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The HBS Blog


The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

The Green Bay Packers Team Offers Stock
By Devin Scott Monday, June 11, 2012

When thinking of purchasing stock, most people think about making money, return on investment, and profit. With Green Bay fans and supporters, it is a little bit different. They bought stock to support the organization, be a part of something they love, and be a piece of the team they follow all season long.

In December 2011, the Green Bay Packers football team offered the organization’s fifth public stock offering.  The shares were priced at $250, with the goal being to raise money for the expansion of Lambeau Field. This $143 million project is expected to be complete for the 2013 season.

The Packers previously had offerings in 1923, 1935, 1950, and 1997. The proceeds from the first 3 offerings went to assist the organization financially, when they were looking at bankruptcy. The fourth offering helped the organization to redevelop Lambeau Field, which was finished in 2003. Fans purchased stock online with a credit card or by mail. The Packers initially offered 250,000 shares, but the stock sale closed with more than 268,000 shares. The organization earned almost half of the money needed for the $143 million dollar project to expand Lambeau Field.  Wisconsin fans bought about 50 percent of the shares in this offering.

What do these shares of stock do for the shareholders? Fans should take note that Packers stock is not the same as the traditional investment in shares of stock. It should not be purchased to make a profit, receive a dividend, tax benefit, or any other economic benefits.  The value does not go up, and the shares have virtually no resale value.

Some fans have said they bought shares just to show their appreciation to the organization that they follow and love. They say they just want to be able to say they own a piece of the organization. Other fans say it seems too much like a donation, and is not even tax-deductible.  They say they would rather spend the $250 to purchase a ticket to a game.

With the amount of money that was raised, I believe this was a good business move by the Packers. It brought the fans closer with the organization by offering them a sense of ownership, and probably will make them more loyal fans. It also accomplished the goal of raising money for the expansion of the stadium. Now the organization has approximately half of the cost paid, which decreases the amount of debt they have to take on for the expansion.  It’s a wonder why other teams have not offered stock of their own, yet no other team has ever offered stock to the public.

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The JOBS Act Opens The Private Placement Market: Part I
By Brett Melson Wednesday, June 6, 2012

The President recently signed the Jumpstart Our Business Startups Act (known as the "JOBS Act") with broad bipartisan support.  The JOBS Act removes restrictions on solicitation and advertising for companies seeking to raise capital in private offerings (as opposed to a costly public offering).  This change greatly expands a company's ability to reach large numbers of sophisticated investors and will fundamentally change the way that private capital is raised.

Currently, most offerings of securities that are not "public offerings" registered with the Securities and Exchange Commission (the "SEC") (a very time-consuming and costly process) are conduct pursuant to exemptions for offers and sales of securities made in private offerings.  Most private offerings are conducted pursuant to a safe harbor created by the SEC known as Regulation D.  Rule 506 of Regulation D permits a company to raise an unlimited amount of money from an unlimited number of sophisticated investors, known as "accredited investors," as well as from a small number of non-accredited investors.  In conducting an offer and sale under Regulation D, however, an issuer could not engage in a "general solicitation" or "general advertising."  This meant that the issuer could not use any public media (radio, print, television, ads in trade publications or even cold calls) to offer its securities.  In addition, an issuer could not use a list of contacts that it knew to be sophisticated in contacting investors, such as a list of company CEOs.  Instead, an issuer had to have a substantive, pre-existing relationship with any potential investor it contacted, or, more commonly, had to retain a broker and rely on the broker's relationships and contacts.  The broker, of course, would take a significant fee for its service.

The JOBS Act directs the SEC to eliminate the prohibition on general solicitation and advertising.  Thus, once the rule is amended, issuers can go directly to investors with potential investment opportunities and even engage in mass marketing such as mailers, ads in trade publications, unsolicited requirements for meetings or even television or radio advertisements, so long as all of the ultimate investors are "accredited investors."  This change will benefit companies engaged in private offerings by drastically increasing the pool of potential investors.  Bringing aboard investors just became a lot easier by eliminating layers of red tape!

Stay tuned for the next installment concerning The JOBS Act!!

