Today we are talking all about the California law that is affecting service providers all over the country.  California Assembly Bill 5 (AB5), also known as the “gig worker bill,” is a piece of legislation signed into law in September 2019. It requires companies to reclassify contractors into employees. As a service provider, how can this law affect you? Is there a way around it? What effect does it have on your business if you have California based clients? 

In this episode, we will dive into the details of AB5 with lawyer, Emily Baker as she makes a very unfun topic relatable.  Listen in as we uncomplicate this matter and zero-in on its implications to writers, VAs, and other contractors. We also discuss the importance of having a business that’s solid and prepared for changes now.

Emily D. Baker left her 10-year career to help serve online business owners as they start and grow their business. She has helped hundreds of entrepreneurs get their business life right so they can focus on their zone of genius.

Value Bombs:

  • Support businesses that do good and give back to others
  • The value of building relationships in-person
  • The California Assembly Bill 5 (AB5) and why it’s causing headaches to service providers
  • Why many are fighting against California AB5
  • Why you should comply with California AB5 now
  • Determine if you’re working as an employee or contractor
  • How the California AB5 is actually protecting contractors
  • California AB5 fines and penalties
  • The value of niching down and sticking to your boundaries as a service provider
  • Exceptions to the California AB5
  • How California is enforcing AB5

Listen, change is coming. Either you stick your head in the sand or face it head-on, empowered with the legal knowledge you need to know.  If you know what the rules are, you can structure your business properly and be prepared. 

Emily’s interview today shows us the power of niching down, scaling without a team, and setting boundaries with your clients. 

This episode was so empowering so I hope you all take time to tune in!

XO, 

Brandi
 

 

Resources Mentioned:

 

Episode 12: Why Service Providers Should Be Attending Live Events

Download the Independent Contractor Guide 

 

Where to Find Emily:

 

Emily’s website

Find Emily on Instagram

Find Emily on Facebook

Emily’s Podcast 

 

Additional Resources:

Don’t forget to sign up for my free training >> How to Scale to Consistent 10K Months Without Hiring a Team 

Subscribe to the Podcast

Follow Brandi on Instagram 

Follow Brandi on Facebook

Read Full Transcript

Today's episode we're talking all about the California law that's not just in California, but that's affecting service providers all over the country. So if you want to make sure that your business is legal-proof California-proof, then you are definitely going to want to stay because I have attorney Emily Baker, who's making a very unfun topic relatable. And she empowers us to embrace this law and shows us how powerful it can actually be for our business. So let's jump on in.

Welcome to the Surf Scale Soar podcast. The podcast dedicated to helping service based entrepreneurs scale their online business to 5-figure months so they can soar into 6-figure years. Your host, Brandy is a wife mom. And in less than one year created a 6-figure business. And now she is spilling all her secrets so you can to.

Hello, Serve Scale Soar. I'm so freaking excited because I have one of my friends, Emily Baker, on here and she is an attorney and many of you know that I went to law school, but I'm also the first person to tell you that I am not going to give you legal advice because I am not an attorney.

I just have a really expensive degree. So Emily is actually an attorney and she's going to talk about all these questions that we have as service providers. And so, Emily, please introduce yourself. Tell us who you are and who you serve.

Absolutely. I'm so glad to see you. And I'm so glad to be here. For everyone who's new to me, I'm Emily D. Baker. I'm the Badass Lawyer for Online Business. And I serve online business owners and entrepreneurs. I do serve other businesses, but my sweet spot is the online business owner. What I find is with online business, most online business owners started out of a need or a passion or both. And it might be I need an extra $500 a month for my family. I need to get away from a job that's not serving me. And most of my online business people have a bigger purpose in the world. And I love supporting those business as they do good. So what I see s my ideal clients start to scale their business, they give back in such a beautiful way. And I love supporting that. Not to say that brokepreneurs who just want to drive a Porsche aren't my ideal client, but they're not. So I support clients who want to do good for their business, do their business right. And then do a greater good in the world.

