Speaker 1 00:00:11 This is Charlie. Welcome to the click, getting screwed podcast, where we talk about everything related to contractors, construction, and information to help you run better businesses.
Speaker 1 00:00:23 Hey, good morning guys. And welcome back to the quick getting screwed podcast, where we talk about all the ways not to get screwed in the construction, because there are a lot of them. And today is a solo episode where I dive into what I like to call legal landmines. What are legal landmines? Okay. These are the things that you don't even know that are out there, but if you don't prepare for them, they could do serious damage or take you out completely. So I've kind of made a checklist that I go through with my, you know, my clients or any potential clients to go through and make sure that we're in line and all these areas and that they don't get taken out by one of these missteps that I've seen happen in the past. And so the first thing that if you're in the construction industry and you're a business, is that you absolutely must be incorporated.
Speaker 1 00:01:16 And so what does that mean? It means whatever state that you are working in, or states that in most states is called the secretary of state and some states that's called, uh, something different, but it's where they register businesses. And so you register with the state, you file your paperwork. I said, Hey, I'm going to be in business. There's a filing fee. And they put you on file. And usually there's some kind of annual reporting fee reporting requirement that you keep up with and keep in good standing. And so that's a yearly or more obligation that you keep up with whatever your state requires to be incorporated. And so why is this so important? Okay. Being incorporated protects you individually and your individual assets from liability of your company, whether that's liability for debts, you know, loans, you know, materials, whatever you've signed for on behalf of your company that your company owes money for or could get in trouble for.
Speaker 1 00:02:12 It doesn't necessarily mean that your personal assets are up for grabs and there they aren't, if you are incorporated and run your company like its own entity, like it should be. So first thing being incorporated as a side note with that, whenever you sign a personal guarantee, which sometimes you're required to do to get a loan from a bank or some materials, suppliers require a personal guarantee, realize that in that situation you are intentionally waiving your corporate protection. Meaning you're saying, yes, I agreed that my personal assets can be up for grabs if the company cannot pay. And that's what a personal guarantee does, and it actually steps around the corporate protections. So the first thing is make sure, incorporated make sure you that you do whatever paperwork is required normally on a yearly basis to keep your corporation in good standing, because if you don't, you'll forfeit it and then those protections don't apply anyway.
Speaker 1 00:03:08 So it's not just a one-time thing it's usually yearly or more often that you have to file updated paperwork or pay taxes depending on whatever your state requires. And the other thing is, if you're working in more than one state, you can register your entity, whatever state it's originally formed in, in that, in that state where you're working, which it should be required. So if I have a Delaware business and I'm doing business in Texas, I need to register or let the secretary of state know that I'm a foreign business doing business in Texas, uh, because you don't get the, you know, the protections or the, um, certain rights if you're not incorporated in that state. So another thing to look out for another big, um, uh, landmine that happens a lot is when we deal with employees or subcontractors first, you know, what is the difference between an employee and subcontractor?
Speaker 1 00:04:04 I know I've had episodes on this, um, before basically the more control you have over someone, the more likely they are an employee, an employee, and the, if someone has their own business and does their own thing and only works for you occasionally, uh, the more likely they are subcontractor. So ha you know, call us, call an attorney, have a discussion about what do you actually have? Do you actually have employees or do you have subcontractors? Okay. And so then once, you know, what you have are we paying them properly? Because if you have employees, you got to pay them the right way, pay them overtime, potentially take out with holdings, all of the things. And, you know, if you have a subcontractor, then you need to have a written sub contract. Um, and that's that spells out the terms of the agreement between you and the subcontractor.
Speaker 1 00:04:52 Um, don't just hire somebody and call them sub don't. Just give them a PO. My firm offers a subcontract agreement for a flat fee of $2,500. I don't have any ads on my show, but I can promote myself. So that is one thing that we do in all 50 states and particularly for your business, and actually what I recommend if you're using the same subs over and over again, we use what's called a master subcontractor agreement. And so what that means is the subcontractor signs, your main terms and conditions to seven or eight, up to 10 page document that that is insurance. You know, all the risk involved, they sign that document one time. And then for each project, you issue a work order. And that main document follows them with every job. So they don't have to sign the same document over and over again.
Speaker 1 00:05:39 And like I said, we do it for a flat fee of 2,500 bucks. It's particularly for you, it's done in less than a week. That way your subs know exactly what to expect. It's in plain English. And so, and then again, it really helps prove that subcontractor relationship as, as opposed to an employee. So you have a subcontractor, you need a subcontract agreement. If you have employees, you absolutely need a consistent intake process and an employee handbook. Um, that's also something we do at the firm for a flat fee specifically for your business in the construction industry, because we have to have OSHA and all of the, you know, updated, uh, new mandates that OSHA may or may not be enforcing, but we'll find out on that. But, you know, just having, here's our application process, here's the kind of research we put into candidates.
