Are You Ready to Start Your Own Business?

Many people daydream about opening their own business. If you are among that number, then it might be time that you stopped just thinking about it and that you actually did something about it. However, it takes a special type of person to start a business and to keep it going. Do you think that you are really ready to become your own boss? Let’s look at some of the indicators that might prove you are ready… or not.

Do You Have a Good Idea and the Expertise?

One of the most important things when it comes to starting a business is ensuring that you have a good idea and the means to make that idea a reality. You need to have, or be able to acquire the expertise needed to start your type of business. You don’t necessarily need a brand new idea. After all, there are countless pest control companies out there. However, you need to have your brand and niche that can qualify you as an expert for whatever type of business you are trying to develop.

Are You Self-Motivated?

When you are trying to start your own business, you have to be self-motivated. Sure, you can find some great help out there that can assist you with getting your business off the ground. However, they can’t motivate you. Without motivation and the desire to succeed, your business is doomed to fail.

Are You Ready for Marketing?

In addition to running the daily tasks at your new business, you also have to think about branding and marketing. When you are starting a small business, many of these tasks will fall to you, and that’s where many people have trouble. Most people don’t know heads or tails about marketing properly, and that’s why a number of businesses fail.

Are You Ready for the Hard Work?

While you might think that it will be great to become your own boss and make your own hours, you have to realize just how hard the work is. Whether you start a freelancing business, a car detailing business, or anything else, you will likely have to put in more hours than you would at your regular nine to five job. Getting a business off the ground and making it successful is not easy, but you will find that it’s well worth the effort.

Investor or Partner? Choosing Your Path Forward

No business stays the same forever, and you shouldn’t hope to do so. A static business is a dead one. However, moving your company forward can often leave you facing difficult choices, particularly when it comes to bringing in additional money and help. There are two options here – you can opt to bring in investors, or you can bring aboard a partner. Which is right for you?

Investors

Investors are pretty much what you’d expect. These are people who believe in your idea enough to part with some of their own money, on the gamble that they’ll be repaid and then some. Investors typically don’t have any say in what goes on in your business. They’re just along for the financial benefits. Of course, if you choose to give them shares, then they will have some say, but small businesses don’t usually face that choice.

Partners

Partners are very different from investors. While they typically do bring cash to the table, they’re also intimately involved in running your business as well. They may have as much say as you do over what goes on within your business on a day-to-day basis. This can be a good thing, particularly if you find that you’re struggling to get everything done, or want a more experienced hand at the wheel.

Which Is Right for You?

Understand that there is no one true answer here. What’s best for you will not be right for another business. So, analyze your situation. Do you just need an infusion of cash? If so, an investor is probably the best bet, or a loan. However, if you want someone to help you shoulder the load of running your business, then you can consider bringing a partner into the mix, but understand that this can complicate matters.

Partners have a vested stake and a say in what happens, so if you’re not prepared to share control over your business, this is not a good option. You need to be willing to share ownership, decision-making and delegation depending on the arrangement you have with that partner.

That’s another point – what type of partnership do you want to form? What rights and say should your partner have? These are difficult questions to answer, but they must be. You should also take the time to have everything written out by an attorney to ensure that everyone knows exactly how things stand.

Why You Should Use a Broker to Buy a Business

On paper, buying a business may seem fairly straightforward. Someone is selling their business, you’re in the market to buy, so you contact them and the two of you work out the details. However, in reality, it usually makes more sense to bring in a broker in order to help you purchase a business.

For one thing, most brokers won’t dirty their hands by being a part of selling a business that is overpriced or otherwise subpar. When a broker is involved, then, you can usually rest assured that the company you want to purchase is on the level. While this may be your first time buying a business, brokers depend on these transactions for their livelihood and don’t want to see their reputation tarnished.

Along the same lines, brokers are expert negotiators. They want to see both sides walk away happy. This is where brokers really earn their keep. Throughout the negotiations, they’llmake sure both you and the seller stay on task, ensuring a quick, smooth process.

Now, let’s say you simply want to buy a business, but you haven’t located the right one yet. You may never actually find it if you don’t contact a broker first. For one thing, they’re probably simply more “in the know” than you are. Again, their livelihood is to be aware of who is in the market. However, you may also never know because many sellers wish to remain anonymous. They use brokers because if they tell everyone they want to sell, this could negatively affect their business in the meantime.