And I love this because my whole podcast is about service providers and I'm just putting this together. But you're an online service provider yourself. You are an attorney. So you are in the perfect spot. And I just want to do a quick introduction of how we met, because we talk a lot about the power of connecting in real life and not just meeting each other on Zoom or cups of coffee on Zoom, but actually getting out and meeting people in real life and how that builds deeper relationships. But also, it's so different. So Emily and I met each other in Florida. This was before I actually lived in Florida at a very intimate retreat. And we hit it off and we found out we shared a client. And it was just amazing to spend those days with you. So what is your take on people getting out to real life events?

Real life events have changed my business. First and foremost. And the thing about me is that if we meet in person and I have that personal connection, if somebody reaches out who I know, I tend to respond faster because I'm like, "Oh, I know you. And you know me." And I don't ever feel like I don't ever have to read behind the lines. It's like, "Do you want to be on the podcast?" Yes, I'm here for you and I'm here for your audience no matter what. Because I know you and I know what you're serving. I don't have to go research you. I don't have to go research or podcasts. I already know you. I'm already familiar with you. And in-person events have changed my entire business. So one of my mentors and friends, Chris Ducker of the Youpreneur, saying he and I met at a live event and became friends over Pokemon Go, which we're both obsessed with. But if we had not both been at that event, that relationship wouldn't have developed in that way over something like DMs in Instagram. And while I love connecting to people that way, meeting people in real life is hands down the best. I went to social media marketing world this year, even though I didn't pay to go to social media marketing world. I went to San Diego because so many of my online friends were going to be there and I wanted to spend more time with them in person. I'm like, I'm not even buying a ticket to the event and it is worth coming down to be in space with people. And that is super valuable, which is why I love a small event like the event that we met at. I love a small event.

I love that. And we'll link up to the episode where we chat all about maximizing live events, whether it's local to you or you have to travel to. And they are so powerful. And so I know all of you are on the edge of your seat wondering all the things about law. And I feel like, Bradndi, this can be a boring episode. It's not. This is exactly why I picked Emily to come on the podcast, because I knew if we were going to talk about such as newscast topic like law, I needed to have a really fun attorney on here.

Thank you so much. I really do take a lot of pride in trying to make law not boring. So I was a district attorney in L.A. County for over 10 years. And if I can keep people awake for like a 3-week trial about tax evasion, I've got you. I also got in trouble with judges for being too personable with the jury because they felt it was too informal. And I did get yelled at for making a jury laugh once and was told literally by the judge told "Miss Baker, I'm the only one allowed to be funny in this courtroom." And I'm like, I can't I'm sorry they're stuck here. It's so boring.

I love.

I get it. I really in my prosecution career took boring topics like Internet intrusion and computer intrusion and tax fraud and embezzlement and made them accessible and approachable. I didn't realize that that was my skull was taking complex stuff and making it information that you can use and information that you will remember, and storytelling is part of how I do that with law. And that's what I do for my clients. So I know that they will hear my voice in their head going, "Oh, right, I need a contract."

Yes. And we are definitely going to talk about that. But first, I want to talk about this California law and that everyone wants to know how does this affect us as service providers?

