July 7, 2022

In Early Retirement, it often makes sense to create “side hustles” or small businesses that can help sustain or add to your portfolio, especially during bear markets. The type of business you create depends on your particular skills and experience. In my case, I thought it would be fun and interesting to try my hand at consulting in purchasing and procurement in which I have almost 20 years of experience. A friend and colleague had reached out to me with a project so work was readily available but I did not have the structure in place. My friend happened to have experience in consulting so he gave me some guidance.

Here are the Steps Involved:

1. Create a Limited Liability Company (LLC) & Employer Identification Number (EIN)
2. Obtain General Business Insurance & Professional Liability Insurance
3. Open a Business Bank Account
4. Purchase a Domain Name and Web Hosting
5. Setup Google Workspace – Secure Email/ Storage/ Video Meetings/ Calendar/etc.
6. Setup Skype & Google Voice
7. Negotiate Contracts with Each Client

Create a Limited Liability Company (LLC) & Employer Identification Number (EIN)

When creating a company of any type, it is critical to consider the risks and liabilities. This is true in virtually every business and it only takes a quick glance at the news headlines to see articles on companies being taken to court for a myriad of issues. Setting up a Limited Liability Company (LLC) can help protect your personal assets if something unfortunate occurs with your fledgling business. Owners may still be liable for debts that they have personally guaranteed, unpaid payroll taxes, or personal wrongdoing/negligence/fraud/etc. It is also critical not to mix your personal assets or accounts with the business accounts. The LLC should have it’s own bank accounts, credit cards, contracts, invoices, etc. that are all business accounts in the company name.

In order to setup an LLC and EIN, I used Rocket Lawyer which I highly recommend for their ease of use, efficiency, and reasonable prices. I submitted my order on March 5th, the Articles of Organization for the LLC were completed March 14th, and the Employer Identification Number (EIN) was established March 24th. Here were the costs: Business Incorporation Service $99.99 USD, Tax Identification Number $59.99 USD, State Government Fees – Illinois – LLC $155.88 USD. (Total: $315.86 USD)

Once the LLC is setup, you also need to create an LLC Operating Agreement that details the financial, legal, and management rights of the members such as how profits are distributed, how members may exit the business, and what capital is being contributed to the business by which members. This should be done even if there is only one owner/member. There are a lot of free templates online that you can use.

It is also necessary to maintain your LLC to be in good standing with the state. This may include submitting an annual report, paying taxes, and maintaining appropriate licenses and permits.

General Business Insurance & Professional Liability Insurance

General Business Insurance typically covers: bodily injury or property damage, defense costs if you are sued, personal and advertising injury for libel/slanders, and physical damage to electronic data. There are reams of pages with the details on what they cover and mostly on exceptions and what they do not cover. I used Hiscox Insurance and my General Business Insurance costs $400 USD/Year.

Professional Liability Insurance is probably the most critical insurance for someone operating as a Consultant. It typically covers: negligence, defense costs, claims and damages, and libel/slander. It does not cover bodily injury or property damage, employment matters, false advertising, failure to protect personally identifiable data, regulatory claims, and intellectual property claims. I used Hiscox Insurance for this as well and my Professional Liability Insurance costs $926 USD/Year

The frustrating thing about the insurances is that it’s very difficult to get insurance when you are starting out and do not have a long history of operating the business with no claims. In addition, the coverage they provide is not very helpful for a consultant. Since I operate online/virtually, the risk of bodily injury of property damage to someone is nil. The only item covered above that may actually help me is negligence but that is very unlikely. The largest concern in consulting is intellectual property/confidentiality and data security which they do not cover. So, in my view, these insurances offer some protection but they should in no way be viewed as all encompassing.

One insurance I am trying to add is Data Breach Insurance but so far I am unable to obtain coverage. I would recommend getting it if possible. Also, if you start hiring Employees, you need additional Insurance like Workers Compensation Insurance and possibly others.

Business Bank Account

As I mentioned earlier in the article, an owner cannot mix his personal assets with those of the business. Therefore, the LLC must have a separate Business Bank Account and Credit Card. Many of these accounts charge monthly fees, transaction fees, ATM fees, etc. I opened a Chase Business Checking Account because I already have some accounts with them and they currently have a $300 offer when opening a business checking account. I also opened a Chase United Business Mileage Plus Card because the first year has $0 annual fee and I can earn 75,000 miles if I spend $5k in the first 3 months which may be achievable. The process was fairly simple and easy to do online.

