The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
You structure your own LLC. That’s the beauty of the entity itself; no need for three tiers of power, like the General Corporation. No need to follow what others have done, or follow their rules. You dream up the ideal structure for your situation, draft it up and that’s it. Your LLC Company Agreement can be uniquely yours so that it fits the deal like a glove.
The simplest form of LLC can be one of two categories, a “Member Managed” LLC or a “Manager Managed” LLC. Each is perfectly self-explanatory. The difference is found not in the filing documents, but in the Company Agreement. Changing from one type to the other is an internal matter requiring the unanimous agreement of all members, and an amendment to the Company Agreement. This is a very easy process, so long as all members agree.
In Delaware your right to structure your LLC anyway you want is called “Freedom of Contract”. You can draft the “contract” that all members agree to follow.
What does this mean to you? Let’s look at a few examples from our clients’ experience.
Want to hold a vacation home or rental property in an entity that will shelter it (and you) from legal attacks yet provide for its long term ownership? Want to restructure a family business to divide up shares, giving the minority owners some specific ownership rights, yet giving the reins of power to the family members who actually run the business? Want to forge a strategic alliance between your company and another with stated responsibilities and predetermined profit splits? All these and so many more examples are out there. After all, business ventures are not all alike so why shouldn’t they be structured and governed according to their own unique characteristics?
Only an LLC can be used like this, and still give you entity status. All these structures can be devised by a good corporate attorney, with your input as to what specific details you want to include. You can also start with a boilerplate agreement and draft it up yourself. I’d recommend that you have it reviewed afterwards by an attorney familiar with the intricacies of LLC law.
The aforementioned structures are simple compared to other exotic structures like the “Series LLC” and the LLC with multiple classes of members. We will do a separate blog post on each of these in the future. If you don’t require a custom structure, simply select the member managed or the manager managed LLC company agreement. If you have question about structuring your LLC please call us. We can’t advise you on what to do, but we can help educate you on things to consider when structuring your own LLC.
Business Week recently posted two great articles. One discusses the pros of starting a business in smaller cities and the other highlights some of the best small cities for startups. It is interesting to see that the universal qualities of the top small cities for startups include affordability, availability of a talented labor pool, existence of a thriving business community, and quality of life. Definitely all important components to keep in mind when starting a business. Let's take a casual poll in the comments.....Where have you started your business?
Check out the full articles by clicking on the links below:
If you've read my bio, then you know I'm not an entrepreneur: I work in a library. But I know that you, the readers of The HBS Blog are the entrepreneurial types. To help get myself acquainted with the challenges that you face as you get your companies off the ground, I read Rob Adams' A Good Hard Kick in the Ass: Basic Training for Entrepreneurs. This book really is as entertaining to read as its title implies! It gave me a good perspective of what you, as new business owners, are up against and how you have to eat, sleep and breathe your endeavor. Adams, at the time of the book's writing, was founder and managing director of AV Labs, a venture fund in Austin, Texas. His book provides several pieces of advice, how to implement that advice, and stories of businesses that followed the advice he gave at AV Labs. The stories are interesting and relevant to the advice Adams gives.
As for sound advice, I'll leave it up to you if it's good, or relevant, to your new company. I was shocked to read in the first few pages that he didn't consider a solution 'viable' if the market didn't have revenues of about $1 billion per year. Since Adams comes from the IT world, I presume he sees things a bit differently than somebody who is opening a photo studio, hardware store or a deli. His thinking goes that with a billion dollar market, even capturing only 10% of it means you make $100 million. The bottom line is to know your market. And that is his first piece of advice. Good ideas, he says, are a dime a dozen; no matter what it is, its already been done. The trick is being flexible with your idea and to give the market something that they will pay good money for.
I'm not going to give away the whole book; but I'll give you some hints though. Some of the other areas that made Adams want to give a kick include raising start-up capital, the business plan, time-to-market, sales, and marketing. At least half of the book would probably be useful for anybody looking to start a business. Even if your new business is several years away, this book may help you get a perspective on what to expect.
What Is News?
Last week I explained how executives could make the media work for them and why they should consider media encounters, specifically interviews, as opportunities, rather than challenges. Also, I listed and described my Five Commandments of Interviews, the most fundamental rules for media mastery.
A key element in that mastery is understanding the current media scene, so today, I’ll explore the definition of news. Only seven years ago, in 2002, I wrote my first book on the subject, How To Make the Most of Every Media Encounter. In it, I didn’t bother defining news, instead I relied on the general perception of what news was; in other words, the dictionary definition. By 2007, when I wrote my second media guide, How to Master the Media, news had evolved so much I decided the dictionary definition wasn’t sufficient, I had to add a practical definition of the word. Here is what I came up with:
Dictionary definition: news [nooz, nyooz] a report of recent event; intelligence; information.