AB5 is all of a steaming hot mess. So if you are listening to this episode, whenever you're listening to this episode, keep looking at AB5, cause it's not done yet. It is half-baked. It is not fully cooked. And there is still stuff changing daily with this law, which is what's causing service providers in California heart palpitations. And I've been doing as many consultation calls as I can to help people stabilize their business. AB5 has changed the independent contractor test in California. And before you think this is just California, this is not just California. The test that has changed in California is also the test in New Jersey, Massachusetts and Connecticut. However, Washington State, Oregon and New York have similar bills as we sit now in early 2020 passing through their state legislatures. And the federal government just passed a very similar bill in the House. This year, it is going to fail in the Senate. But this is something that the House is going to continue to push for. And this could very really, in the next year or two, become the national test for independent contractors. As service providers, it is critical to understand, one, if you are mis-categorizing yourself when you do work with a client. So from provider to client and if you have other service providers supporting you in your business, if they're mis-categorized to you. So as a service provider, you have to look at two things: you to your client and you to the your team or your support and make sure that all of those are properly contractor relationships. What's happening is a lot of people are going, "Oh, I need to make these people employees." And that is on average a 20% overhead increase, if not more. And it can feel very overwhelming if you are running as a solopreneur with some support from contractors. So this is a rule that everyone needs to pay attention to. California's the battleground for this, which is why you see so many industries fighting it. Because if California starts making up their very large deficit by converting all the contractors to employees, other states are going to follow. New Jersey just did this. California implemented a really rigid fine and fee structure in this law. And New Jersey just crammed through something very similar, though they've had this independent contractor test on the books for a while. So other states are taking a page out of what California's doing. And the musicians and the photographers and the freelance writers are all losing their minds, fighting California on this law. And the general feeling is that the ABC test, which we can talk about, I'll break down the elements, but the ABC test is not going to go away. In California, some of the wonky exceptions and exemptions, some of that might shift, but the core heart of this is not going away. In California, it was a Supreme Court decision. So California had to change their independent contractor tests. They didn't have to add in all this other stuff that is causing quite a lot of confusion and making it very hard for businesses to figure out how to move forward because it's unclear. So understanding the ABC tests and making sure that if you're hiring contractors, you're doing it right now means that your business is not going to have to freak out when this either goes nationally or comes to your state. It means you're going to price your services right, so that you can absorb a little bit more of an overhead increase. And that is the biggest issue I'm seeing right now with all kinds of businesses like a Pilate studio locally. All of those instructors are now employees. But if you're not pricing your products right to take them on as employees, it's very hard to raise your prices all at once. At the beginning of a new year when the studio one town over isn't doing it right, is going to roll the dice on those large fines and isn't changing their pricing. So stabilizing your business now and starting to look forward to the fact that this might be coming puts you in the best position to survive as a business as this changes and people who heavily subcontract I am talking to you. I am here for you. But this is a time to evaluate when it's not crunch time, because in California, this past in three months, this went into effect September, January 1st. Everybody get it together.

I love it. OK. So let's chat because most of these people are going be virtual assistants that are listening. Facebook managers. Let's talk about what is the test.

So there are two independent contractor tests in the United States, generally. States that I have not listed here are operating still under the IRS test. It can be called different things. It is a twenty one factor test. Guess what? I have a list. We will put it in the show notes so y'all can get it. And if you are not in a state that I list, you can go through those 21 factors and look at your relationships and go, yes, no. Yes, no. The ABC test has distilled to three parts. Guess what? They are A, B and C, part A is the worker free from control and direction of the hiring entity in the performance of the work? Both under the contract for the performance of the work and in fact. So are you really a contractor? Or are you being directed and told how to do your work? The more you're being told how to and what to do, the more likely it is that you're an employee. The more independence you have, the more likely it is that you're a contractor. If I hire someone to run my Facebook ads, we're going to talk about what like my target products are, but I'm not going to tell them how to do it because I don't know how to do it. It's like when you go to your hairdresser and you're like, I don't know. I needed a little shorter. What do you think? And then they do their work. You're not directing the work. But if you're a V.A. and you have a client who is up in your grill all the time. I want it like this. I want it like that. They're treating you like an employee. And that can be problematic for you. Part B tends to be the most problematic, which is does the worker perform work that is outside the usual course of the hiring entity's business? Once again, an example for me as a lawyer with an ads manager, that's not my business. But if you're a Pinterest V.A. and you're hiring someone to do Pinterest graphics and they're doing Pinterest graphics that you're turning over your client in an ABC state, they are more likely an employee because they're doing work that is within the usual course of your business. And this is where in California, you see companies like Instacart and Door Dash, Postmates, Uber, Lyft, all of them struggling because the state is saying, hey, "Uber, your business is ridesharing." And Uber saying, "No, it's not we're an app." And they're like, "No man. All of those drivers are employees. You're a ridesharing service and they are the ones driving." So this B prong is where a lot of businesses kind of go, "Oh, dear." And this is where if you are a general V.A. in an ABC state, you're an office manager. Whether it's virtual or not, you are more likely an employee. And in California, that is causing quite a lot of problems. Part C, is the worker customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity? Basically, meaning? Are you doing the stuff that you do for other clients too? So if you are a Pinterest's V.A, are you providing that service? If you're a graphic designer, are you providing that service? And that prong really gets to the fact that when you're an employee and I'm sure a lot of you have been employees in your life, I have some days your employer will come in and be like, I need you to go to all this other stuff and maybe not within your job description, but because you're an employee, it's kind of you roll with all the other stuff that comes your way. As an independent contractor when you set appropriate boundaries, nobody's coming to me being like, "Oh, by the way, can you do all this other stuff?" Nope. That's not the scope of this project. Sorry. We can add a new project. I can charge you more, but I don't just shift course because somebody has a whim, because I'm not an employee. I'm a contractor. So if you are a very general V.A. and people are just like, "Oh, today, I need you to do this." In an ABC state that's very problematic, where if you are a marketing V.A. and you're just doing marketing work, yes your client might say, "Hey, I want to switch to marketing this product next round or whatever." They're not going to be like, "Oh, and I need you to go take flatlay photos and I need you to liaise with this person and I need you to book my next flight." Because that's well outside the scope of what you do. Does that make sense?