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101: Peer-To-Peer Business Funding
By Gregg Schoenberg Monday, June 4, 2012

While the worst of the global financial crisis is now three years behind us, one area of the economy that has yet to fully recover is the small-business loan market. Because large banks are still dealing with the economic fallout, and trying to reduce the size of their loan portfolios, most of them are only interested in lending money to their biggest, most creditworthy clients. So where is an entrepreneur to go when in need of a loan for his business? One answer may be to look to the world of peer-to-peer (P2P) lending.

The premise and business model of P2P is fairly simple: People lend money to one another and to small businesses via the Internet. Both sides benefit by cutting out the costly middleman—the bank—and borrowers wind up with more affordable loans while lenders get a higher rate of return than they would from parking their money in a savings or money-market account.

P2P lending got its start in the early 2000s and grew significantly during the financial crisis as bank lending all but stopped when the global economy seized up. And it just got a big boost of legitimacy when John Mack, the former Chairman of Morgan Stanley, one of the world’s largest investment banks, joined the board of the P2P firm, Lending Club.

If you are interested in obtaining a P2P loan, it’s easy to get started. You’ll need to fill out an application at one or more P2P lending firms where you’ll be asked to divulge some basic information about yourself and your finances, agree to provide access to your credit report, and write a personalized listing describing the purpose of the loan and why lenders should feel comfortable loaning you money.

If the P2P company approves you as a loan candidate, they will assign you a credit rating based on your credit history and financial situation. The more creditworthy you are deemed, the higher your rating will be and the lower the interest rate you’ll wind up paying. The P2P firm then places the details of your loan request on its online platform where lenders look for investment opportunities that fit their risk and return profiles. There is no guarantee that your loan will get funded, but if it does you’ll receive the money in a timely fashion and be required to pay it back in fixed monthly installments.

One of the keys to passing muster with any lender, be it a bank or a P2P firm, is to maintain an outstanding credit score so be sure to do everything possible to boost your score before applying for a loan.

And whether or not you’ve had trouble obtaining bank loans for your business it may be worthwhile to look into the possibility of obtaining P2P financing. While the traditional banking industry has been shrinking since 2008, P2P lending has been growing, meaning that both borrowers and lenders see it as a valuable platform to help meet their financing and investing needs.

 

 

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How To Make an Online LLC/LP Franchise Tax Payment
By Amy Fountain Tuesday, May 22, 2012

As you know by now, the State of Delaware LLC/LP Franchise Tax is due annually by June 1.  Harvard Business Services, Inc. has been sending plenty of reminder notices via mail and email to make sure you make payment arrangements before the deadline. 

 

If you don’t pay on time, the state of Delaware is going to impose a $200 late penalty plus 1.5% monthly interest on your company.  In addition, the company is going to be put in a ceased good standing status. Since you likely don’t want to pay any more fees than you have to, it’s a good idea to take care of the filing sooner rather than later.

 

You might be thinking that because we are talking about a tax that the filing process is difficult, cumbersome and will require a lot of your valuable time.  Not the case. To make filing as easy as possible, Harvard Business Services, INc. has created a simple and efficient online payment system.

 

So let’s get started.  First make sure you have your full Company Name and corresponding Delaware State File Number ready.  If you don’t have these items, no worries, just contact our office and we will provide the details to you.

 

Once you are ready, visit our secure website at www.delawareinc.com/payft/.  On this page, you will need to enter your Company Name and Delaware State File Number previously mentioned. Next, you need to provide some basic contact details. Enter your First Name, Middle initial (optional) and Last Name in the three (3) separate boxes shown.

 

Then enter a telephone number, in case we need to contact you with any questions. Finally, enter your email address, exactly the same, in the two (2) boxes indicated. This is the email address where your payment receipt is going to be sent to. The next section asks for your Principal Place of Business, but since you are paying the Franchise Tax for an LLC/LP, you do not have to complete this section. Check “Yes,” you are paying for an LLC/LP.  Now you are rolling right along….click the “Continue to next page” box.

 

You will now see a Review Page. Confirm your information and correct any inaccuracies using the Edit button. Click Continue to Next Page.