Practical definition: news [nooz, nyooz] a report that captures and holds an audience’s attention.
Today’s media environment is like Niagara Falls: unending, relentless, LOUD! News -- or what passes for it -- comes to us from radio, TV, newspapers, magazines, online and on our smart phones. It is inescapable. While producing a television documentary recently, a colleague went to one of the most remote places on earth: Surtsey -- a barren island that is the planet’s newest land mass. Surtsey, formed by an underwater volcano off the coast of Iceland in 1963, is just an uninhabited rock in the ocean, a 40-minute helicopter ride from the nearest human habitat. Yet, my colleague’s Blackberry functioned there and he could access the world’s news. More recently, in the ancient Inca city atop Machu Picchu in Peru, our guide stopped amid the ruins to make a call on his cell phone. Had it been a smart phone, he could have also accessed the Dow Jones Industrial Average, checked the Associated Press headlines or scrolled through the opinion pages of his favorite newspaper.
Because of the information cascade, today’s media must compete for our attention and so they are driven by five “F” words -- all of them acceptable to the FCC for broadcasting. They are: Fear, Fury, Fame, Fun and Fascination.
Fear -- The media love stories that scare you. If you’re frightened, they’ve got your attention. When I moved to Los Angeles from New York 25 years ago, the local broadcast media were hysterically reporting on the implacable advance of Africanized killer bee swarms from Mexico. Here it is a quarter century later and the bees still haven’t arrived, but now they’ve been replaced by fear-mongering coverage of mosquitoes bearing West Nile Virus. Every recent summer our local media -- particularly the broadcasters -- have beaten that drum, despite the fact that local authorities have done an outstanding job of eradicating the bugs.
Fury -- The media are biased. They are biased in favor of a good, furious argument. If the argument is based on something emotional -- especially something scary -- all the better because that combines fear and fury. Coming up in the Fury/Fear media cross hairs: construction of new nuclear power plants. Since there is a nuclear component in current clean energy and energy independence plans, we are going to read, hear and see impassioned media debates that will invoke Three Mile Island and the far more serious Chernobyl accident of 1986. While the media know full well that comparing newly designed plants with the shoddily-engineered, slovenly-run Chernobyl is like comparing the Wright Flier to a Boeing 777, facts will play second fiddle to emotion in many media outlets. One of my big challenges as a media trainer is equipping clients to respond when they are on the defense against highly emotional arguments in major controversies.
Fame -- The media love stories about the famous or those they can make famous. If I were to be stopped by the police for driving with an unsecured infant in my lap, it would not be a story. Britney Spears does it and it’s news. Similarly, if the checkout clerk at your local supermarket went off to kidnap her romantic rival, it would not be much of a story. But if the would-be kidnapper is an astronaut, that’s a different story because the media can make her famous.
Fun -- The media likes funny stories and stories they can have fun with. Hence, if the would-be astronaut/kidnapper is wearing an adult diaper so she won’t have to make pit stops on her way to meet her rival, it’s all the more compelling a news story.
Fascination -- Since most stories executives want to tell are not fearsome, do not involve fury, have no famous players and are not, in and of themselves, funny, we can be thankful that the media still respond to “gee whiz,” “I didn’t know that” sorts of stories. I include in the fascination category “news you can use” stories: How to save money, how to improve your health, how to look younger, act wiser, raise brilliant children, etc.
Check back in next week to learn about Crafting Your Interview Agenda.
Choosing a company name for the new business you are incorporating is a big decision, one that requires quite a bit of thought and effort. Some people like to keep their company's name as vague as possible while others prefer to spell out exactly what their company offers; still others think of a creative and unique name to catch the public's attention. Both of these approaches have advantanges and disadvantages. By keeping a company's name vague, potential clients may not know what type of business the company offers. However, advertising the exact activities of the business via its name often results in a too-long and/or awkward company name. The problem with creating a really unique name is that it might be too hard for potential clients to remember. A great way to settle on a name is to conduct a mini-focus group by asking family, friends and associates for feedback.
Once you have decided on a favorite name and you're excited to name your company, let Harvard Business Services, Inc. help you take the next step. We offer a free name availability service--let us check on the availability of the name you'd like to use. Simply call us or go online to https://www.delawareinc.com/name-check/. Both options are fast and easy.
If you wind up choosing a company name that is not available, adding another word, such as partners, group, international, worldwide or enterprises often helps. I tell everyone that choosing their company's name is usually the hardest part of the entire incorporation process. If you put some time and effort into the decision now, you’ll get the name right the first time.