This was so good. I love how you broke this down. A few questions that I know they're going to come up: One, people need to make sure that they set boundaries. We talk about this all the time, how important that is. But now California is saying we're making a law that you can set some scope.

It's not just California. Some of those factors of the test creep into the IRS test. So if you are a true contractor, you set your rates, you set your time, you set how you work and you set the course for the project. Yes. The person you're working for might have targeted goals, but you decide how to meet those goals, not them. So if you don't set those boundaries up, you put yourself at risk for mis-classification. You also put yourself at risk for really terrible clients and being very stressed with your work. So you can tell your clients if you're not doing that now, you can start implementing this in your business, saying, "Hey, there is more scrutiny on independent contractor laws and I am making sure that I'm doing it right in my business. Because of that here is my new contract that sets out how I work." Because as a contractor you provide the contract, not the person hiring you. You set your rates, not the person hiring you. The person hiring you can tell you their budget. You can either work with that or not, but you set your rates. And so if their budget's below your rate, you can say, "I can work with your budget, but I can only do this much." Because they don't set your rates, you do.

I love this so much. I think everyone's been freaking out. But there's so much gold in this that it's almost protecting us. Like I know a lot of people have said, "Oh, this is going to kill our industry and stuff." But this is protecting us in so many ways, because I always tell people, do not take a client's contract. You send the contract and they're like, "Well I don't want to lose a client because they don't want to sign my contract." But then they should have an employee, not a contract.

And they should have an employee, because your employer provides you an employment contract, an independent contractor. I've never had somebody come to pay house and I give them a contract and say, this is how you're gonna do it. They're my contractor. So as a contractor, you have to view yourself as a contractor, even if the work you're doing is blurry. And if the work you're doing can be blurry, you have to get these things right, because if you're mis-categorized, it's going to cost you and it's going to cost the person that's working with you. I would rather lose a client than deal with the IRS saying, "By the way, you owe us back payroll taxes or the tax board in your state." In California, the fines are significant. And what I've seen the franchise tax board do in California, because I've worked with them, I've worked with businesses in trouble with them. They will go back as far as they can and say, "Hey, boo, you should have paid us all of this. Cute that you didn't, but you owe us that money. Oh, and because you didn't pay it, you owe us interest on that money. Oh, because you were supposed to pay us, you also owe fines because you didn't pay us. And so we're going to do those fines each year and then that interest is going to kind of compound. So what you owe us is now like four times what you owed us. Oh, and there's also fines because now we implement fines." So you've got fines like penalties. I've called both of them fines. You got fines for nonpayment, penalties for getting it wrong, interest on the stuff you didn't pay, plus all the payroll that you didn't pay. California is not playing, but the structure they set up. Other states are going to be like, wait, we can charge fines and penalties and interest and all the stuff you were supposed to pay us Sweet.