 

At the top of this page is the Franchise Tax Calculation, which is basically a breakdown of how much you owe. If you have a prior balance, it will be shown here. Now you know exactly how much you have to pay for the annual Franchise Tax fees. Next, provide a form of payment; you can pay with a debit or credit card, such as Visa, MasterCard, American Express or Discover by filling in the customary credit card information in the boxes indicated. Or you can pay with your valid PayPal account. If you choose this option, you will be redirected to the PayPal website for further processing.

 

Now all you have to do is check the box to agree to the Terms and Conditions and then click the Place Order button. You are done! Wasn't that easy?

 

In a few minutes you should check your inbox for a receipt. If the receipt hasn’t arrived yet, you might want to check your spam folder too, just in case.

 

At this point, Harvard Business Services, Inc. is going to start processing your Franchise Tax filing with the state of Delaware. Once the state Franchise Tax authorities have approved your filing, you will receive a separate email confirmation from Harvard. This typically takes about five to ten business days.

 

If you have any questions about the filing process, just let us know and we will be glad to help. Send us an email at payments@delawareinc.com or call us at 1-800-345-2677 or 1-302-645-7400, Extension 6904.

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Learn How to Use Facebook as a Marketing Tool
By Gregg Schoenberg Monday, May 21, 2012

We all know that Facebook recently went public. Of all of the eye-popping numbers surrounding Facebook—850 million active users, 250 million photos uploaded per day, a $100 billion valuation—the figure that small-business owners might be most interested in is a considerably smaller one: fifteen. As in the fact that the social-networking site accounts for 15 percent of all time spent online.

With Facebook dominating so much of Internet-users time, it has become a great medium for small-business owners to build their clientele, communicate with customers and gain valuable feedback and insights.  If you haven’t done so already, it’s probably time to create a Facebook page for your business—it only takes a few minutes—and then try following these five steps in order to maximize its usefulness.

1.) Invite friends & family to “like” it.

With Facebook business pages the easiest way to gauge your reach is by looking at the numbers of users that like your company.  By asking your friends and family to click that little like button on your page, you can build up a reasonable number of fans before unveiling your business page to a wider audience.  This serves two purposes: First, it will help make your business look popular, and second, it may help increase your profile with those people that interact with your friends and family on Facebook. That, after all, is what social media was designed to facilitate.

2.) Post often and be interesting.

People may give your page a look and a like when they first hear about, but if you don’t update it with new and interesting content on a regular basis, you’re going to lose their interest fairly quickly. In order to make a more genuine connection with viewers, try to post content that is not purely informational, but also reflective of your business’s unique personality. And definitely take advantage of the ability to post photographs and videos that help to share your story in an entertaining fashion.

3.) Don’t be hard sell.

Facebook didn’t become the world’s most popular Internet site by ramming a buy-buy-buy message down customers’ throats; it got there because people love to interact with others online for free.  So it makes sense to follow this same strategy when trying to connect with your business’s Facebook following.  Rather than making your page all about the sale, use it to engage with your audience and to listen and respond to their comments and criticisms. This way, you’ll build long-term relationships and maybe even gain some good ideas on improving your business.

4.) Offer special deals.

While Facebook users aren’t interested in the hard sell, they do love the special deal—so try offering users a reward or a discount for “liking” you in order to increase your number of fans. To keep people coming back to your page on a regular basis, you might consider running special deals that can only be unlocked via a promotional code or password posted on your page.

5.) Consider utilizing paid ads.

Creating a Facebook page and following the preceding strategies can be effective and won’t cost you a dime, but if you’re willing to invest some money in an ad campaign, Facebook can offer the kind of targeted marketing that was a pipe dream just a few years ago.  Because users are willing to share so much of their data with Facebook, businesses that pay for ads can target an incredibly precise audience.  For example, if you’ve got a wedding photography business in Chicago you could create an ad that is delivered exclusively to people in your local ZIP codes who list their marital status as engaged. Think of what this kind of targeting could mean for your business.

Whether you choose the free or the paid route, or both, remember that it will take some time to see the results, so be patient and stay engaged with your audience as you wait for the social-networking effect to take hold.

 

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