A broker can also be your best friend by helping you understand what kind of business would be best for you to buy. They’ll start by learning about your interests, skills, backgrounds and aspirations. Oftentimes, people who thought they were buying the right business to suit their personality had no idea that one in a completely different industry would actually be a much better fit.

Lastly, as brokers do this all the time, the paperwork involved won’t read like Greek to them. Not only will they understand all the latest laws, they’ll also be more adept at cutting through red tape, keeping bureaucratic costs to a minimum and helping you become a business owner as soon as possible.

Although it may seem like you’re just involving one more moving part, a broker is really worth it when you want to buy a business. Taking on the process by yourself will mean it takes longer, costs more and potentially ends up poorly.

Important Considerations Before Buying a Business

There are countless benefits that can be enjoyed from buying a business. Many of them are often why people decide to purchase a preexisting business instead of starting one from scratch. However, before you take the leap, consider the following points.

First, of all, understand that you aren’t actually buying a business. You’re only buying its assets. Amongst other things, the “business” encompasses far too many intangibles that, simply put, would be impossible to sell. The soon-to-be-former owner may have been a great salesperson, for example, or a respected name in the community, which helped bring in customers. Understand that things like that aren’t coming with, meaning you need to adjust your expectations and price accordingly.

Of course, this also means that, if you’re dealing with a corporation or LLC, you don’t end up buying the business through stock. This is the advantage of just buying a company’s assets. By simply purchasing them, you aren’t taking on any of their financial liabilities. Furthermore, your tax treatment will be much better by going this route too.

Speaking of which, even if you just buy a company’s assets, you can actually be taking on some of their tax issues (this is one financial liability that’s an exception). Be sure to ask the seller about payroll and sales taxes before you buy their business as, if they owe, you may end up owing too. Along with speaking to them about it, go to their state’s tax authority too and have them provide a clearance letter. This document will confirm the seller is current on all their taxes by your closing date.

You’ll find this process may take a while, but it’s completely worth it when you consider that the downside could mean losing money for someone else’s mistakes.

Lastly, make sure you understand if the property they use for their business is part of the deal. Don’t simply assume it’s just another asset. Even if it appears to be included do your research. If there is a lease, find out if you’ll be assuming it after the sale. Then, if that’s the case, know how much is left on it and if you can take it on “as is” (meaning the landlord won’t decide to tack on more to the rent).

Buying a business may already seem like a lot of work, but the above extra steps are essential to making sure you get what you want out of the deal and no surprises you don’t.

Understanding the Fiduciary Responsibility of Those on the Board of Directors

At some point, many companies become so big that they take on a board of directors. For the most part, this is rightfully seen as both quite the accomplishment and a positive sign of things to come. However, it’s incumbent on individuals on the board of directors to understand what the role actually entails. Chief amongst these points is their fiduciary responsibilities.

What Are Fiduciary Responsibilities?

To put it simply, upholding fiduciary responsibilities essentially means playing on the level. It means that a member of the board of directors can’t work to deceive their fellow members or hurt the company.

However, it also refers to board members staying objective (e.g. not letting personal differences or biases affect decision making), honest, responsible, trustworthy and efficient. Their decisions and actions must reflect that they are putting the organization first. Members who act in ways that reflect poorly on the company—even if they do it in their personal time—may be said to be reneging on their fiduciary responsibilities.

Financial Acumen

Part of upholding one’s fiduciary responsibility means understanding the basics of finance. Not everyone is going to have an accounting background, of course, or even a strong one in financial matters. But given the stated purpose of a company, board members can’t serve if they don’t know how to read financial statements, for example. How else could they competently judge a matter and make a decision?

Keep in mind, too, that board members are tasked with reviewing and deciding on the budget. Giving that kind of responsibility to a financial novice would be calamitous.

Conflicts of Interest

One way to maintain an objective approach and exercise sound judgment is for board members to lack any conflicting interests. An example of a conflicting interest would be if a board member for Company A owned stock in competitor, Company B. Even if the board member meant to profit from a short sale, this could cloud their judgment enough to potentially put the company he serves in jeopardy.

Sometimes, it’s not as clear as all that which is where fiduciary responsibility can get murky and board members need to simply be honest. A member on Company A’s board of directors may own stock in Company E. Competitor Company B could be forming a partnership with Company C, which already has one with Company D. As it turns out, Company D is in the midst of buying Company E. Complicated matters like this make it important for every member to constantly check their motives and networks.