So where I'm seeing that this is really important for my audience is why you have to niche down. Like I say this over and over, but now it's coming down to a legal aspect. So being a general V.A. Is not going to be ideal if you want to work under these structures. So it's going to be like get specific. Are you a Facebook ad manager or Pinterest manager or a podcast manager? And then also I teach how to scale without a team. And so this may be getting those systems in place because if you decide you want to grow an agency and it's going to come down to can these people be subcontractors or do they need to be employees?

Right. And that's a consideration to make before you start an agency. Cause I'm getting a lot of those phone calls to sing, "But I have an agency." And there are some exceptions to this in California. And if you're in California, get the downloadable that's in the show notes and go through those exceptions because there is some wiggle room for graphic design and for marketing. In New Jersey, there's a blanket exception for copywriting. So there are some categories of specific services. So if you say "I do this service" and you stick to your boundaries, you're very valuable to the person hiring you because you're helping them get it right and you're getting it right. At the beginning, it might not feel that way, but as you said, appropriate boundaries in your business and clearly delineate what you do, you will outlast people who are doing it wrong. The problem with California is that the people who are doing it wrong aren't going to get fined for three or four years and then are probably going to go bankrupt. So this is an ongoing problem, but the IRS just has some of these components in it. They're not as hard and fast. But if you're doing very broad general V.A. work in an ABC state, you are an employee. If you are doing very broad V.A. work in a non ABC state, you need to go through the IRS test and make sure that all of your structures are in place to be very clear that you're not an employee because you're still at risk from mis-categorization.

Ok. Perfect. I know that listeners are going to be saying "This sounds like it's going to affect OBMs, project managers, executive virtual assistants, integrators the most. Is that correct?

That's correct.

OK. So is there anything that those people can do to make it where they don't have to become an employee?

In California, no. There is some wiggle room maybe with project management, depending what is happening in California's people are trying to make the business-to-business exception fit where it doesn't necessarily fit. Because when you get to the business-to-business exception in California. Yes. It tells you how they want you to lay out your business structure. And I can go through that real quick. But with the business-to-business exception in California, you have to go through the 21 factors of the IRS test, plus an additional 16 factors in California. So there is a lot of factors that have to happen to make that work. And a number of those factors are proper business structure, proper tax filings, that you're setting your own hours, that you're setting your own rates and then going through the IRS tests on top of it. So there are some business-to-business exceptions, but it is a very deep analysis of your business and the working relationship. But the things that have to be in place are your business structure, meaning business, bank account, even proper tax filings, filing DBAs if needed, having a business license in the state where you are, in the location where you are, having the ability to negotiate your rates, having your contracts really solidly written and very clear as to how you work and when you work and what you do. So there are some options for that. But in California, the OBM example as a business-to-business exception doesn't fit right now.

Ok. So that is good. So my question is: I'm in Florida, so let's say I hire someone in California. Does the Florida law apply or is the California law apply?

The law applies where the person sits, where the person you hire sits. And California is going to lengths to make sure that if somebody has ties to California, that that's the law that applies. And the franchise tax board just did this with a gentleman who lives in Arizona, worked for some of the movie studios here in California, was a writer, screenwriter, earned about $40000 in the year or over two years from California and didn't file personal income taxes. He was a sole proprietor in Arizona, didn't file personal income taxes in California. Right. Because you live in Arizona. So why would you file income taxes in California? The franchise tax board and the state courts in California decided that if you derive income from California, you can be taxed in California. So now we're getting to a point where if you are a service provider, not in California, you need to be aware of your California clients and you can be taxed in California for work you do in California. And if you're a business that hosts like a live event, like, "Hey, I want to do a mastermind retreat in San Diego." It's beautiful. There's a ton of entrepreneurs there. But you're a Florida company. You have to register as a foreign business, doing business in California because you're deriving income from an event in California.

Oh, my gosh. That's so funny. Because we guys talked about maybe our next mastermind retreat being in San Diego instead of Florida. Now I'm going to be like, no, axe that.

Maybe Austin?

So my question then is, so this is at a state level, so let's say you talked about Washington state, how this may go through there. They don't have state income tax. We don't have state income tax here in Florida. So if this were doing this, you know, like one of us is in Florida, one of us is in Seattle. Since we're only paying federal taxes, is this still going to apply?

