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this. Most people think that you should just jump and just register whatever, but the bottom
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line is is that the most important thing that you need to know about having a business structure
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is that it protects your personal assets from the debts and liabilities of your company.
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So it’s basically putting a shield around you personally and allowing your company to
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contract with your clients or provide services and things like that. So you really wanna
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make sure that you pick the right one for you and you don’t wanna just jump to an LLC.
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That’s what most people do. They think, “Oh, business structure. Perfect. I’ll
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just go register an LLC.” But that may not be the best option for you because it depends
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on your tax situation. You may have kids, you may have other assets, your company might
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want to grow to a different level. So you really should just talk to an accountant and
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a lawyer to decide which one is best for you.
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I love that. And just coming back to my own story, when I first started, I was terrified
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to even talk to a lawyer because I felt like, “Oh, I can’t afford that.” So that’s
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actually what I did was talk to my accountant and that was the best thing that I did because
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exactly as you said, we went through my specific tax situation and he also asked me about where
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do I see the company going and that’s how we made that decision. So I love that. So
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for people watching, it doesn’t have to cost that much money. Right? I know that that’s…
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money is always the big thing. That was my big thing. Oh, I can’t afford it. So when
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it comes to choosing your business structure, if you can’t necessarily afford to go to
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a lawyer right now, an accountant is a good choice.
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I think that’s… that is a really great option. If you decide that you can’t afford
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to have a lawyer work with you, then, yes, talk to an accountant if you’re strapped
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for cash and the most important entities that you… that give you the legal shield are
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the C corp, the S corp and the LLC. So you wanna speak to your accountant and find out
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specifically which one would actually work for you based on your tax situation. But I
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wanna talk about a little bit about the misconception about it… a lawyer being a lot of money.
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Yeah, absolutely. Because I know that’s what holds so many of us back from even thinking
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that we can get all this stuff handled is I can’t afford it. So when do you have to
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say to people if that’s their excuse?
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Well, as you know in our industry, it’s often that people want to pay for solving
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a problem versus prevention. Right? And, I mean, and that’s all of us. We all… when
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the stuff hits the fan…
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That’s when we’re ready to pay. Of course. I mean, it happens… I didn’t want my dog
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to go pay for him to prevent him to get fleas, but once he got fleas I spent hundreds of
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dollars to get rid of them and now, of course, I want to prevent them from ever happening
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again. So same thing.
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Yes. Absolutely. And so I like to liken it to if you have a car, for example. You wanna
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pay for regular oil changes, tire rotations and things like that so that your engine doesn’t
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break down. So that’s gonna cost you a lot more money than if you were to just pay for
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prevention, preventative care. Or if you go to the doctor, for example. Instead of going
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when you’re getting sick, just going regularly and getting your checkups and making sure
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that your health is ok. It’s the same thing with having a lawyer for your business because
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your business is its own entity, so it needs to be taken care of, right? So it needs to
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have that legal health. So you wanna make sure that you have a lawyer on your team,
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kind of like a doctor for your business.
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Yeah, no. I mean, that’s great. And that analogy because think about it, and I know
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this, as the business gets bigger if you don’t have the right legal foundation in place,
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something happening legally can be fatal for your business.
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Absolutely.
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It can totally take you out.
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And I’ve actually… I actually had a client come to me a long time ago and she… this
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was the situation that happened with her. She didn’t get the right advising about her
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business structure and she ended up paying 50% of what she made that year in taxes and
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it did shut down her business. So it was heartbreaking for me, but luckily we were able to take care
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of it. But you don’t wanna have something like that happening just because you weren’t
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able to talk to a lawyer or an accountant about the right business structure for you.
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So it’s something that’s really important to your business to make sure you get that
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handled.
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Yeah. So what do we need to know about protecting our goods and services?
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The thing that you need to know the most about this area is if you don’t have something written
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down, you’re creating a bunch of verbal agreements with people that have no terms.
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So it’s really important that you have a service agreement. And the service agreement
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is going to outline what you’re providing the person, what their obligated to pay, you
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wanna make sure you have your return policy clearly outlined…
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Yes.
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…and for people who are in high risk type of professions, you wanna make sure that you
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have some type of disclaimer because it’s just as important to know what you’re going
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to be responsible for and what you do as a service provider and what you don’t do. So,
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for example, if you’re a health coach, you wanna make sure that you have some type of
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agreement or some type of disclaimer in there that says, “Hey, I’m not a therapist,
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I don’t prescribe medication,” X, Y, Z. So these are the kind of things that you want.
