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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.

Book Review: Fooled by Randomness
By Jake Cornelius Wednesday, March 11, 2009

I've just finished reading Nassim Nicholas Taleb's Fooled by Randomness: the Hidden Role of Chance in Life and in the Markets. I know, I'm late to the game on this one as his follow-up; The Black Swan has been a best seller for a few months now. I wanted to go back though and see where the black swan premise came from before I dive into that book.

As indicated in the title, Taleb's interest, and his profession, is all about how we get tricked by ignoring outlying data and put way too much emphasis on forecasting. His focus is on Wall Street, but the methodology can be applied to everyday life as well. Think about weather forecasting, or even the traffic on your drive into the office: we expect one thing, but sometimes get another for no apparent reason.

As humans, we like to know why things happen and sometimes apply the wrong cause to an effect. Even when we are 99% sure about cause and effects, if we try to use this data set, we will encounter errors when we forecast. Also, we might just be looking at a period of data that has yet to run a course, thus skewing our expectations of the final result. These are just a few of the reasons Taleb gives for being so skeptical of forecasting that we might just as well ditch the whole process anyway. In fact, Taleb seems skeptical about practically everything that the human being does when thinking about their individual futures!

I prefer to think about the flip side of this: What we don't know just might be a pleasant surprise! Imagine if we woke up every morning expecting the day to be just like the day before, and the day before that…like Groundhog's Day. But, we don't. No matter how we try to keep a routine, something unexpected happens. Even when we know the odds are good for an event to happen, we don't know quite when it will. For example, we may have prior knowledge that we will receive a tax refund; the odds are in our favor then for it to happen anytime. Will it be today? Likewise, the more we drive ourselves around, the better the chances become to have an accident: will that happen today as well? Will we spend our refund check on a new fender or on a new TV?

I realize that I am over-simplifying this; most of the time, we contribute to making our own luck and we have a general idea about the final result. We try to drive safely and to avoid accidents; we don't plan for them and leave for work an hour early every morning! We don't spend all our money and hope that the tax refund will cover it. In other words: planning for randomness may be more foolish than trying to skirt around it!

I read Fooled by Randomness for pleasure, not for a lesson or an explanation of anything. It's not a self-help book or any kind of investment guide. It is, however, an interesting book about decision-making, whether in business or life.

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10 Ways to Stabilize Your Business During a Recession
By Carleigh Lowe Tuesday, March 10, 2009

1. Don’t lower your prices.

2. Avoid giving deep discounts.

3. Think small, sell big.

4. Offer alternative payment options.

5. Build your reputation.

6. Get control of your thinking.

7. Practice a rational mindset.

8. Cultivate an eye for opportunity.

9. Adopt a different way of thinking.

10. Focus on what you want to expand.

These tips are from business consultant and author, Susan L. Reid. She wrote a great article about getting through these tough times at the American Express Open Forum Blog.

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Every Delaware Entity Must Have a Registered Agent
By Brett Melson Monday, March 9, 2009

The Delaware Registered Agent has two main functions, to receive and forward service of process and to forward any communication from the Delaware Division of Corporations. Many clients pay their agent over $259.00 per year for their agent service. Harvard Business Services, Inc. has been offering Delaware Registered Agent services since 1981 for $50.00 per year, guaranteed never to increase!

Can my company switch to Harvard Business Services, Inc?

YES! We offer a service to change the registered agent with the State of Delaware. To change the registered agent for an existing Delaware corporation, the State of Delaware charges a filing to file the “Certificate of Change of Registered Agent and Registered Office”. We will prepare and file this form for you plus we'll include your first year's agent fee. Thereafter, your annual agent fee will be only $50 per company, guaranteed never to increase!

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TED Talks and Twittering
By Carleigh Lowe Friday, March 6, 2009

One of my favorite places to find inspiration online is by watching a video from the extensive library of TED Talks. In a recent talk, Evan Williams, co-founder of Twitter, discusses how following your intuition and listening to your clients are key ingredients to success as an entrepreneur. In addition, he explains the whole twittering phenomenon. After learning about the many uses of Twittering, I wondered....How many of you are Twittering and in what capacity? Let us know in the comments, I think it will be interesting to compare notes on this new form of communication.

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History Lesson: The General Corporation
By Rick Bell Friday, March 6, 2009

Every Fortune 500 company is a General Corporation. Most of them are Delaware General Corporations, of course, but there are no LLCs, not even one, on the Fortune 500, the New York Stock Exchange or the NASDAQ. Stock exchanges are for stock companies, and that’s why the General Corporation is often referred to as a “Stock Company.” It is created with stock that can be sold on the open market.

The General Corporation is an enlightened creation by 19th century American lawyers to allow for, and provide financing for, the growth of the era’s biggest businesses--Standard Oil, DuPont, the railroads--which were all outgrowing their family partnerships or personally-owned businesses at the time. The problem was that at that time, they had no options.

Before 1875, when Delaware passed one of the first General Corporation laws, the state legislature had to approve a bill to form a “public corporatio.n” Libraries and banks were examples of the very few corporations in existence. Until the smartest lawyers in New York and New Jersey got together and wrote a law for the state of New Jersey allowing for a corporation that could be used for business purposes. It was to be available to the public “generally,” i.e., not just to those who could get a law passed. The term “general” was to be defined as available to anyone who could follow the legal procedure the state had prescribed to form such an entity. In other words, anyone could form a General Corporation simply by making an application that contains the required information to the proper government agency and is accompanied by the correct fee for filing the document. The filing by the Secretary of State’s Office is, in a real sense, the birth of the entity.

Once the state of New Jersey enacted the first law allowing for the creation of General Corporations, all of the biggest companies in the U.S. formed a New Jersey General Corporation, including the DuPont Company, which was indigenous to Delaware, a much smaller state than New Jersey, but right next door. Delaware reacted.

Using it’s smallness as its strength, the state of Delaware went to the DuPonts in the early 1900’s and offered to work with them to make fair and favorable laws to govern corporations, if they would re-incorporate in Delaware. The deal worked. At the same time, New Jersey passed a series of laws that restricted corporations and increased their tax rates. Soon, all the big companies followed the DuPonts to Delaware and Delaware became the Corporate Capitol of the United States.

At the same time, Delaware’s Court of Chancery was rapidly becoming the premier business court in the country, with almost 100 years of case law. In the final analysis, it is the Court of Chancery that explains why 63% of the Fortune 500 are domiciled in Delaware. Although these giant companies may not have a physical presence in Delaware, they are domiciled there by virtue of their choice.

Conveniently, the General Corporation structure works just as well for small, innovative companies that need to raise money to get their enterprises up and running. If you plan to raise money by selling stock to get your company quickly off the ground, the Delaware General Corporation is the entity of choice.

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