So what the exception I just talked about with California grabbing state taxes from somebody who derived income in California, right now, CPAs and I am not a CPA, but CPAs, that is completely their job to make sure that your taxes are being filed where you're deriving income from. And they know what they need to do. With regard to the independent contractor rules in the state of Washington, there are still payroll withholdings, even though there's no state tax. So if Washington says this person in Washington now qualifies as an employee, you would have to hire a foreign employee and file whatever state filings need to be had for an employee in the state of Washington. Because we haven't seen exactly what's going to be passed in Washington and Oregon, I think the mess in California, when these get passed, there's going to be at least a six-month to 12-month lead in, because what they're seeing in California is businesses just shutting down. Vox Media did this over the holidays in December. They wrote to all of their freelance writers in California "Peace out. We're done. We're shutting down all of our. California operations." And so I hope that other states will look at that and say to protect people in our state, we are going to pass this and we're gonna give a six to 12-month ramp up so businesses can evaluate it and can evaluate if they need to change their business model. And that, I hope, is what other states are taking away from what's going on in California right now, because people are protesting daily in Sacramento over this law because it was quickly rushed through. And there are funky exceptions. So if you are a multi-level marketer, you're exempt from AB5, but if you are a freelance writer, you're limited to 35 submissions a year. So there's this very odd, nonsensical way that this has been done. There's no like graphic designers are exempt, but no one will say if a web developer who is designing the user interface and the front facing Web site counts as a graphic designer or not, or if they're not. So it's very hard to parse through. And I am with all of my clients that I'm consulting with on this, advising how to structure their business to work with this. But ABC isn't going away. Some of these wonky exceptions might change, but ABC is not going away.

So my question is, how are they actually catching people? Is this only affecting like the big companies like Uber? Do we really have to worry about this?

I appreciate the question. Let me tell you what I've seen from the franchise tax board. I have seen the franchise tax board go industry by industry to enforce things. My husband's a dentist. A few years back, they went through all of the medical industries, dental included, and said, hey, "You haven't been paying sales tax on dental materials purchased outside the state of California. Pay those, please. Oh, for the last six years, please. And you need to bear the expense of putting that together and showing us that you are paying us and showing us every material you've purchased out of state over this last timespan." So I have seen the franchise tax board audit industry by industry. I think that will be a part of the enforcement. They've also empowered counties to enforce this. So you could set up a county task force to go in and raid businesses if you wanted to. And I believe that they will set up algorithms in tax filings to look at how many 1099s are being reported. So, no, it's not just big companies. No, it's not just companies that make like over a million a year. I think there will be some industry by industry. And then I will think taxes are going to start getting flagged when they look at how many 1099 you had in 2019 and 2020. I think they will start flagging taxes and auditing people.

Ok, I get that. So that would probably be when it effects us. Because I'm thinking like some of us of course work with local businesses. And then if they get raid. I understand that. One thing about the us that work like course creators. We don't even like just to throw it out there. Like a lot of us are probably supposed to be paying like county taxes as businesses. And were not. And we're probably not going to get caught because we don't have a physical thing. I mean, yes. I'm not saying don't pay your tax, you should. Not taxes, but the licensing board and stuff like that.

Right.

But you could probably get away with it for a long time. How do you think, until it comes down to where they're flagging the 1099, is that when do you think it's going to catch out with course creators who are hiring and things like that?

So I don't know how they're going to roll out enforcement. The thing I do know is if they decide that your business has been willfully mis-categorizing that they can charge you up to $40,000 per instance, if they're finding that it's a pattern of behavior. But they will also fine you for all of the payroll taxes you should've paid, plus interest plus fees and fines. They can do that seven years from now. So that could be hundreds of thousands of dollars, if not more. So what worries me is that businesses, this might not start catching up for two, three, 4 years, but when it catches up, the amount of money that it will catch up is going to be substantial. And that is a risk most companies can't bear. A company like Uber might say, "I'm willing to roll a couple of hundred million dollars on this because this pisses me off." If your business isn't willing to sustain a tax bill in potentially the hundreds of thousands of dollars, it's not worth rolling the dice on doing this wrong. It is my personal philosophy that businesses should be in the best position to defend themselves, and ignoring this does not put you in the best position to defend. Evaluating this and saying I don't think this applies to me. And having a reason why at least you've made an empowered decision versus sticking your head in the sand and going la la la la la la la. I don't want to deal with this.