Speaker 1 00:06:28 Here's our interview process, just having that all. So that way you make sure it's not missed and you don't accidentally hire somebody that doesn't have a license, or that is not qualified. You know, says I have something, but they don't, you know, don't have the qualification. So having that intake process is huge. And then an employee handbook, if there's ever an incident, if there's ever an accident, if there's any, one of the first things, what happens when you get sued is they're going to ask for your employee handbook, what are your rules and regulations for your employees? If you don't have one, they can pretty much assume that you don't care about rules and regulations and you don't have any. And so it looks bad from a liability standpoint, if we don't have a set of rules that everybody knows how to play by with a company like safety rules or what, what what's required when we drive a company truck, you know, what's required when we're dealing with company property, all of those things should be spelled out for a good process.
Speaker 1 00:07:20 But also from a liability standpoint, you look like a responsible business owner. If you have this in place. And then when something happens, you're like, oh yeah, here's what they were supposed to be doing. They weren't supposed to be, you know, driving after hours or they weren't supposed to be doing this or that. And so, you know, it's not my fault. I had this set of rules in place. They didn't follow them. You know, I will take care of internally, but the liability is somewhat stopped because you can say, Hey, yes, I'm a responsible business owner. I can protect the public, you know, by managing my employees through an employee handbook. So hugely important. And usually what happens, you have the onboarding process, you decide to hire somebody, you have the terms and conditions of employment, and then you have the employee handbook, which you give them all which they sign off on before that actually start working.
Speaker 1 00:08:06 So, you know, something else we can walk you through the entire process. All right, we've been through over subcontracts insurance. The other thing is that being in business in general is a risky proposition specifically in the construction industry. So there are companies out there that do write policy specifically for people in the construction industry. All right, the same guy you got your car insurance from is not who you want to get your business general liability insurance from because you can have insurance all day long, but there's a whole bunch of exceptions that may or may not be covered depending on your scope of work. Especially if you're in construction and you hire subcontractors, your general policy is not going to cover any damages or incidents caused by the subcontractor. So find a good company that write policies specifically for companies. And you can find one that does, you know, specifically for your scope of work.
Speaker 1 00:08:59 Like if you're a painter, you know, will it cover over sprayed? You know, you want an ask all these questions where you, you want to know in advance here are the potential ways that I could get in trouble. Does my insurance cover that? Or can I find insurance that would cover that? You know, workman's comp is another huge thing that will limit your liability down the road. I know, especially if you're in the construction industry, it's expensive upfront, but it could be a lot more expensive if you don't have it. So find an insurance agent is specifically for construction, sit down, ask them the questions, tell them what your business does, find out if that is something that you can have covered. If not, so, you know what risks you're out there taking, don't just assume a GL is going to cover it in a general liability.
Speaker 1 00:09:41 Positive policy is there's lots of things that jails don't cover. So know that. Um, okay. So then we get into the actual performing of the work. All right. So there's contracts involved now, either your customer signing your contract or you are signing someone else's contract. So let's take those one at a time. If you, if your customer is signing your contract, let's say most in most situation, this is a residential project. And I can say that I deal with pissed off homeowners. A lot of the times I get calls from piss offers homeowners all the time about bad work from contractors or mostly that the expectations a homeowner had about how the project was supposed to happen and what could be expected, weren't properly managed. And so now they're pissed off. And so what does that mean? That means that your customer has, has an idea of how this project is supposed to go.
Speaker 1 00:10:41 And I promise you, it's not based on anything in the construction or in reality of how it's actually going to go. So you have a picture too, in your head of how the project is going to go. And what we need to do is get those pictures to match. You know, you want the owner to have in their head, the same picture that you have so that there's no surprises or unexpected things. Or if there is, we take care of those in advance. And so a well-written contract should handle all those things. What does the schedule look like? What is the actual scope of work? What happens? You know, if things, if we tear into a wall and a remodel and things, aren't like, we expected them to be, we've got to replace more. Your contract should say, yes, I'm an expert in my field, but I can not see through walls.
Speaker 1 00:11:24 And so if something is behind her that I don't know, I'm going to come to you and say, Hey, this, I couldn't see this. This was not included and it's going to cost additional. So that's a change order provision that should be in your contract as well as if you're working on residential contracts. Each state has, has something required when you're dealing with a homeowner that needs to be in that contract either to protect your lien rights or be able to collect your money that needs to be in there on upfront end. So we need to make sure that that is in there. The main thing is, is that your contract should be a document that you understand, and your customer understands because it manages expectations and keeps us out of trouble in the long run and protects you. Right? And so that, I mean, my firm offers this for $1,500, well worth the investment, right?
