Do Business in Other Countries? Contracts for Int’l Biz: EPW Live 008

Are you a small business owner or entrepreneur who:

  • Has clients in other states or countries?
  • Travels or moves often?
  • Has employees, co-owners, independent contractors, or vendors in many locations?
  • Sells products online?

Doing business internationally can be complicated, and in EPW Live 008, the 8th video of the EPW Live SeriesElizabeth Potts Weinstein shared strategies for how to reduce the risks.

Tips included specific clauses in written contracts & the types of agreements you can use–some are pretty simple! 

Full Transcript

Hey everybody, this is Elizabeth Potts Weinstein. Hopefully, this is working today and everyone can see me. You can let me know and say hi. I’m going to check on my Facebook on my phone and make sure that this is working well. It looks like it actually is. I’m going to go ahead and start the Facebook Live today.

This is about reducing risk for businesses who do business internationally. It used to be that doing business internationally 20, 30 years ago was something that your average small business didn’t do, that doing business internationally was something for big businesses who had their own in‑house counsel, legal team.

Now, anybody can throw up a website, and all of a sudden, you’re an international business, right? The end light of that, it introduces a lot of complexities for anybody who is doing business, even just doing business in multiple states in the United States or doing business in multiple countries. It comes up a lot more often than people might think.

Let’s talk a little bit about who this applies to. You may not think that you’re necessarily in international business. Obviously, if you have clients or customers in other countries, if you have a business partner in another country. If you have a business partner even in another state in the United States, a lot of these same issues are going to apply.

If you have independent contractors or, obviously, employees who are in another location, a lot of these same issues are going to apply. Vendors. You have a web designer who is in the Philippines. You have a graphic designer that you hired who’s in Canada, a lot of the same issues are going to apply.

If you’re selling products online, people can buy your information product from anywhere. Someone can buy your physical product from anywhere. You’re going to be shipping all over the world, potentially, unless you specifically restrict your stuff to only be sold in the United States or your particular country.

In light of that, these issues apply to a lot of businesses nowadays. What could actually go wrong if you’re doing business internationally? A number of things where you can run into problems.

Obviously, it’s the same of the problems that any business owner could run into, but they particularly become issues when from international or multi‑state perspective. Clients not paying you money, clients doing charge‑backs if they’ve already paid you money and they do charge‑backs in the PayPal or the credit cards.

You have problems with your co‑owners and your business, either because the business is successful, and then you want the other business owner out, or they want to leave, and then what happens with all the assets? Or the business isn’t successful, and then how do you guys dissolve this? Maybe there’s debts leftover, and who pays for those debts?

There’s disputes going on between people, and then what rules apply? You may want to fire somebody who is an employee, or a contractor, and then they have your website hostage, or some works that they’ve done for you, and then how do you handle that?

These are the issues that happen with anybody regardless of where their location is, but it specifically becomes a problem even more if you’re an international business. Why is that?

The reason that becomes a problem is because if you have an international business, you don’t know what rules apply. Let’s say you start a business here in San Francisco, that’s kind of an old‑school brick‑and‑mortar business.

You’re in San Francisco, your business partner is in San Francisco, you have an employee in San Francisco. You’re a client, and you’re consulting for other clients in San Francisco. Even if you had zero written contracts, we would know that the laws of the United States of America and California, and the ordinances of the city of San Francisco, that’s the rules that apply to you.

If you didn’t have any written contracts at all, we could look those laws up. I won’t say it’s simple, [laughs] but it’s possible to do, right? Let’s say instead, you as a business owner in San Francisco, and your co‑owner is in Canada, and you have an independent contractor in New York.

Maybe another contractor who’s your web designer in the Philippines, and then you have consulting clients in the United States, and in Canada, in the EU, and then a couple other places in the world. What law applies to you? All of those places? A bunch of different of those places? Yes. No. The answer is very unclear.

If you have no written contracts, if you have no terms of service, if you don’t have a partnership agreement, if none of those things are written down, the answer is a gigantic mess and a lot of lawyer’s fees.

