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

101 on Business Licenses
By Michael Bell Wednesday, September 15, 2010

Every day we are asked questions about business licenses. Generally, the business license is obtained in the city, township, county and/or state, and even on the federal level in many cases. The determining factor is usually whether your company is physically conducting business in the “jurisdiction”. Depending on your locality, you’ll file for two, three or four licenses, maybe more. Almost every company files for a license in at least one locality.

Licenses are just another way to tax companies, although the government agencies that require the licenses are quick to point out that without licensing the consumer would have no protection against unscrupulous rip-off artists, posing as reputable companies.

Licenses aren’t fair. Building contractors file in every little town they have customers in, yet internet mail order companies file only where they are located, even though they have customers in many localities. Since it’s a government mandated fee the local, state or federal government can raise the fee anytime they want to. That said, they are usually minimal in the overall scheme of things. Most locations charge a minimal fee to register for a license to operate there – sometimes as low as $25.00 per year.

At Harvard Business Services, we cannot file your business licenses for you, since our customers are located in tens of thousands of locations around the globe. Your best bet is to call your local city, county and state development departments to find out the local requirements for licensing, or check out the following:

I recently read a great article on business.gov called “A Start-Ups’ Guide to Business Licenses & Permits – Be Compliant from the Get-Go” that will better explain and help answer all your questions regarding permits and licenses. Below is an excerpt from the article:

“Most of us are aware of common business licensing laws-whether it’s a license to sell alcohol and food, or a permit to expand your business premises. But business licensing is a lot more complex and broad than it first appears.

Unfortunately, business license and permit violations occur all the time leading to costly penalties, tax problems, and even the closure of your operation.

So if you are starting a company-be sure not to overlook federal, state and local licensing requirements for your business or industry. Get the right license and permit in One Simple Step with “Permit Me”

Permit Me - this government-developed online tool helps small business owners understand their regulatory requirements by matching basic information about your business type and location to the state and local permits, licenses, and registrations you’ll need to run a business in your location.

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Repeating History and Failing to Repeat History
By George Merlis Monday, September 13, 2010

The philosopher George Santayna is widely credited with the phrase, “Those who fail to study history are doomed to repeat it.”  What he actually wrote was “Those who cannot remember the past are condemned to repeat it.”  Either way, it means pretty much the same thing: learn from past mistakes.

In the world of crisis response and crisis communications, the admirable history of Johnson & Johnson’s response to the 1982 Tylenol recall is studied in journalism, public relations and business courses. I use it in all crisis communications consultations I do because it is a textbook example of what to do.

In that classic case,  J & J recalled 31 million bottles of Extra Strength Tylenol after seven deaths in the Chicago area were linked to the drug.  It turned out the deaths were part of a murder or extortion scheme and were in no way J & J’s responsibility.  Someone stole packages of the drug from shelves in Chicagoland supermarkets and drugstores, adulterated the tablets with cyanide and then replaced the bottles on the shelves.

Despite intensive federal and local investigations no one has ever been charged with the murders.  A man named James W. Lewis was convicted of extortion when he demanded $1 million from J & J to stop the killings, but there wasn’t evidence to indicate Lewis was responsible for the tampering.  Johnson & Johnson won high praise for its swift action -- which cost it well in excess of $100 million. (Remember that’s $100 million in 1982 dollars.)  At the time, the Washington Post wrote, “Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster.”  J & J won further widespread praise for being open and honest with the public as well as a place in crisis response textbooks.

Fast forward to the present. Last month, the New York Times ran a lengthy story on its business pages headlined “In Case of Emergency: What Not to Do.” The story told of the numerous public relations pratfalls over the last several months by BP, Toyota and Goldman Sachs. The story makes me wonder if the executive corps of these companies had a Ferris Beuller day off when crisis communications was taught during their MBA programs, causing them to miss the lesson about Johnson & Johnson’s 1982 Tylenol response.

The Times might have added another, far more ironic, corporate public relations pratfall to that story: Johnson & Johnson itself.  The company cited in the textbooks has had, over the last year, sluggish responses to breaking crises.  (Yes, that’s crises; plural!) This year, after 20 months of consumer complaints, J & J recalled batches of Benadryl, Motrin, Rolaids, Simply Sleep, St. Joseph Aspirin and -- compounding the irony --Tylenol because of a sickening smell suspected to be caused by contamination with a chemical bearing the tongue-tripping name 2,3,6-tribromoanisole.

In addition, J & J has multiple state attorneys general probing a series of other recalls of over-the-counter medications, the most serious being the firm’s reluctant April recall of 136 million bottles of liquid children’s medicines which had overly-high dosages of the active ingredient and contamination from metal particles.

The Chairman and CEO of Johnson & Johnson, William Weldon, is no carpetbagger hired from another company, but a lifelong J & J employee.  Even if Mr. Weldon missed class the day they taught the Tylenol lesson, it’s hard to fathom a long-term J & J executive not knowing about and following the example of the company’s bar-raising response to the 1982 crisis.

Belatedly, J & J announced a restructuring of its manufacturing procedures and the creation of a new executive charged with product quality. But the company’s earlier responses needlessly damaged its sterling reputation

If nothing else, the Johnson & Johnson response gives this new twist to George Santayana’s observation: “Those who cannot remember the glorious past are condemned to fail to repeat it.”