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But it’s really important that you talk to a lawyer about this part of it because
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then they’ll be able to look at what are the areas that you are… that you are providing
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services in and how they can prevent against the ones that you aren’t. So it’s really
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important to make sure that you talk to an attorney about that part of it.
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So do you have any idea like a ballpark figure of what someone could expect to pay to get
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a service agreement and these kind of disclaimers in place?
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I think it really just depends on the lawyer because some lawyers, they charge on an hourly
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rate and some of them charge on a flat fee. What you wanna do is interview the ones that
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you’re thinking about hiring and then ask them what their fees are and what’s associated
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with it and then you can make your decision from there.
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I love that. And I love this idea of interviewing several lawyers because I’ve worked with
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many in my career and I wish I would’ve done more of that because you can really get
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a good sense of how people interact and all that stuff, so perfect answer.
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It’s a relationship. So you wanna make sure that if this person is gonna be the general
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counsel in your business and gonna help you with developing your business and understanding
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what you need as you grow, you wanna make sure you have the right person doing that,
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so it’s important to interview.
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Ok, so our final area today is about business relationships, and I think this is the one
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that you are the most passionate about. So what do we need to do to handle ourselves
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legally with our team or anyone that we’re doing business with?
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Well, Marie, this is one of the areas that I absolutely love talking about because so
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often it is missed in our industries, especially when you’re an online entrepreneur. You
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are hiring VAs, you’re hiring different team members, and it’s so important to make
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sure that all of your business and that your personal information is protected. So you’re
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exposing them to passwords, client records, all kinds of credit cards.
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Yes.
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So it’s really important that you have some type of agreement in place that makes sure
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that they are not gonna take that information and distribute it outside of your company.
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So you need to have some type of independent contractor’s agreement and you need to make
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sure that it has a nondisclosure in it. And that means that you come into my business
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and you can’t take anything outside of my business when you leave.
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Yes. Thank sweet heavens. I remember a little while ago when I first started getting all
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of my NDAs in place, I breathed a sigh of relief because I felt terrified. There’s
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a lot of sensitive information and a lot of projects and ideas and book things. And I
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know it maybe not is the best thing in the world that I’m like, “Oh, God. What if
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that gets out?” But it made me feel so much better and it always makes me feel so much
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better.
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It’s so true. And also when you’re an online entrepreneur, most of us don’t have
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the privilege of seeing our teams or bringing them… or flying them in. So you really need
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to make sure that you have the right people in place and how you ensure that, take a preventative
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measure, so to speak, is to make sure that you have something that they’re signing
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that makes sure that they understand what it is that they’re going to be providing
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you for services, how you’re going to terminate the contract in the event that they don’t
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work out, and all of these various different things like protecting your IP, for example.
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So it’s really important to have that and the other thing, if you’re in the United
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States, if you’re planning on paying someone over 600 dollars in a given year, you wanna
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make sure that you get their W9 form as well because you’re gonna have to issue them
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what they call a 1099 form at the end of the year so you can write that income off that
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you paid them.
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Right. And it’s really important that you do that because you want as much money as
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you can get in your business and you wanna keep it. You don’t wanna pay it to Uncle Sam.
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Yes. You want to keep it all tight and right and above board.
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Exactly. And obviously W9s, that’s appropriate for a contract based worker.
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Absolutely. Absolutely. And also, what I always tell people to do is get the stuff right up
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front. As soon as somebody comes to you and they want to work with you and you’re like,
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“Great, this is gonna be a great relationship, I wanna work with you,” first thing you
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do is send them the independent contractor’s agreement and then send them a W9 to fill
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out because if you… the relationship doesn’t work out and you decide that you don’t want
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to hire or you don’t want to use them anymore, you wanna fire them, it’s gonna be really
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hard for you to get that form afterwards. So…
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That’s like a pro tip.
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Yes.
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That’s a total pro tip. I love it. Get it up front.
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Get it up front.
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Jo-Na, thank you so much for being here today. This was fantastic.
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Thank you so much Marie. It was so much fun.
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So if you wanna learn more, everything is right down below. So Jo-Na and I have a challenge
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for you today. If you don’t have all your legal ducks in a row, what’s one step you
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can take right now to start making that happen? Tell us about it in the comments underneath
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the video.
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