This is the problem that having written contracts can solve ahead of time. It can make your life a lot simpler if you deal with this on the front end, especially if you’re an international business. It’s the kind of thing that is relatively straightforward to solve on the front end.

I say relatively, because obviously, if you start a business with somebody, and you’re in the United States, and your business partner is in Canada, it may be difficult to agree what law applies to you. You have to make a decision about, are you going to be a Canadian business or a United States business?

That may not be something simple to decide because there’s a whole lot of issues there. There’s legal issues, there’s tax issues. There are a lot of decisions to be made, and I’m not going to announce that right here.

Obviously, that’s a whole, entire multiple‑day seminar on all the complexities that could be involved. Also, it really is a case‑by‑case basis, especially when you’re dealing with tax problems or tax challenges. I just want you to be aware of what goes into that.

It’s the kind of thing that if you do it on the front end, it’s relatively straightforward. If you wait to the back end, when you’re upset with each other, it is a gargantuan mess. That’s one of the biggest issues is figuring out what law applies, and that’s something that can be decided relatively straightforward as long as you do it on the front end.

There’s a whole bunch of laws that are wildly different in different countries and even different states in the United States. For example, with your clients and customers, whether or not they can have deposits that are refundable, you want to know what law applies.

You want to pick a state, pick a country. In some places deposits are refundable, and in some places they aren’t, how many days they get for their refunds and things like that, so you want to pick which country you’re talking about.

The complexities of that are detailed, so it’s not quite that simple. It’s something that you want to discuss with someone who knows about the law in your particular area if you’re not in the United States. The idea is you want to do that on the front end.

Arbitration clauses, non‑disparagement clauses. This is especially for people in the info product industry, because this is a huge trend.

In the info product industry, I’ve seen this a lot lately where people put in their terms of service on their website that if someone buys your membership program, or signs up for your coaching, or signs up for whatever your seminar is, that they’re not allowed to ever talk bad about you.

Those clauses are probably not enforceable in the state of California and probably other places, too. It’s a violation of free speech. They might not also be enforceable in other places, too.

You really have to look at where your people are. You have to be incredibly artful about your choice of law and choice of forum clauses. You have to be artful about how your arbitration clauses is written. You can’t just cut and paste these things from other people’s agreements.

Some of them probably were actually written by lawyers, but I’ve also seen ones where people are just randomly cutting and pasting it from other people. They have agreements in there that there’s no possible way they are legally enforceable, because they’re trying to have something that is actually not enforceable in a particular place where they’re selling this thing.

You obviously want to have written agreements, but you also want to have agreements that are actually going to be enforceable in a particular jurisdiction. Disparagement clauses, I find them to be amazing, how you’ve been saying that all.

The laws of other jurisdictions are also a big issue with privacy rules and regulations. For example in the EU, if you’re checking data from people, which probably everybody is. People sign up your email list. They put in their name and their email, at least.

If you have cookies on your website, if you have people from Europe who are coming to your website and buying your stuff, etc., and signing for your email list, then you need to be aware of the laws of the EU and also the laws of Canada, how a lot more rules than the privacy laws of the United States and the privacy laws of California, which actually are in some ways have more details than the laws of the United States, federal laws in the United States.

These are the other kind of things that you’ve to think about if you’re an international business, even if you’re a tiny international business, because a lot of these rules are going to apply to you. It’s very doable, but you want to be aware of these things.

If you’re collecting information from people in a lot of different jurisdictions, you’re going to need to have…Everybody needs to have a privacy policy on their website, but what needs to go into that privacy policy depends on both what data you’re collecting and then also where those people are specifically located.

If you’re hiring staff, whether they’re employees, obviously, but also independent contractors, especially ones that are just hiring…You’re not going to time them for a particular gig.

I’m not that worried about someone you’re hiring just to do a logo, and you’re paying them $500, or $1500, or something to design a logo, and it’s going to take four weeks, and it’s just a one‑time thing. But someone you’re hiring is independent contractor for an ongoing multi‑month or a year‑long kind of thing that looks employee‑ish.