No, and I totally get that and a lot of listeners are probably doing that right now. And what am I really gaining from this is just really important just to know. Download the link in the show notes, we'll link that down on that form. Get really clear on what your services are. Starting niching now and stop being general. Also, get on a phone call with Emily and ask about the agency model. If that's the route you're going to go or scale without a team like I teach. Go through the free training and then really get specific on scope creep. I think this is so great because this actually gives you a law that says like, "hey, you can't scope creep and we're going to put this down." So I really like what I'm hearing. The people my heart does go out or is for like OBMs and project managers. And I would definitely encourage ya'll to maybe jump on a call with Emily to see what you can do if you're in one of those states.

Absolutely. And go through the guide. And I think for everyone, whether you're in this or not, going through the guide, it has the whole IRS test that applies in most states. Look at those factors and use those to structure your business in a legit way. You are not going to get caught unaware if you're structuring your business properly because the ABC test, if you use the IRS test, is not a huge shift. What happened to California is they put in all these really wonky factors that go with it and that is making everything harder. States like Massachusetts and New Jersey are just like the ABC test, that's it just handle it. And that makes it a lot cleaner and easier to work with. So if you know what the rules are, you can structure your business properly. And that is having a local business license, having a separate bank account and EIN and having your own contract that puts you in control of your work. Because I guarantee you're working as a contractor so you can be in control of your work. And when you have clients that are all up in your business, it doesn't feel like the kind of work you want to do because they're treating you like an employee. And if that's what your client wants, it's OK for you as a contractor to say, "you know what? This is more of an employee relationship. And if you want to hire an employee, you're welcome to. I am either comfortable or not comfortable being a virtual employee."

I love that. Well, this has been so good. I would love to have you back on the pod as I'm going to put you on the spot and talk about contacts because I know that is one. But this one I feel like really need to be talked about. And we covered so much and I don't want to like pound people in the head with more legal stuff when there's like, "Oh, my God, I got to go into ABC testing and all this stuff." And so we will have you back on the podcast for sure.

Happy to. We'll do contracts another day. And there's one other thing, because you did mention course creators. In the course creation space, the FTC is also starting to crack down. It's just creeping into the course creators space. So working online used to feel a little like it was the Wild West and we could just kind of do whatever it's like "We work online. It's fine." But all of these agencies are catching up to the fact that there is a lot of money happening in the online space. A lot of it is going on without a sales tax, without a transaction that's regulated because not everyone's doing business right. When you run your business right, you are not part of the problem. You are part of the businesses that are going to rise to the top. As this starts to crumble a little bit, the regulations in the online space are only going to increase. And in the US, we still pay significantly less than anywhere else. If you're a course creator out of the UK, you're paying tax on everything you sell and a substantial amount. So we are still in a great position to work in a way that we want to work with pretty low overhead and pretty low tax. So don't feel like this is a burden. This is an opportunity to evaluate your business, run a legit foundation and step into the fact that you're a business owner, even if you're like, I just want to provide services five hours a week. You're a business owner. And that is something that's really incredible that you get to choose to do. But you doing it right is something you have to do. So take it as an empowerment of your business owner status. Embrace your inner CEO and start evaluating this because it's coming.

Yes. And we can't end on like a legal note. We've got to end on some fun. So I do have some rapid fire. Are you ready for these? It doesn't have to be the first word. It just has to be the first thing that comes to your mind.

Ok. Yes. Let's rapid fire it.

OK. So what is the favorite part of your business?

My clients.

Clients. I love it. Favorite software tool that you can't live without.

I mean, my cell phone. I can't live without my iPhone.

No one's ever said that. I love that

You said software tool. That's my tool, I can't live without it.

I love it. OK. So what is the best conference you've ever attended, virtual or in-person?