Bylaws

The above are general rules that apply to all board of director members. However, each board will have some of their own too. If you’re creating a board of directors for your company, certainly consider the above, but don’t forget about unique requirements too. Then hold people accountable if they break their fiduciary responsibility.

Fiduciary responsibility isn’t an overly complicated concept, but it can become one in short order when put into practice. Understand the above concepts, though, and you’ll be in a better place to clarify what they are for your organization and then enforce them.

Source:

http://www.bridgespan.org/Publications-and-Tools/Nonprofit-Boards/Nonprofit-Boards-101/Fiduciary-Responsibilities-Board-Members.aspx#.U6PLBbHQPbw

The Fiduciary Duty of the Boards of Directors

The board of directors of any corporation represents a number of responsibilities. Generally, each director is chosen to fulfill some need within the organization, but they’re expected to all work together in order to help the corporation succeed. While this should seem obvious enough, there’s actually a legal mandate that requires them to do so. It’s known as their fiduciary duty and is an essential component of their position.

The Basics

Fiduciary duty is an easy enough concept to understand. It simply means if someone is contractually obligated to represent another person or party, they must fulfill their duties as opposed to looking for opportunities of personal interest.

A lawyer is a good example of this. If a lawyer represents you during divorce, they can’t tell your spouse information you relay to them, even if it would mean a large profit. In many ways, the laws surrounding fiduciary duties are very much about enforcing contracts. However, they serve to cover those areas that may otherwise be considered vague or unspoken.

The Board of Directors

Those on the board of directors have a fiduciary duty to their corporation. So they’re mandated to do what’s in its best interest even if they can find opportunities for personal gain if they were to act against it. So if a director is offered a higher paying job with Corporation A if they’ll help vote down a deal their current company, Corporation B, is working on, they’d have to decline (and, actually, they’d be bound to report this espionage) because of their fiduciary duties.

Taking it a step further, the board of directors has, by extension, fiduciary duties to their shareholders as well. So, they could conspire to help each other out in a way that would hurt their shareholders. A director couldn’t pencil a deal for themselves wherein they’d sell some asset, which the corporation would “buy” at an inflated price. The board of directors may not feel the pain, but the shareholders certainly would.

Acting against Their Own Self-Interest

You can probably understand how things can quickly enter a gray area though. No director is supposed to sacrifice their own wellbeing to assist the corporation or its shareholders either.

For example, you’d have a hard time making the case that a director had a fiduciary duty to sell off some or all of their own shares to help the corporation.

When a Corporation Goes Insolvent

Not all corporations succeed, obviously. Many actually become insolvent. At that point, it’s generally understood that the board of directors now have fiduciary duties to the creditors. This means, upon becoming insolvent, they can’t start selling things off or taking unnecessary risks because they know it will soon be over.

The same usually goes for corporations who know they will soon be insolvent. Obviously, it would hurt shareholders if a board thought they’d soon be in too much debt to survive and decided to start playing with shareholder money.

The laws surrounding fiduciary duties differ by state, can be complicated and, sometimes, even a bit contradictory. If you need help clarifying them or picking board members who will honor their duties, my experience can help.

The Fiduciary Duties of Corporate Directors

Corporate directors play an essential role within their organization. It’s more than just a title. These men and women are tasked with overseeing the corporation’s progress and ensuring its mission statement is fulfilled. While this may seem like a vague concept, even lip service, there’s actually a whole legal concept built around it.

Fiduciary Duties

Legally, a fiduciary duty is a mandate to act completely in someone or something else’s interest. When it comes to someone having a fiduciary duty toward another person, they’re not allowed to profit without their principal’s consent. Examples of those with fiduciary duties would include doctors, lawyers, and guardians.

With a corporation, it’s implied that a director will be profiting from the organization’s progress. Part of their fiduciary duty, though, means not profiting by hurting the corporation in some way. In that way, the director has a fiduciary duty to their shareholders.

These duties also detail how corporate directors will deal with one another. Basically, they must be honest, act with good faith and be accountable to the other directors.

The End of Fiduciary Duties

For the most part, fiduciary duties can come to an end. Prime examples would be if a director resigned or was otherwise removed. At that point, they’re free to do what they like with complete neglect of their fellow directors, corporation or its shareholders. Of course, legally, there may be other mandates they are contractually obligated to follow (e.g. non-compete clauses, non-disclosure agreements, etc.)

