5 Key Points to Consider Before Incorporating Your Business
Issue #2054
- WEALTHY: Corporation? Limited partnership? LLC? How to choose the right structure for your business (Darius Barazandeh)
- HEALTHY: What’s better for your heart than exercise? (Craig Ballantyne)
- WISE: Voltaire on being protected by the law
ALSO IN THIS ISSUE:
- 6 steps to a successful overseas business launch (Michael Masterson)
- 5 ways to use PowerPoint to enhance your presentations (Virginia Avery)
- It’s Fun to Know… about cockroaches
- Add "skullduggery" to your vocabulary
Revealed: Probably The Biggest Red Herring in History!
While the World’s Been Stock Watching (and losing!), The Elite Quietly Play a Different Game with Different Rules…
Feeling cheated and disillusioned by the stock market? Sure, you may have made a good trade here… but then lost on another. The people dutifully pour their hard-earned cash into investment banks to put into the stock market for them… and those investment banks gladly oblige, for a fat fee… which they invest somewhere else! I’m no conspiracy theorist, but in my opinion the stock market is really a diversion for the masses… a distraction from where the BIG and consistent money is made… in the world’s money mountain. And when I say “Money Mountain”, I speak quite literally… the BIGGEST mountain of money on the planet.
- Patrick Coffey
"All men have equal rights to liberty, to their property, and to the protection of the laws."
Voltaire
5 Key Points to Consider Before Incorporating Your Business
By Darius M. Barazandeh
Whether you’re a real estate investor, an independent contractor, or a small-business owner, you may want to consider establishing a corporation, a limited partnership, or a limited liability company (LLC). These entities are designed to make your business less risky and more financially rewarding.
An LLC, for example, can provide its owners with personal liability protection. But many people believe they can create an LLC - or file a corporate charter with the state - and automatically have ongoing liability protection. This is simply not true.
You need to learn as much about the limitations of business entities as you do about their benefits. In particular, there are quite a few points you should address during and following the creation of any business entity you choose to establish.
Here are five of the most important:
POINT #1: You Can’t Just "Set It and Forget It."
Each type of business entity (the LLC, the corporation, and even the limited partnership) requires you to take certain key steps after the structure is created. I like to compare a business entity to a fancy Italian sports car or a new baby: They demand proper care and feeding.
They are fun on the first day, but you had better know how to maintain them. You can’t neglect the baby or take the car for a spin if it doesn’t have oil in the engine. Yet, many new real estate investors and business owners believe that because they hired an attorney or service to create their business entity, the work is done.
What you do after the entity has been created is crucial. There are countless nuisances, details, and traps that you must understand in order to maintain your liability protection.
POINT #2: Be sure to spell out key contingencies.
If you plan on buying a property or going into business with a partner, consider this: What happens if there is a disagreement? Do you have to sue to resolve the problem? Do you use mediation? Do you have procedures in place to require efforts to settle things out of court? What happens if you (or your partner) want to sell your ownership interest? Who will buy it? What will you sell it for?
The way issues like these will be handled should be spelled out in the Article of Organization (for an LLC) or Articles of Incorporation (for a corporation).
Here is a typical scenario: Let’s say you go into business with your best friend, Tom, and you set it up as an LLC. Things are going great until Tom decides he needs to spend more time with his elderly parents. He wants to sell you his part of the business, but you tell him, "Just wait a bit, Tom. Things will get less stressful soon." He agrees, but shakes his head in doubt.
The next day, you learn he has sold his shares in the LLC to his uncle. You now have a new co-owner. You never would have started the business if you knew you were going to have to work with Tom’s uncle.
Situations like these can be avoided by utilizing proper "buy back" agreements between co-owners and limiting transfer rights. Sadly, most business owners don’t learn about these precautions until it is too late.
POINT #3: Don’t get careless. No business structure protects you from personal negligence.
If you’re a real estate investor, for example, understand that you always assume risks when you decide to make repairs on your property or hire someone to make the repairs for you - even if you have established an LLC or other business entity. A business owner is always personally liable for negligence. In other words, if you (or someone you hire) are negligent when you make a repair, you can be sued personally.
