SETTING UP A BUSINESS

Elawyering, VLO's, Virtual Law Offices and how they work.

2010-03-22T00:35:00.000-07:00

The Upside of Incorporating and When

2010-02-23T17:56:00.000-08:00

Here are just a few reasons you might want to incorporate, but the reasons can be many:

-You are going into business with someone you are not related to and there is a chance that there could be a dispute about money, obligations, job performance, etc. In this case having a corporation is strongly advised because it is important to memorialize what each person's obligations are, what each person's stake in the company is, and what are the standards of conduct of each person in the corporation.

-You eventually want to sell the business someday. Not everyone wants to eventually sell their business down the road, but most do. If you have your business incorporated, and all the legal work is squared away, and you basically have a turn-key operation to hand over, then a prospective buyer will be much more likely to give you a decent offer.

In contrast, a potential buyer may be spooked by a business that is not incorporated, the assets or intellectual property are not appropriately tendered to the corporation, there may be a myriad of unresolved legal issues, and a lack of documentation. This could be a strong sticking point for most prospective purchasers.

-You want people to take your business seriously. Now, hear me out. I know several corporations that are basically run like three ring circuses and are basically empty shells. And I know of several mom and pop sole proprietorships that aren't incorporated that pull in millions and operate with the quiet efficiency of a German Sports Car. That being said, most people will not take your business seriously if you are not actually incorporated. That's just the way it is.

However, I would not incorporate solely for this purpose alone.

-You might want to use your corporation as an Estate Planning Instrument. A lot of people don't know this, but it is possible to use a corporation as a vehicle to pass assets down to your family members and get around probate and other administrative actions. Now I am not suggesting some shady moves to get away from taxes, nor am I suggesting that you deed your residence over to the corporation as a slick move to avoid death taxes.

However, if there are several high priced assets in the business, it is a perfectly acceptable and ethical way to pass this down to your family members through a corporation. You just simply name them to be the people to take over the corporation upon your passing or disability.

-Obviously, you want to incorporate when you have a substantial amount of personal assets that could be attacked in the event of a lawsuit, but then...I'm sure you already knew that.

-You are in a marriage that you are not sure will last. Face it, stuff happens and you may have to protect yourself in the event of a divorce. A corporation can be structured in a way to specifically spell out who is the manager, who are the shareholders, and who will run it in the event certain things happen.

***Keep in mind that in this case, if you are already married, or you will soon be married, you will either have to make a "Post-Nuptial Agreement" or a prenuptial agreement. A postnuptial agreement is an agreement you make while you are still married and it will basically say that in the event of a divorce, that you are the sole owner of the business and that your spouse will not be able to get any of those profits.

Note: This case is currently being played out with the Los Angeles Dodgers. Back in 2003, when Frank McCourt purchased the Los Angeles Dodgers, he made a postnuptial agreement with his wife Jamie McCourt that said that he would be sole owner of the Los Angeles Dodgers. Fast forward 6 years later, and Frank looks like a genius. After he found out that Jamie McCourt was sleeping with her personal chauffeur, he fired her. And even though Jamie McCourt claims that the postnuptial agreement is null and void, she has been barred from managing the Dodgers (She had been President of the Los Angeles Dodgers from 2004-2009 and is now replaced by Dennis Mannion). This case is still pending, but it is expected that Frank McCourt will be named sole owner of the Los Angeles Dodgers by virtue of the postnuptial agreement.

The downsides of incorporating your business

2010-02-23T17:29:00.000-08:00

Keep in mind that I am not saying that incorporating is a bad idea at all. I'm just saying that you should weight all the pros and cons and make an educated and informed decision. Generally speaking (and I mean GENERALLY), a person who is really serious about setting up a business properly should incorporate eventually.

Here are some of the things that you might want to think about before incorporating:

-Most states have an annual franchise tax. In particular, California has an $800 minimum annual franchise tax for corporations, although this tax is waived the first year of operation during the calendar year.

-You cannot just walk away from a corporation. A lot of people don't know this, but once you form a corporation, and if you decide to close up shop and stop doing business, you have to dissolve the corporation. Now, this might not be very hard, but if you need an attorney to help you out, then it can get pricey. Some attorneys will charge several thousands of dollars to do this for you.

What's more, if you owe certain taxes, you will not be able to dissolve your corporation until you make good on your fees.

-If you are running a business as a sole proprietor, and if you are sued, then you can go to court yourself and you can represent yourself. However, if you are incorporated, you will have to hire an attorney to represent the corporation. Because technically, since the corporation is a separate entity apart from yourself, it will need a licensed attorney in order to represent itself.

This could be a problem if you're just starting out your business. For litigation, an attorney can easily charge a $5,000 retainer and the bills can pick up real quick. However, if you are just a sole proprietor and you are operating on your own, they will sue you instead. Now although that doesn't sound good (especially if you have money or assets they can attack), most plaintiffs and their attorneys will think long and hard about filing a $5,000 lawsuit if they know you're broke or don't have enough assets to go after. However, with a corporation, someone else might just simply want to put you out of business, file a lawsuit, get a quick summary judgment and then your corporation is in trouble.

