Friday, September 25, 2009

Incorporating Your Business

Incorporating is a big step, and its important to be ready. This is your first official declaration to the world that you are ready to start your business. In addition, this is when your money starts going to the government. There are resources to help you incorporate, and here I'll let you in on what I found.

There is a book by Nolo, "Incorporate your Business" which is quite helpful in understanding the reasoning behind incorporating and the difference between all the different kinds of formations. At the end of the book there are specific state pages which tells you the particulars of how to incorporate in each state and how the laws and fees differ.

Delaware is known as a corporate friendly state. Their courts are experienced and they have more refined and company friendly outcomes than most other states. Also the incorporation fees in Delaware are relatively low and you are able to perform a name search online for free and real time.

Here is a great guide from the state of Delaware of the steps to incorporate in Delaware:


Monday, September 14, 2009

Losing a Business Partner and Moving on

On July 6th I had written a post about taking on a business partner. Unfortunately that relationship has come untied. But alas, with every life experience comes learning that is best applied later in life.

I had thought my relationship with my business partner was beyond paper. We had trust and understanding, and a passion for entrepreneurship that we shared together. And then one day I receive an email that erased all of it. From happily coasting along, I received an email that single handedly broke down my world. It was an email that dismantled our partnership.

As a full time entrepreneur your work is your passion. If an individual wants to make money, find a good paying job. If an individual wants to create a business and make a difference, they create a company. It's hard to separate your heart from your business at that point. The question still looms of, do you have to? Ask a VC, and the answer will probably be "yes". Investors are out to make money, most of them could care less on whether or not your company is a moral one. In fact, your company may lose some money every once in a while because you choose the happiness of your employees over the bottom line, but how about the end result?

There are companies that have passion burning within them, and you can tell with every product or service they spit out. Apple...IDEO... these are companies with passion. You can tell that their founder put heart into their creation, and although money keeps the company going, it is not what drives the company's existence. And then you have your standard run of the mill companies that are clearly there to increase their profit margins, be mediocre in every aspect, and neither excel or fail. There are more difference between these companies. When a company is built on passion, the employees who apply for positions are filled with passion. I bet if it were tracked you'd have at least 5X the applicant for a passionate company than a money driven company.

If you have a passionate company with 5X the applicants you can pay lower salaries because the demand is high for your positions. If you have a company with a sub-par reputation you need to hike up salary levels to obtain better applicants.

So, in the end my conclusion is that it may be harder to get people on the band wagon of a passionate company, because people will doubt your business's financial health, but if you can make those gems survive, you and your company are golden, and you become a legend. See Oprah, Steve Jobs, & David Kelley for reference.

Now, back to the partnership conversation. Even if you have the trust, love and everything else that you think you need to survive...get yourself a contract. Although you may be good on your word until the end of time, it is unpredictable whether your partner will wake up one day and decide that this is not what they want for themselves. And when and if that unfortunate comes, it is dire that its in black and white how to handle the separation.

Make sure you have guidelines on how to handle equity, files and money. It's important to protect yourself and your venture. I am not one for contracts, but I have quickly learned my lesson. Although you'd like to believe the best in people, that you also need to prepare for the worst.

So, to conclude, I do believe in the formation in a moral and emotional company. I also think that it is more likely for that company to either fail miserably, or fly much higher than other companies. I think mideocraty would be a rare occurance in such a company. I believe it takes more elbow grease to create such a venture, and it's a must to have the help of some good 'old fashioned black and white contracts to keep everyone on the same page.