You want to look at the laws of their location of their jurisdiction. Jurisdiction means their country, state, province, whatever it is, town. To see, are they actually an employee, or are they actually an independent contractor? Are we going to have problems with that?

This is of course a gigantic topic, but it’s something that you need to think about. How that works really depends on a case‑by‑case basis and how you handle that.

I’ve had clients wherein for their United States workers, their employees, for their people in other countries. Sometimes they’ll have someone set up their own business in the other country, and they hire that business to have their local workers. There’s all kinds of creative solutions that you can do when you’re a really tiny business.

You need to address that on the front end, so you don’t have problems later. It also depends upon whether or not the people working for you are citizens of your own country, even if they’re traveling abroad, or if they’re citizens of that other country. Then of course, how long you plan for them to work for you.

Going back to the privacy rules and collecting data. A lot of this, how deep you go into that really depends on how many people you’re getting from those countries, how much exposure you actually have? Do you actually sell products there? Do you want to have exposure in those places? It really depends on your kind of business.

I have some clients where they do get as few people from Europe who are sending for the email list, but they have zero customers or clients there. That really changes things verses people who actually are selling products there. They’re obviously completely liable to that. The laws of the jurisdiction will change things.

Another big thing to think about is, how are you going to actually enforce any of your contracts, and are you? [laughs] This is something to really think about.

It also depends upon your price point you’re dealing with. I have clients where they’re selling things that are at $50 price points, or they’re selling things at $5,000 price points, or they’re selling things at $50,000 price points. Where you are really depends on those that the spectrum is on how you’re going to deal with your international clients and customers.

If you’re selling, your price points are $50, and you’re selling to people all over the world. Someone doesn’t pay you the $50, and they’re in Australia, and you’re in the United States, are you going to go to Australia and enforce that contract? Well, but probably not.

However, you may still want to have some kind of terms of service, some kind of thing that’s enforceable, so if they do a charge‑back, you can enforce that.

Same kind of thing with even the $5,000. The $5,000 may or may not be enough for you to go to Australia. It might be enough to hire someone in Australia to enforce that for you under $5,000, but it’s definitely enough for you to have a written contract, so you can enforce it against a charge‑back.

The whole charge‑back situation is something, I think, people don’t think enough about is that you definitely want to have written agreements that, and this is true whether or not you’re an international or not, you definitely want to have written contracts that apply to your clients.

That way, if your client does a charge‑back on your credit card, or PayPal, or whatever it is, or check for that matter, then you can go to the bank and go to your merchant account. You can go to PayPal with that written contract to prove up that the client has no right to do the charge‑back.

It’s not 100 percent slam‑dunk, it never is. The idea is if you don’t have a written contract, they’re never going to accept just your word against the others, or most likely they want.

Now, $50,000, $100,000, when you get into those price points, then it actually will make sense for you to enforce agreements. You want to think about what your strategy is going to be.

There’s a couple of different ways you can structure your agreement. The simplest thing you need to put in every single agreement that you have, like I already talked about, is your choice of law. You have a choice of law clause, and you see this in the agreement, where you’re picking what law applies.

If you have a headquarters, and the headquarters could just be your office, like this is my home office. [laughs] You could pick your headquarters, which could be California, or Canada, or whatever. It could be your home office location. The laws of that place could apply.

If you don’t move around, and you’re incorporated into one place, you may want to pick that. That law may be the most logical law for you. Now, if some clients who actually move around all the time, so it doesn’t necessarily make sense for them to pick the law of some location.

Now, if some clients who actually move around all the time, so it doesn’t necessarily make sense for them to pick the law of some location. I have clients who are maybe US citizens, but they’re world travelers. Really, it doesn’t necessarily make sense for them to pick the law of any particular state in the United States. For them, a lot of times, we pick New York law.

New York law has very well‑established contract law. It’s relatively neutral. It doesn’t have a lot of weirdness to it. It’s a good neutral contract law to apply and super easy to figure out for people. Sometimes that’s also what we pick for choice of forum, which is the next thing I’m going to talk about.

If we have no location, that’s the place we’re going to have a lawsuit, that’s going to be our forum. It could be your location. For me, I could pick here in California, which is where my contract is in. You could also pick really anywhere. You do want to have a logic to it.