That's a hard one because I have multiple factors cause I'm a lawyer, I'm like, but it depends. My favorite speaking engagement was when I got to speak on Hal Elrod stage at Best Year Ever Blueprint. It was the first entrepreneurial conference I went to when I was considering leaving the D.A.'s office. So getting to full circle that experience and speak on stage there was one of those moments where I'm like, "Oh, I'm a real business. Like I'm a real girl. Like I'm a real. I have things to share and people love it." So that's probably my favorite for that reason.

I love that. And tell me the best piece of advice you've ever received.

The best piece of advice I've ever received was to lean into what makes me different and to be me. And when in the online space, if you guys go and look at anything of mine, my podcasts or whatever, you will actually see me and see my voice. When I first started my business, who showed up on stage and in person was very different than what was showing up online because I was afraid to be too much. And I was afraid to be like all of the things. And when my online wing of my business started reflecting who people were meeting in person, everything grew. Everything felt more authentic. And the people who don't resonate with me just kind of excused themselves from the conversation and everything got easier. People who are looking for a super buttoned up lawyer, a lawyer of the world, aren't going to resonate with me. I'm much less formal than that, which is why I love working in the online space. So, yeah, lean into what makes you different.

I think that's a great advice. I love that and I'm so glad we're ending with that. But before we end, Emily has been so gracious to offer. When this episode comes out, she's actually going to pop into our Serve Scale Soar private communities. So this is something exclusive for our members. And she's going to be there to answer questions about this topic. And so we will link up all her links. But also know that once this episode airs inside Serve Scale Soar, you can come in, tag Emily and she has agreed so graciously to offer up some advice. But for those who are not in Serve Scale Soar, where's the best place for them to find you?

Well, obviously they should get into Serve Scale Soar.

I know it's so hard. No one gets it all.

I love it. Obviously you should get into Brandi's community, but you can find me @theEmilyDbaker all over social. Emilydbaker.com is my web site. And if you just need legal templates you're like, "I just need an independent contractor agreement stat," the get legit shop has all of that for you. I also have a podcast where I talk about these topics and others. It's an explicit podcast. It's a headphones kind of a situation. So come find me. I get legit law and it starts with an S and rhymes with legit.

I've got it. And so we will link of all of that in the show notes. And thank you so much, Emily, for getting on here. And just I think you really not only empowered us as service providers, but you also debunked a lot of the stuff that I see going on when it comes to this. And so I so appreciate you for taking that time and joining us and just sharing your expertise.

Absolutely. I have been fighting with people on Facebook over this law. And I'm like, no, "That's not the truth. Where's your legal education? Stop it." So you guys don't let everybody freaking out online push you in your business. When you're running your business right, we can work it out. But hopefully this gives you the, you know, last bits of inspiration to set those boundaries in your business, run your contracts, negotiate your prices and know that the law supports you doing that, because that's the way to be a contractor.

I love that. Well, thank you so much, everyone. Make sure you reach out to Emily and tell her how amazing it is and we will chat soon.

Y'all, can I just tell you, this was a way better conversation than I thought it was going to go. I was like "Oh snooze City, attorney, like Legal." But I felt like that was such an empowering conversation that Emily just had with us. And it shows you the power of niching down, scaling without a team and setting boundaries with your clients. So I encourage you to download her link, we'll put it in the show notes. Download below and grab that guide and see where you're falling on this AB test. And just because you're not in the state, don't discount this. I would still encourage you to go through there. And if you're part of Serve Scale Soar, we are gonna have Emily in there, and if you're not in the group, go in and download the training below that she left us and go through that guide and this week go out, continue to serve your clients, scale your business and soar into that 6-figure year you deserve.

Thanks again for tuning in to the Serve Scale Soar podcast with your host, Brandi. If you loved our podcast, please be sure to leave a comment or review. And be sure to tune in next time.

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Meet Brandi

Brandi Mowles is the host of the Serve Scale Soar podcast which is a podcast dedicated to helping service-based entrepreneurs scale their online business to five-figure months so they can soar into six-figure years. Brandi is a wife, mom and in less than one year, created a six-figure business.   Now she is spilling all her secrets so you can too.

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