Speaker 1 00:12:11 Call up. I'll have an attorney give like an interview, find out what's important to you. We'll go through all the terms. You know, your payment terms, the week turnaround we'll have a contract to you that is specifically for your business specifically for your state. You know, we're here to help because I don't want you to get sued. And I don't want you to get in a place where, you know, you're having a disagreement and you don't have any way out or any recourse. So if somebody assigning your contract make the $1,500 investment, you can use it over and over again, it can be tweaked. It can be changed for any specific, um, any specific job. But that way, that contract gets you in the homeowner on the same page, you both have the same idea in your head of what to expect. And when that happens, there's a lot less likely to be in your disputes or hiring attorney because you can't get along.
Speaker 1 00:13:01 So spend the 1500 bucks, give us a call. We'll put our contact information in the show notes. Uh, we're here to help you on that. So that is if someone is signing your contract or you're going to work for somebody, um, hugely important, uh, even, even if you don't do the 1500, have something in writing, just because you opened your out self up to huge liability about what you were hired to do without a contract at all. And that's where, that's where we're getting real trouble. So any kind of writing is better than none. I highly recommend our $1,500, you know, residential repair, remodel contract. So give us a call for that. The other side is if okay, what if you're signing someone else's contract, you just sign it. Do you read it? What do you do? Um, what I recommend is even if you don't want to negotiate, because you're afraid that you won't get the job that you haven't reviewed and understand what you're signing, because again, a contract is supposed to manage expectations.
Speaker 1 00:13:56 You know, I think that, I think the commercial side of the business of the construction is industry does a poor job in having contracts be what they actually are, which is another set of instructions of how the job is going to work. Like, what do we do if there's change orders? What is the warranty? What is the middle schedules? You know, all of this should be in there in a way that everybody can understand it. And it's not, you know, I've read thousands of sub contracts. You know, my eyes went blurry. I had to get LASIK because it was just horrible reading subcontracts. And it took me hours to understand them. And this is what I do for a living. So my push is first off, if you have a subcontract ready to sign or anybody's contract, you're getting ready to sign up for a flat fee.
Speaker 1 00:14:40 I offer a contract review and I'll go through and tell you what everything means. So you can understand and plan English. You know, we start that review service at 550 bucks for 15 pages. And under, I think it's 1,004, 15 to 30 pages. Um, so you know, affordable, put it into your, you know, bid price so that we can go over what, what the contract you're getting ready to sign means and what you're agreeing to. And once I tell you what it means, and you know, what the risks are, then you can decide if you want to negotiate or not. And when I say negotiate, I'm not just saying cross it out and say, no, I want to agree to that. I'm saying, okay, let's meet in the middle somewhere. What are some ideas on how, you know, the pay one pay clause can be split in the middle or not all the risk is on the subcontractor, but even if you don't want to negotiate, just know what you're agreeing to.
Speaker 1 00:15:27 You're getting a lot less trouble if you understand the contract. Cause here's the thing, whatever you agree to in a contract will be used against you. There's no set of rules that protect you. There's no set of something that this can't be in the contract, or you can't agree to this. Um, generally speaking, that that just doesn't happen. So, you know, don't just hold your nose and sign it. Let's, let's make an informed business decision. Let's figure out the risks that we're taking, you know, and then try to negotiate it if that's what you want to do. But at least understand what's in there. Like I said, again, we offer this for a flat fee, starting at 550 bucks. I don't know why you wouldn't do it. It's just a smart business decision. So two types of contracts, your customer's signing yours. You're signing someone else.
Speaker 1 00:16:10 You know, yours. If someone's sending yours plain English, easy to understand, manage expectations. If you are signing someone, else's make sure you understand what it says and what you're agreeing to. Another thing that is illegal landmine is not having a consistent collection strategy, right? It happens over and over again that, um, you're in a position where you're owed a bunch of money and then you're like, oh, now what can I do to collect this money? And it happens faster than you think, right? You're working, you're working, you're working. And then all of a sudden you take a look at your open invoice, your report reporting. You're like, shit, how did it, how did it get so big? How do they owe me? You know, that a hundred thousand dollars or half a million dollars that I just, you know, I'm working work. And it seems like I don't have any money.
Speaker 1 00:16:55 And it's because you don't because it's sitting there, it hasn't been collected. So I will tell you that being prepared on the front end it having okay, if I'm not paid at 45 days, this is the process we make phone calls, we do this, whatever it is, have it up front. And, and especially guys, you're working in construction, use your lien rights. Right? Huge, huge thing out there, right? What is a lien? It is a way to make the amount that you're owed secured by the property, right? It is, it takes your debt. The amount that you're owed from being an unsecured debt to a secured debt, the catches guys it's different in all 50 states, what is required to have available lien is, is different in all 50 states. So requires, you know, you gotta send some type of notice at some point in time, before you filed the lien, the Lane's gotta be filed and you gotta send, notice the lien.