Don’t ever forget these words: "Business owners can be sued personally for negligent acts."
POINT #4: Tax benefits or asset protection? If need be, what trade-offs are you willing to make?
When you choose a business entity, you are fighting two battles: one to minimize taxes; the other to protect your personal assets. One of the structures you might be considering may be ideal in terms of taxes but doesn’t offer the most asset protection - or vice versa.
That is why it’s always a good idea to seek out the right counsel. For instance, most attorneys will have a good understanding of the legal issues involved in personal liability protection. However, they may not be as informed on the complex tax issues associated with real estate or other businesses. Likewise, an accountant may steer you toward tax savings but recommend a business structure that offers inferior asset protection.
And that brings us to my final point…
POINT #5: Get educated. All professionals are not created equal.
How do you choose a capable attorney or accountant to counsel you? Ask them questions that relate specifically to your business/industry. And to make sure their answers are accurate and up-to-date, you’ll probably have to do some research before you talk to them. I especially recommend browsing through your state laws related to business entities. (You should be able to access them easily online.)
Doing a little groundwork will not only help you choose the right professional, it can save you money. For example, if an attorney does not have to create an entire set of forms for you, you will save several hundred dollars or more. And if you know how to run your business entity properly and understand the IRS requirements, there will be less work for an accountant to do.
With the right information under your belt, you can make your life - and their job - a lot easier.
[Ed. Note: Darius Barazandeh is a licensed attorney in Houston, TX. He also holds an MBA and is an active investor in tax liens and a trainer for other tax-lien investors. To learn more about setting up the best possible business or real-estate-investing entity from a tax and asset-protection perspective, register for Mr. Barazandeh's teleseminar on The Wealth-building LLC. Be among the first 150 to register and guarantee your spot. Free of charge.]
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Notes From Michael Masterson’s Blog: Going Global
After a week of very productive business meetings in Paris and Rome, my head is full of new ambitions and ideas, personal and professional.
Fifteen years ago, when I started working with the company that is now my biggest client, it was an $8 million business on its way up. The potential in the U.S. market was great, but the company’s founder wanted to make his business international. I believe his primary motivation was personal: He wanted to live an international life. But his course of action was very business-like.
He identified a company in England that was in the financial newsletter business (as his company was at the time) and began working with them to help them grow. Once good faith was established, he offered to buy up 50 percent of the shares of that company at a premium. Several years after that deal was made, he bought up the remaining 50 percent. That was the beginning of an international expansion that now includes Ireland, France, Germany, Spain, South Africa, Australia, and Argentina. Negotiations are underway to open a new office in India.
In 2007, my client’s revenues will be in the neighborhood of $270 million to $300 million. About 20 percent of that will be contributed by the foreign companies.
Having foreign affiliates offers more than added size. It provides a substantial amount of economic stability. If the U.S. market slows, as it does sometimes, other markets will no doubt continue on strongly. More important, my client’s foreign affiliates gave him the chance to broaden the scope of his products and expand beyond the consumer market into the business-to-business arena. This has provided an additional degree of financial balance.
The business benefits of internationalizing your company are significant, but the personal benefits are important too. In my capacity as a consultant for this company, I like being "forced" to spend four to six weeks a year visiting other countries, enjoying other cultures, and speaking other languages. (Who wouldn’t?) And I value the business relationships and friendships I’ve made overseas with my client’s partners and employees.
These are the sort of experiences you get when you travel on vacation. The advantage that an international business gives you is that you can enjoy them all while you are making, not spending, money!
If your business is at the $8 million to $10 million level and profitable, and if it is
running smoothly, you might consider taking it on the road and making it global. If you do, keep the following in mind:
- Get a trustworthy local partner or find a trustworthy local superstar to run the foreign branch of your business.
- If you have the choice, begin in an English-speaking country.
- Start with what you know - products and promotions that have worked well for you in the U.S.
- Make minor changes to accommodate local differences, but don’t listen to anyone who tells you "You can’t do it that way here."
- If possible, test your best product/promotion in the foreign market before making a financial commitment. If it bombs, postpone your plans until you find something that does work.