If you pick Antarctica, which has no courts there, so you can’t actually pick that. You don’t want to pick something that would be burdensome to everyone. A court would say, “This makes no sense. You’re just picking this to make it so no one will ever have a lawsuit, so that has no logic.”

You need to have some kind of logic to it. A lot of times, if there’s no really good place, then I’ll pick New York law, and New York, New York as the location. The idea of being that, that’s a neutral location for everyone in the world to meet up, because we can always get flights to New York.

Now, the issue is, in reality, if your dispute is something like over $5,000, does it really make sense for everyone to get on the plane and fly to New York City? It’s going to cost us all more than $5,000 to get flights to New York City, much less actually have a lawsuit there. In reality, it can be better to have an alternative way to litigate disputes.

For that case, a lot of times, we’ll put in an arbitration clause. I’m not a huge fan of arbitration, overall, in every situation. These’s a downside to arbitration. The downside of arbitration is that you don’t have all kinds of automatic appeal right. If the arbitrator comes out with some bazaar thing, you don’t necessarily get to appeal that.

However, it’s much more simple, it’s much less expensive, and you can also do arbitration via Skype or even via email. It can be much less expensive, much faster. You can also have really complex, fancy expensive arbitrations for big, giant companies who have really complex disputes.

For most of us who are generally with some contract dispute or a business that is in dispute, a lot of times, new arbitrations between owners who are trying to split up a business. They can’t figure out how to do it. They just can’t figure out how to value it, for example.

If you’re having a dispute with a client about $5,000 or $10,000, things like that, arbitration can be a way to resolve something like that where it’s enough money to not just walk away, but it’s not so much to actually hire lawyers and have a two‑year long lawsuit about it.

You can put in a clause that picks an arbitration association, like the American Arbitration Association, or a number of other ones like that. You actually get the language for the clause from the association law, have an engine website to use. You have to put up the money for it.

If you file for an arbitration, you actually have to come up with $750 or some amount of money like that to do the filing. Usually, the person who wins then gets that reimbursed by the loser side. It’s typically what happened. It’s just something to be aware of.

If you have clients who are local to you, it’s usually better to just deal with everything in small claims score if the amounts of money we’re talking about is your clients or between product and brand. If you have international clients, you can just small claims court, because they need to be local. Arbitration is a better solution for that.

One of the other things I wanted to talk about that we actually hinted on a little bit was about cutting and pasting agreements, and creating agreements, and where do you get your agreements from?

I think one of the reasons that people don’t hire lawyers is that it seems like this really expensive thing to do. The issue is that for most businesses, typically, you’re doing the same transaction over and over and over again.

Let’s say you’re a consultant. You probably have a relatively similar deal that you do for most of your consulting client. Yeah, you do change exactly what you do for them, but the general structure is the same.

Probably, what you need is to have a lawyer draft a template, consulting agreement, and then you’re just going to use their consulting agreement over and over and over again, and then you just change the business’s terms of it, the stuff you actually do for your consulting clients.

It doesn’t necessarily have to be this really expensive thing. I think that’s why people don’t hire a lawyer to do it for them. It seems like it’s going to be this burdensome issue, and then they just randomly download from the Internet.

It doesn’t necessarily have to be that way, because it is a template that you’re…You’re having a custom template made for you, but then you get to reuse it for years, potentially. Then everyone is, “Why you don’t have [inaudible 24:04] over? Make sure it’s something you messed up with it.”

You probably want to have it upgraded for all of the mistakes you realized that you made over time that needs to tweaked. That’s the idea. You probably need one that you’re going to use over and over again.

If you saw products of your website, what you’ll need is some kind of terms and conditions agreement. This is something that will apply to everyone who buys your imported product or buys your physical products of your website or signs up for your membership program.

The secret, though, for people who binds up your website, is you want to make sure that they actually are agreeing to the terms of service, or terms and conditions, whatever you want to call it.