Legal Mandates

There is no one single mandate across states or countries in terms of what fiduciary duties explicitly cover. For the most part, however, it is recognized that directors must be loyal to their organization and always act with its best interest in mind. This includes sacrificing personal benefit if it means doing right by the corporation.

It may also mean how the director seeks to run the business itself; to that end, it could involve the employees themselves. A corporate director’s fiduciary duties could mean ensuring that they’ve picked the best possible healthcare or retirement plan for their employees.

As you can imagine, fiduciary duties can become vague quick. Obviously something like buying stock in the competition is a pretty clear sign a corporate director may not be acting in the best interest of the company he sits on the board for.

Other times, though, it can be tough to legally prove that a director didn’t think their decision-making would be right for the company. Even a terrible decision isn’t grounds for legal measures if the director thought it was a good one.

Clearly, a lot goes into being a corporate director. Most live or die based on who gets a seat at the table. If you have a chair to fill and want help with the process, my years of experience are at your disposal. While there are legal ramifications for those who jeopardize their fiduciary duties, it’s best if you can avoid any problem in the first place. With my expertise, I can help make sure this happens.

The Fiduciary Duties of Controlling Shareholders

Corporations are intricate machines made up of countless moving parts. When they work harmoniously, great things can be accomplished, and many people can profit for their confidence in the organization. However, when even one member falls out of concert, the results can be devastating. This is why fiduciary duties are such an important legal requirement of many who work for a corporation. It’s just as essential for controlling shareholders as it is for the board of directors to honor them.

Fiduciary Duties Explained

While the legal definition may differ slightly from state to state, the simplest way to explain fiduciary duties is to say that it means acting selflessly on behalf of another. Doctors, lawyers, and those responsible for wards all have fiduciary duties. Doctors can’t decide to give their patients placebos in order to pocket the real medication or sell it on the side. Lawyers can’t profit off the secrets of their clients. Guardians aren’t allowed to tell a ward’s life story to the news.

However, leaders within a corporation have this same responsibility. This might seem strange because they’re always trying to profit from the corporation. But here, fiduciary responsibility means not attempting to profit on one’s own if it means hurting the corporation. It’s important to understand, too, that shareholders are considered a part of the corporation as well.

Controlling Shareholders

But, those who sit on the board of directors aren’t the only ones who have to play fair. Controlling shareholders have a fair amount of influence themselves, meaning they too have a fiduciary duty to the corporation.

What designates someone as a controlling shareholder? As the name suggests, it means they have power over fundamental components of the corporation. They may actually control it, if they own enough shares. But it usually takes far less to have a vote in who’s on the board and who’s not. That’s an awful lot of influence. In fact, sometimes shareholders rival the power held by the board itself.

So it’s understandable, then, that controlling shareholders can’t act against the corporation’s best interests. One example of how this could go wrong is if a controlling shareholder bought an even larger share of a competitor before dropping all the shares they had in the original corporation. Doing this would be extremely profitable, but it would also hurt shareholders with much smaller interests.

The Right to Self-Interest

That being said, controlling shareholders are still shareholders and are thus allowed to act in that capacity. When they vote, for example, no law says they can’t do so in their best interest. They also wouldn’t be neglecting their fiduciary duty if they decided against selling off some of their own shares solely because it would help other holders.

If this seems a bit confusing, you’re not alone. Countless lawsuits have been filed over accusations of people violating their legal responsibilities as a corporate fiduciary. So if you need help understanding this important topic, I’m here to help. In my capacity as a provider of nominee director services, I deal with this important matter all the time and have helped others make sense of it.

The Duties of Directors with Reference to Fiduciary Duties

The directors of major corporations certainly have a lot on their plate. In order to successfully run some of these juggernauts, they need to surround themselves with the right people, manage them, and delegate as necessary. Of course, some tasks can’t be delegated. One important responsibility that no director can hand off is their fiduciary duty.

Fiduciary Duties

Directors of corporations aren’t the only ones with fiduciary duties. Just about anyone who is representing another party—by contract— has some type of fiduciary duty as well. It means they have a legal mandate to do right by the party they represent.

One example would be a doctor. A doctor can’t prescribe you a medication because they’ll be receiving a kickback for doing so. This would not represent your best interest.