- Prepare to spend a considerable amount of time overseas in the beginning. My recommendation is to move there for the first six months and spend every day working with your key people.
- Michael Masterson
[Ed. Note: Learn how to build your own Internet business at ETR's upcoming 5 Days in July Internet Conference. You'll walk in with nothing - no product, no marketing skills, no technical know-how - and you'll walk out with your own online business. If you even think you might be interested in this opportunity, you must sign-up for the Five Days in July Conference today.]
And to read more of Michael’s unedited, uncensored (and sometimes unexpected) ruminations, check out his blog here.]
Use - Don’t Abuse - PowerPoint
By Virginia Avery
As Michael Masterson explained yesterday, misusing PowerPoint is a good way to sabotage your efforts to put on an effective presentation. But if used correctly - to support your message rather than distract from it - it’s a great tool.
Michael gave you a few good PowerPoint tips yesterday. Here are some more…
- Prepare simple visuals that can be read anywhere in the room. Your graphics and your font should be large and easy to read.
- Use pictures in place of words. Instead of using 35 words to say "You need to be able to search orders by date, so if anybody calls…" why not just the image of a big date enlarged by an even bigger magnifying glass. With one glance, your audience gets the point and remembers it.
- Keep your visuals simple. Illustrate your important ideas and essential points, keeping them few in number. Your audience should be able to grasp the idea of the visual in 20 seconds or less.
- Think of a good visual as a billboard. Ideally, each slide should have a Big Picture and a few words. Never put full paragraphs or even complete sentences on a slide. If you do, your audience will read the slides rather than listen to you. You want the slide to aid your presentation, not be your presentation.
- Don’t expect PowerPoint to magically get your audience to remember every word you utter. Put the magic in your presentations by standing up and talking to them. It’s you they came to hear… and see.
[Ed. Note: Virginia Avery is a communications specialist who has trained thousands of individuals to make more dynamic presentations. Become more confident and persuasive in just two days with her Presenting Yourself Professionally workshop.]
Fish Oil Beats Cardio
By Craig Ballantyne
Doctors have long recommended exercise for better cardiovascular health, but nutrition can be far more important.
A new study from Australian researchers reinforces just how beneficial the omega-3 fatty acids in fish oil can be for heart health. In the study, men and women between the ages of 25 and 65 were given fish oil (supplying 1.9 grams of omega-3 fatty acids per day) or sunflower oil (an omega-6 fatty acid, which served as a placebo). In addition, half of the subjects receiving the supplement performed three 45-minute aerobic sessions each week for 12 weeks.
The researchers found that the group that supplemented with fish oil improved their blood lipid levels significantly more than the sunflower oil group, lowering triglycerides by 14 percent and increasing HDL ("good" cholesterol) by 10 percent. Surprisingly, the regular aerobic exercise sessions provided NO benefit in terms of cardiovascular risk factors. But the combination of exercise and fish oil supplementation did help the subjects lose fat.
[Ed. Note: Craig Ballantyne is an expert consultant for Men's Health magazine. If you're looking to burn fat, build muscle, and quickly step into the body you have always wanted with just three workouts each week, check out Craig's fat-loss system, Turbulence Training for Fat Loss.]
It’s Fun to Know: About Cockroaches
Australia’s giant burrowing cockroach, Macropanesthia rhinoceros, is the world’s largest. It can grow to more than three inches long and weigh over an ounce.These insects are sometimes kept as pets by the Aussies, and are described by their owners as easy to care for.
(Source: Wikipedia)
Start Making Money Today
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They say when you’re first getting your feet wet with a side-business, the most important dollar to make is the first one. Well, Marc is an expert at taking beginning entrepreneurs and showing you how to make that first buck. He knows, because he’s done it dozens of times for himself, his family and his friends.
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- Patrick Coffey
Word to the Wise: Skullduggery
"Skullduggery" (skul-DUG-uh-ree) is devious, dishonest, or unscrupulous behavior or activity.
Example (as used by Hilary Mantel in Eight Months on Ghazzah Street): "And then the inquests, and the coroner’s reports, and the hints of diplomatic cover-ups, and skullduggery in high places."
[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007