On your website, when you have the terms be at the bottom, you have your website and your products that they’re buying or whatever. Then we have some button that’s like, “Yes, buy this,” like after they’ve never seen the terms. It means to have it under there by making this purchase, you agree to these terms of service, blah, blah, blah.

Go on Amazon, and you can see how Amazon does this, or Zappos, one of the big companies. You can see how they do their language. You have to make sure that people are actually having the opportunity to read your terms of service and/or agreeing to your terms of service when they click that button. It’s very important that they do that.

If you have people sign up for a membership program or some kind of recurring program, if you do a subscription boxes, anything that’s a recurring charge, you need to make sure that they really are agreeing to that. It’s best if there’s some kind of checkbox. You need to have a language that they’ve, yes, consented to the terms of service for that.

Recurring charges is one of those hot button things that people did in travel forum. That’s actually one of those areas where the laws of different states and different countries can really come out.

It’s something I actually haven’t researched the laws of all the different country. Well, no one researches the laws of all the different countries. I’ve looked at the recurring charges of different states, but I haven’t looked at recurring charges in different countries lately. That’s a real interesting question to look into because the enforceability of things like that.

If you have some kind of subscription box service or membership service, you really want to make sure that you expressly get people to agree to that. If you’re going to go back and enforce those, of course, people will do charge‑backs. You want to try to not have something that goes in your account, if nothing else.

Even if you don’t challenge all those, it will ruin your credits of your business and become as big, it will just be a nightmare. It’s something to be aware of.

I’m trying to think of any other things. One of the, of course, last things is for some kind of agreements, they are going to be negotiated permits, you will have an attorney draft busting for you.

This is on the high‑end, of course. It could be because the relationship is just so complicated. It could be because it’s such a high‑end, you have a client where this is at $50,000 or $100,000 relationship. It could be something that is just so complicated from the intellectual property perspective. There are so many risks involved.

There’s a number of reasons in intellectual property, that there’s so much trademarks, and copyrights, and trade secret issues. That you’re going to be sharing a lot of secrets of each of the businesses. You want to make sure that everybody’s rights are protected. These are the kind of things you may want to have a lawyer involved.

The fact that both parties are in different countries, it makes things even more complicated because you’re going to have the intellectual property rules, the copyright laws, which are relatively similar in different countries but not exactly the same. The trade secret laws, it would definitely be different.

The complex in those rules are just making everything a lot more complicated when you’re dealing with the laws of different countries. Those are the kind of things that at that point, you would want to have a lawyer, actually, in those agreements and drafting some of the custom.

Even for settings like that, sometimes I do have clients where we have a start with the template that they use for things like that, and then we just customize it on top of it. It makes it less expensive.

That was really my number one tip for you was your number one best practice, whether you’re an international business, or whether you’re just doing your ordinary business from day‑to‑day, even with your local clients, is to have a written agreement.

Whether your agreement is terms of some website, whether your written agreement is an actual piece of paper that people are signing with a pen, whether your written agreement is an electronic agreement the people use, Adobe sign, write, signatures, something like that to sign, always give people the opportunity to read it.

Have, as if possible, a way for them to expressly agree to it, if at all possible. The expressed agreement could be them signing with pen. It could be them electronic signing it, like write signature Adobe sign.

The more expressly they sign it, the better, the more enforceable it is. The more money they’re spending with you, the more risk that is involved in this arrangement, the more likely you’re going to have to enforce this agreement, the more you want them to be signing it. [laughs]

If you have a people binds up off your website, and it’s the $39 e‑book, I’m not as worried. Make it a terms of service, and that’s just next to the box that they click. If they’re signing up for something on your website that’s $5,000, you may want something more than that.

This is a risk management issue, though, that really depends upon…It’s partly a legal issue, and it’s partly a business issue. Of course, it’s not my decision for your business. It’s something that every business owner needs to make for themselves, and it really depends on the overall scope of how things work in your particular business.

The more you can have people have the opportunity to agree to the contract and manifest their agreement, the better, the more it reduces your risk.

Thank you guys for watching today. I hope this was helpful to you, and I hope you guys have a wonderful rest of your day and week. See you guys next time. Bye‑bye.

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