Directors and Fiduciary Duties

When it comes to directors of corporations, they have fiduciary duties to the company itself. For the most part, this means they have to do right by the shareholders. A director’s fiduciary duties can best be explained in two ways:

The Duty of Care

This category essentially covers the prudent mindset a director must have when running their corporation. Behavior that would reflect someone who wasn’t thinking things through or seeing the big picture would be examples. Rash decisions—whether or not they have ulterior motives—would be jeopardizing a director’s duty of care. State governments generally enforce rules surrounding this category.

The Duty of Loyalty

This category covers a director’s responsibility to their corporation and its shareholders over their own self-interest. A director also can’t favor some other corporation or business they might have some interest in. This is where having fiduciary duties to two separate entities can be problematic.

Solvent Corporations

For the directors of solvent corporations, this means they are obligated to act in good faith and with a prudent mind on behalf of their corporation’s best interest.

They can’t take part in self-dealing, receiving inappropriate personal benefits, or otherwise bypassing opportunities that would help their company grow.

Insolvent Corporations

If you’re overseeing an insolvent corporation, then you actually have fiduciary duties to your creditors. In fact, solvent corporations that soon may be insolvent often fall into this category too.

Because insolvency is not a hard-and-fast legal term, the definition is largely decided by the courts. Sufficed to say, though, if you think the corporation you’re the director of is soon to declare bankruptcy or otherwise be unable to pay its debts, now is not the time to play fast and loose with your obligations.

Directors of insolvent companies still can’t forget to think about their shareholders too.

Ramifications

There can be all kinds of ramifications for breaching fiduciary duties. Obviously, at any time, boards or controlling shareholders can remove a director if they believe they’re flirting with a fine line. However, as actual laws are involved, there are situations when the courts will step in. Sometimes, depending on the scenario, directors may even be liable for making restitutions.

If you have questions about your fiduciary duties or picking directors who will honor theirs, I have experience with both and would love to be of service.

Source:

http://apps.americanbar.org/buslaw/newsletter/0003/materials/tip3.pdf

Sell a Business on eBay

When it comes to selling your business, you have a number of options. You can try to do it on your own or have someone like me, a broker, help you with the process. Of course, nowadays, many people opt to go online in order to find a buyer. However, one option you may have not considered is selling your company on eBay. The auction giant sells everything else, so why not? It’s certainly possible, but there are some things to consider first.

The Advantages

There are a couple unrivaled advantages to selling your business on eBay. The main one is eBay’s popularity. It’s within the top 25 most popular sites in the entire world and comes in at number 7 in America. Plus, from 2007 to 2012, it grew in popularity by 12%, indicating that even poor economies couldn’t slow it down.

The other benefit to selling on eBay is immediacy. Selling a company usually takes a couple of years. When you leverage eBay’s infrastructure though, you could have the whole thing over within a couple of days.

The Disadvantages

While people have definitely sold their businesses on eBay, that doesn’t mean it’s for everyone. Perhaps the most popular type of business to sell on the site are eBay businesses themselves. We’ll get to them in a moment, but that makes sense. People who are familiar with eBay businesses use the site regularly, so there’s a good share of the market you can pitch to.

However, other industries—while present on the site—aren’t as well represented. If you want to sell your restaurant for example, you’re probably going to want an audience with other restaurant owners who, for the most part, do business in your general area. It’s possible those people are searching for a restaurant like yours on eBay, but you could also be missing out on a lot of opportunities.

Selling an eBay Business

One very popular option you see more and more of these days is people selling their eBay business on the popular auction site. eBay revolutionized ecommerce once by making it easy for people to sell online. Then they one-upped themselves by allowing sellers to erect virtual storefronts on eBay. This comes with a number of advantages at a very small free, and the industry has boomed.

However, just like with the traditional version, many owners decide to sell and what better place to do it than eBay? The problem is, in these situations, you need eBay’s permission to do it. Otherwise, the buyer could inherit all kinds of issues they don’t know about. There have been stories of people who bought eBay stores only to find out the sellers weren’t on good terms with the actual website. Obviously, you don’t want this happening to you if you are buying.

No matter what kind of business you’re selling, if you want to do it quickly, eBay may be an option. Contact me today and I can help you assess your current situation so you can better decide if eBay is really the best choice for you.