-Let's say that you are starting up a new business, and you're pretty sure you've got a great idea and you feel like you've got a good shot at making it work. But you're not COMPLETELY sure. You might want to wait on your incorporation if:

a.) you don't have any assets, money, or other things a plaintiff can go after

b.) you would like to see your business play itself out and see if it can produce fruit. That way you will know if it's worth it paying the annual franchise tax, incorporating expenses, attorney's fees, etc.

c.) the chances of being sued are miniscule because you will be selling children's books which you will be writing, distributing, and producing yourself. Plus, you will have a limited number of contracts to strike with outside third parties

d.) Say it is October, and you don't expect to turn a profit until January next year, or maybe you don't expect to start producing and distributing until next year. You might as well hold off until you start making profit and save some money on the taxes since taxes go by the calendar year and are not prorated

e.) You plan on operating your business all on your own or perhaps with close friends and family who probably won't sue you. To the contrary, if you are operating with partners, then you should think long and hard about not incorporating. Having a corporation is a good way of getting things on paper and carefully setting forth who does what, who invests what, and who gets what.

MARKETING: EXCITING NEWS AND NEW TECHNIQUES

2010-02-08T16:36:00.000-08:00

***CAUTION***

When I refer to online advertising and marketing, I am almost exclusively referring to either Google/Bing/Yahoo pay per click advertising and also Organic SEO. Indeed, 99% of all online advertising is probably about as ineffective as traditional advertising.

This might sound like an exaggeration, but ask any experienced business person and they will tell you that with the internet, this is truly the golden age of marketing (that is, if you do not make money by selling advertising). Never before could you get fantastic advertising so cheap. Never before could you limit the amount of money you were willing to spend on advertising. And until now, you really did not have any cost-effective ways of tracking the performance of your advertising dollar.

With traditional advertising such as phone books, magazine ads, TV, Radio, and newspapers if you want advertising you will have to pay a pretty penny. For instance, a one square inch ad in your local phone book could run between $100-$300 PER MONTH! That totals to around $1,000-$4,000 or more per year. And guess what. If you do not make one red penny off those ads, there are no refunds.

Another problem with traditional advertising is that you are quite limited in the way you communicate your information. They will charge you extra for color, special editing, logos, pictures, positioning on certain pages, etc. And let's say that 6 months into your advertising contract you decide to move your shop across the street, you're out of luck. It's not like they can recall those phone books on your count. And if you want to add or delete certain products or services from your ads, a lot of times you're pretty much locked in.

Another problem is that with traditional advertising, especially ones with more than one month contracts as is the case with phone books, you cannot give them a test drive to see how well they will perform. With advertising, unfortunately it is not exactly performance-based pay. There are no sample spoons in their shop. It's take it or leave it.

And of course there are other shady problems to deal with. A lot of times when you purchase advertising with a radio station, the day those ads start playing you will suddenly get a lot of strange and ridiculous phone calls. And these phone calls will invariably be very brief and they will sound like the person on the other line is taking out the trash or something. Then the next day you will notice that there are no more phone calls. And about two weeks later, when your radio advertising contract will expire, you will inexplicably receive a flood of strange phone calls from people asking about your products and services.

It doesn't take a rocket scientist to figure out that a lot of these strange phone calls are actually originating from the radio station, their friends and family. They know that in order for them to charge the high fees they charge they have to give you the impression that their advertising is working like gangbusters. Unfortunately, this happens a lot more than you would think, and the problem is getting worse.

In stark contrast, you can now get fantastic cost-effective advertising that you can:

1.) Track. You can track who comes to your website, from which zip code they live in, how long they were on your website, what operating system they were using, which pages they visited on your website, and other information.

2.) Cut your losses quickly. Face it. I don't care what kind of business you run or how great your advertising is. Some will work like a champ, while others will work like a chump. And most advertising will not work at all. In these cases, you can cut your losses a lot quicker and you can re-distribute those dollars to newer advertising or to the ads that are already winning.

3.) Test. There are many different methods for testing the performance of ads. One method is called "split-testing" which refers to Google AdWords. There are also many other analytics tools available to test and see whether advertising will work or not.

4.) Shift Gears Quickly. Unlike most traditional advertising, you can remain more fluid with online advertising and marketing. You can change the ads to feature new products and services. You can raise or lower price points. You can experiment with new images or different phrases.

5.) Take more chances. Unlike traditional advertising, you might only have one or two bullets in your gun. With online marketing, you will have a machine gun. That's because you will have almost an infinite number of opportunities to test new things and new ideas and see what people really want from your products and services and at what price. With phone books, you send out your torpedos and cross your fingers and hope they hit something.

***CAUTION***

When I refer to online advertising, I am almost exclusively referring to either Google/Bing/Yahoo pay per click advertising and also Organic SEO. Indeed, 99% of all online advertising is probably about as ineffective as traditional advertising.