Purchase a Domain Name and Web Hosting

In order to have your own email address and website, you need to purchase a Domain Name which is basically just a web address like mycompany.com. Once you have this you can setup an email like eric@mycompany.com and you can create a website. Obviously, you have to choose a Domain Name that is not already being used so make sure the name is unique. I used Bluehost.com to buy my Domain Name and it cost $27.99 USD for one year. However, this was a mistake as it is more economical to buy the Domain Name and Web Hosting combined. That would be $35.40 USD for one year of web hosting and you get the domain free! So, do that.

Bluehost has a free website builder application and it is integrated with WordPress for website management which makes it relatively fast and easy. You can build the website on your own using their free templates and drag and drop functionality so you do not need to know any programing. It can be done in a few hours. When building a website it’s critical that you avoid copyright infringement so use your own photos, etc. There are also websites that provide free stock photos for commercial use and there are photos in the public domain that you can use but be careful to check on this to ensure you avoid copyright issues.

Setup Google Workspace

Google Workspace – Business Starter only costs $6 USD/Month and you get the following:

• Custom and secure business email
• 100 participant video meetings
• 30 GB cloud storage per user
• Security and management controls
• Standard Support

You can setup the secure email under the Domain Name you established via Bluehost. Google gmail walks you through the process to setup the email under your Domain Name so it is fairly simple. This way, your email will be more professional and show up as eric@mycompany.com vs. having a gmail.com account that will go to many client’s spam folders or be rejected by their firewall. Google Video meetings are great and, in my opinion, perform much better than Microsoft Teams. They are also secure and easy to use. In this era, it’s absolutely necessary to have video meeting capability for your business.

The Google Calendar also works very well and meeting notices sent by clients through Outlook or Teams will show up on your Calendar seamlessly. That was a welcome surprise to me.

Setup Skype or Google Voice

There are a few ways to manage your Voicemail and Phone. The ones that appear to be the most competitive to me are Skype and Google Voice.

Skype Fixed Phone Number: If you want to have a fixed number that clients can call or text and you want to be able to pick up those calls, then you can use Skype and purchase a fixed number for almost any particular state/city that you would like. You can also make calls from this number. The cost is about $60 USD per year. That is only to have the fixed number and, from my understanding, does not include any fees for actual calls.

Skype Calling: There are multiple monthly subscription plans for Skype depending on where you are calling from and to and how many minutes you plan to use. However, you can also just setup your credit card for billing and then just make calls as needed. This is what I am doing currently and the calling costs are very reasonable. Calls from Portugal to the US are showing up as either free or at a charge of $0.02783 USD/min. I paid $2.71 USD for all my calls in June so I do not plan to sign up for a subscription.

Fixed Phone Number (Google Voice Business): Google Voice for Business provides you with a fixed number that clients can call or text for $10/per user/per month ($120 USD/year). Calls appear to be free within the US and Canada based on the website but calls to the US from overseas are only supported for particular countries (It is supported for Portugal but not Australia).

Right now I am not using a fixed number and only making calls via Skype when needed. However, I plan to setup a Skype Fixed Number going forwards.

Contracts with Clients

Contract must be established with each client and the following are a few key areas to include:

• Contract must be under your LLC and not you personally!!
• Contract should cover Confidentiality and Intellectual Property
• Contract should indicate Project Scope, Deliverables, and Milestones
• Contract should indicate how Changes to Scope, Deliverables, and Milestones will be managed
• Contract should include a Service Level Agreement defining what the performance expectations are an how any shortcomings will be addressed.
• A Dispute clause should explain how disputes or conflicts will be managed
• There should be a clause regarding the state laws under which the contract is being signed. This is the court any disputes would be escalated to as well.
• Contract should have a Force Majeure clause
• Termination clause should define who can terminate when and what the repercussions/ costs are of termination
• Pricing/ Fees should be listed as well as the Timing (50% upon Signing, 25% after key milestone, 25% on Completion, etc.)
• Payment Terms and Invoicing process should be defined. All payments need to go to your Business LLC Bank Account and not you personally.
• Indemnity Clauses should be included
• Contract should also indicate Limitations on Liability so that you can limit or cap your liability under the contract. This is very critical for small businesses.

These are just a few points to consider in your contracts but be sure to review any contract with a qualified Lawyer that is licensed to operate in the state under which the contract is being executed. This is absolutely critical and is usually also required under General Business Insurance and Professional Liability Insurance. I used Rocket Lawyer since they have a subscription for $39.99 USD/month which includes legal review of contracts up to 10 Pages in length. They also have templates for most types of contracts and it includes Document Defense so that, if a dispute arises with your contract, you can review the situation with an attorney and they will respond on your behalf. Some of the attorneys are better than others so I would suggest reviewing any contracts with a couple lawyers available on Rocket Lawyer. You can do this for no extra cost.

That’s my feedback on setting up a one person Consulting Company so let me know your thoughts! Did I miss anything you would recommend? Do you disagree with something I said or is there a better way? Let me know.