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Retain Your Best Employees
By Carleigh Lowe Thursday, September 9, 2010

According to Small Business CEO, there are certain employee retention strategies that work better than others. Below is an excerpt:

There are two main problems concerning human resources today. The first one is the unemployment rate which causes grossly under qualified people to apply to your company and the second is employee retention. For business owners, retaining your best employees may pose as a challenge.

Entrepreneurs know how competitive hiring is in the business sector and the fear of employees jumping the fence to join a competitor is more palpable now more than ever. It is hard to find good employees but it is even harder to promote company loyalty. Once you find top quality people to work for you, you have to ensure that you can keep them because retaining quality employees is one of the keys to ensure the growth of your business.

Here are some tips on what you can do to keep the best employees under your wing:

1. Give compensation where it is due. Not all employees are all about the money. You have to be fair in giving out compensation but you also need to ensure that you are within your budget. If your employee deserves a raise because of their performance and you can see that you are well within budget even after you’ve given the raise, then do so. Giving your employees fair pay makes them feel that their contributions to the company are being appreciated which in turn would make them more committed to the company.

2. Enforce an open desk policy. You need to make your employees feel that what they have to say is important because it really is. Whether they need to air a grudge or would offer you some suggestions for the betterment of the company, you need to hear them out. Some of the best ideas come from employees themselves since they are already familiar with the ropes of the business.

 

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Instead of Forming an S-Corp, Consider an LLC
By Paul Sponaugle Tuesday, September 7, 2010

If you were to call accountant's office and explain that you are a small business owner running a sole proprietorship looking to form a company, it is very likely the accountant would tell you to form an S-Corp. However, that is not necessarily the best or smartest option.

In my six years of helping business owners incorporate, I can’t tell you how many conversations I have had with clients who say they need to form S-Corps because their accountants told them to do so. That’s fine from a small business standpoint; it helps you avoid entity-level taxation so that profits and losses flow through to the owners—that's how you want to be taxed, anyway. However, keep in mind that S-Corp election is just a tax status. Many accountants are only familiar with the taxation of a corporate entity, and that’s the way it should be, since that's what you pay them for. However, when it comes to choosing the type of business entity that best suits your organization’s structure, a tax professional may not be the best person from whom you should take advice. Instead, ask a business formation specialist, like the team at Harvard Business Services, Inc. The truth is, a corporation is not always the best fit, and you do have other options.

Rather than forming a corporation and worrying about shares of stock, a Board of Directors, officers, meetings, minutes and all the other formalities associated with owning a corporation, consider forming an LLC instead. Yes, an LLC.

With an LLC, you all but eliminate the formalities of a corporation while limiting your liability for the debts and obligations of your business. Best of all, the IRS can treat an LLC as a flow-through business entity if you so desire. Once you create your LLC business entity, you'll need to file an additional form with the IRS in order to obtain S corporation status. First, however, you should obtain an EIN (Federal Tax ID Number) from the IRS for your LLC; next, file Form 2553 with the IRS in order to classify your LLC as an S corporation. Note: According to the IRS, "LLC's electing classification as an S corporation are not required to file Form 8832 to elect classification as a corporation before filing Form 2553. By filing Form 2553, an LLC is deemed to have elected classification as a corporation in addition to the S corporation classification."

 

Source:     United States. IRS. "Taxation of Limited Liability Companies." IRS.gov. Nov. 2014. Web. 29 December 2015.

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ThINC Green
By Amy Fountain Thursday, September 2, 2010

Everyone remembers the absurd gasoline prices of approximately $4-$5 per gallon or more the U.S. experienced a couple of years ago.  Gas prices may have decreased since then, but they still remain at higher than average levels.  Now is the time many entrepreneurs are exploring options to capitalize on alternative gasoline dependent markets, as well as other forms of clean technology.

Environmentally friendly industries are currently growing at a time when many others are dwindling.  According to MSNBC, the fastest growing sectors are recycling, energy efficiency, solar, wind and water conservation.  This “green” market is a hot bed for innovative thinkers and entrepreneurs who have what it takes to start a ground-breaking environmentally responsible business on their own.

A 2008 Dechert LLP Annual Report on Trends in Trademarks indicated 2007 was the busiest year ever for trademarks.  There were 300,000 applications for the first time in history, which surpassed the old record of 289,000 during the Internet surge of 2000.  The word “green” was the most popular branding of all trademark applications.  In 2007, the number of applications containing the word “green” increased from 1100 to over 2400.  This was the third year in a row in which the word “green” has significantly increased in the number of applications.  Applications for incorporating the word “earth” increased approximately 60% from 550 to over 900 in 2007.

Due to the recent economic downturn, it is only inevitable that the overall number of patent and trademark applications have decreased.  However, the Dechert LLP Annual Report for 2009 indicated that “applications for marks containing the word GREEN increased 32% in 2008 (to more than 3,200 filings), ECO-prefix marks were up 86% (with 1,700+ applications), and applications for more than 500 ENVIRO-marks were filed, representing a 22% jump. The word CLEAN was also a popular buzzword, appearing in over 1,000 marks to suggest environmental friendliness, up 30% from the year before.”

While there are some industries that will suffer from the hardship of extreme gasoline prices, there are other markets that will flourish.  Being environmentally conscious is a worldwide trend that will continue to escalate and intensify during the coming years.  When considering starting a new business venture, think how the new company can prosper and thrive in an ever growing “green” world.

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