Toy Vibrators

2010-02-08T12:07:00.000-08:00

If you are interested in setting up a business around adult content, you can get some ideas at the Toy Vibrators blog.

Sticking with what you know?

2010-01-27T15:03:00.000-08:00

STICKING WITH WHAT YOU KNOW...MAYBE

A lot of business experts will tell you that if you want to start up your own business, that you should stick with what you know. That way, you will be able to perform well in your business. You will know your industry inside-out and you will have a leg up on the competition. This advice is great as long as it does not run up against the following problems:

-your current expertise or industry is in a funk and is experiencing industry-wide layoffs

-you are tired of your current occupation or career

-you probably were not very good at your career

-in order to set up shop, you would have to take out a loan for $10,000 or more

-in order to start up your business, it may take several years to set up and get going

-if you see a massive exodus of talent out of your occupation

-all signs of the current economy paint an ugly future for your industry.

Now let's take a specific example. Let's say you are currently an salesperson in a high end men's fashion store selling Armani, Gucci, Ferragamo, etc. And since sales have dropped sharply, you have been moved from full-time to part-time. To make matters worse, your manager tells you that unless things turn around soon, you will be let go.

In response to this pressure, you begin to consider opening up your own retail outlet of high-end men's fashion. Although with your store, you plan to cater to middle class customers who have limited disposable income. Alternatively, you are considering catering to high net worth individuals by offering house-call tailoring on the go. And you start thinking about this because you want to stick with what you know.

Now, I am not going to sit here and tell you whether this plan will work or not. The only thing I will tell you is that in this current economic climate, if your boss is hurting for customers, don't think that you will find the going that much easier. And I will also tell you that there are some industries or markets that are essentially radioactive.

Of course, that raises another question. How can an experienced sales person who has a lifetime of knowledge and wisdom regarding high-end men's fashion leverage his experience, knowledge, and know-how into a business? Well, instead of thinking along the lines of starting up a business in the exact same industry, perhaps you should look at the peripherals of your industry. Start with distribution. Is there a way you can leverage your skills in the distribution of men's clothing? Perhaps a drop-ship sort of thing where you can cut out middle men? What about starting up a magazine or an online review site? How about information products such as videos or ebooks on how to select the right clothes for the right industries?

Yes, the old adage of sticking with what you know is sound advice...most of the time. It's just that you have to widen your perspective a little for it to make sense.

X-Treme Speed Reading

2010-01-26T10:29:00.004-08:00

Speed Reading in 5 Minutes or Less

2010-01-26T10:29:00.003-08:00

How To Speed Read

2010-01-26T10:29:00.001-08:00

Free Speed Reading Course

2010-01-26T10:28:00.001-08:00

GC Season 4 - Ep9 - Seg7 - Loc8tor Plus

2010-01-26T10:27:00.000-08:00

Get Connected - Tech Look - IZIP Electric Bike

2010-01-26T10:26:00.004-08:00

Get Connected - Tech Look - Micro Mosquito

2010-01-26T10:26:00.003-08:00

GetConnected - Tech Talk - Ethernet Cables and Router Speed

2010-01-26T10:26:00.001-08:00

Get Connected - How To - Set Up A Small Business Network

2010-01-26T10:25:00.001-08:00

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2010-01-15T22:59:00.001-08:00

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WJJDEJ54W5R5

2010-01-15T22:51:00.001-08:00

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2010-01-15T22:08:00.001-08:00

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CES 2010 Expo: Panasonic Fuel Cell TRWCZATZNXJM

2010-01-13T20:24:00.000-08:00

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Although this may not really pertain to setting up a business, it is always a good idea to keep up on trends and what's going on out there. Here is a fuel cell made for residential use which is supposed to be placed in the family kitchen area. Supposedly this fuel cell will be able to power various household appliances and also will be able to cut down on utility bills. In case you don't already know, green technology will be this decade's main economic driver.

CES 2010 Expo: Que ProReader Demonstration TRWCZATZNXJM

2010-01-13T19:10:00.000-08:00

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Here is a fuller demonstration on the Que ProReader. I wouldn't jump out and purchase this product right away just yet, because I personally think that it can get a whole lot better, however, the massive potential is there.

CES 2010 in Las Vegas: QUE™ proReader

2010-01-13T19:02:00.000-08:00

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One of the concepts we will be preaching to all businesses within earshot is the importance of going paperless. We don't care if you are running a hotdog stand on a street corner, if you are a taxi cab driver, you're running a boxing gym, or you are a financial investment advisor. Everyone, and we mean EVERYONE in business needs to go paperless. TRWCZATZNXJM

Now, not every product such as this proreader will be necessary to go paperless, this is just an example of a paperless technology with which you might be interested in.

SETTING UP A BUSINESS TRWCZATZNXJM

2010-01-10T13:19:00.000-08:00

TRWCZATZNXJM If you are new to the idea of setting up a business and need help on how to get started then this blog is made just for you. Also, if you have already started up your business, but need some more help on how to keep it climbing up the charts, this blog is also made for you.

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