Speaker 1 00:17:43 So whatever your state requires, work that process into your consistent collection strategy, right? There's a lot of things that you can do on your own. Uh, as far as collection goes, what I'm going to tell you guys, my firm offers, you know, collections and liens on a subscription price for very competitive prices, for what you can get a subscription for unlevel set. I will do. I honor the same price, except it's done by attorneys. It's done right. And most of my files are collected before they ever go to lien because I'm not just sending notices. I'm an actual collected collection department. So, you know, if you need just one lane, 500 bucks, if you need, if you have a huge collection problem, you know, a thousand dollars a month, depending on what you need, anywhere from a thousand to $2,500 a month, I'm all here to help you, right?
Speaker 1 00:18:36 Just we have a process that's set up and done, right. Um, because that's what I've done. That's what I've done for the last 17 years. I've collected money that my family was owed in the construction industry, my client's money. And this is what I'm good at. This is absolutely worth the investment. Like I said, if it's worth 500 bucks to try to file a lien, to make a few phone calls, if collections are, you just want to outsource your whole collection department, right. Starting at a thousand dollars a month for a year commitment, but it's done right. Uh, you know, some of the online lien filing services don't do them correctly. They're more of their don't really have your best interests in heart. There's a process. There's automated systems. They don't really care if you collect your money, they're more in the, you know, data collection business, and they are in the money collection business.
Speaker 1 00:19:24 So, um, just some things to know out there, but back to what I was saying about having a consistent collection strategy before collections become an issue. So, you know what happens when you're not going to get paid? This is what happens. You know, we made phone calls, we send letters and then we send it over to the attorney's office for further collection. So like I said, collections, we do collections and liens in all 50 states. Uh, we're here to help you. If you have any questions, we're here to answer your, you know, our phone number is (713) 715-7334. And there'll be links to our website in the short show notes where you can find out more about our flat fees, you know, our subscriptions, all of the things. So collections, huge thing, you got to get paid for what you're, what you do, or why are you even in business?
Speaker 1 00:20:08 Right. Okay. The last thing, um, that really prevents legal landmines is knowing how to CYA or what I like to say, cover your ass. So this is things, your processes about internally when the project starts throughout the project and when it ends, that documents the process and everything that happens in between. So that if anything does happen, you have your whole file. It's there, here's everything that happened. Here's all, you know, here's all the emails where the client approved the change orders. Here's where the approved, you know, the tile color, the paint color, here's all of that. And it's here. That's how we see Y you know, once you're weather, you know, once you're in a contract, whether it's commercial or residential, right? You cannot change that contract by verbal statements, nothing that they say or said, or will be used to interpret the agreement between the parties.
Speaker 1 00:21:03 So it's gotta be in writing, right? So when I'm talking about CYA, I'm talking about if there's an issue that rises up and, and you have a conversation about it, followed up with an email saying we had a conversation about this issue, and here's how it's going to be resolved. Send the email. If you get an email saying, Hey, you're not working fast enough. You don't have enough guys out here. You need to respond in writing to that email. Yes, I agree. And here's how we're going to fix it, or no, I don't agree. And here's why that becomes the story that you may need later on. It's just good business practices to have that all documented. And don't assume that somebody is going to honor their word. Unfortunately, that's where we are in the construction industry. That's why these contracts have gotten so messed up.
Speaker 1 00:21:43 Um, is that yes, they, they mean to, I think they really mean to, but when they get the opportunity that they don't have to, right. Like, you know, I was a huge thing. I know, kind of went over this in the past, but right now increased material costs. If you don't have a provision in your contract, whether that's a contract, you signed with your clients or contract, you signed, you know, someone signs your contract. If you don't have it written in there, then you can't get that. You know, you can't get that increased costs. And now you are the one who's responsible for covering increased costs. So guys, this is the checklist that I try to go over with all my clients and potential clients to make sure that they don't hit a landmine that will take them out. If you want to, um, schedule a time where we can talk about your specific business, I'll make sure that they put my calendar link in the show notes, and you can schedule an appointment. And we'll talk about all of the things and any other issues you might have. So guys, I hope you have a great day. You know, I hope that this helps you realize the risks that are out there and that you won't get hit by a landmine. So then again, we, Carolyn Crow means owner of the Cronin's law firm, and I'm here to help. So reach out to me for any of the flat fees. You have any questions, we can schedule a time to talk about it. All right, guys, have a great day. Thanks.
Speaker 1 00:23:06 Thank you for listening to this episode of quick getting screwed. I hope you found it helpful. If you liked what you hear, please like us and follow our podcast. You want further information so you can find us. Subcontractor is two.com. We're also on Facebook, LinkedIn, and Instagram, and the book is available on Amazon tune in two weeks now for a new episode. Thank you.