I'd like to share with you my gatherings from CIA Mini Conference which took place today at Stanford University. They are not formatted as a story, but more like a notes made on the go.
The 4th annual CIA conference at Stanford.
CIA are going to have live broadcasting. I didn't realize it before and now a little bit tempting about did I really need to come. :) But we'll see in a few minutes.
It seems to be there is about 70% of actually students in the auditorium. We also had a plenty of free places to sit, but the whole place is way more then half full.
First conference was in 2006. Previously they had a few guys from VCs, specifically DFJ, guys from eBay, etc.
Conference is about client design thinking about big problems. Spreading ideas, how to make them sticky, how to explode. How to make them viral.
First guy is from Apple, Pedraum Pardehpoosh, who's running iTunes Video store and was previously related to iPhone stuff. Not going to talk much about Apple, though.
- How to create virally spreading changes in behavior?
- The fundamental purpose of business and commerce is to contribute to the advancement of human prosperity, promoting social justice and harmony.
Doesn't make a lot sense to me, unless translated into real-world language.
Three ideas:
1. Consonance for Survival. Don't fight gravity, learn to create lift.
People don't trust businesses. Business must go beyond generating just ROI.
2. Act/Reflect. The order here is critical.
3. Asking for help.
How do they at Apple (iTunes, to be specific) create product? They do something they want themselves, as they are passionate about being at Apple and doing video and music stuff. Good point when you've got a lot of people to brainstorm with a similar interests. Not very well scaled to the world of startups, when the company is started by two-three individuals, even with a wide vision.
Second speaker is John Winsor (Twitter @jtwinsor, www.johnwinsor.com), VP and Executive Director of Innovation at Crispin Porter + Bogusky with impressive lineup of clients like Microsoft, American Express, Coca Cola and others. Has a blog and authored two books.
First slides of his presentation look very interesting. Shows some stuff that they've been doing for their clients.
We're not big fans of advertisement. Ads alone lost it power to make a meaningful connection between a brand, the culture and the consumer.
Some levelers for creating infectious action.
Lever 1: Start with a true understanding of a product. Product > Packaging > Distribution > Ads.
Lever 2: Bake the marketing into the product.
Lever 3: Focus on changing culture to fit your brand but not vice versa. Shows presentation of B-cycle, new initiative in US, brought from European countries. It looks like the reused the map of Moscow subway for it. :)
Lever 4: Make everything interactive. It's not just digital. Shows pretty funny presentation of Flame.
Lever 5: Exploit a cultural tension. Without guild, there is no tension. Without tension, there is no release. Without release, there is no joke. Burger Kings ad comes here. Whopper sacrifice. Great idea.
Lever 6: Use advertising and PR. VW crashing car in the ad.
Lever 7: Empower people to co-create with you. Few weeks ago launched a wiki with a script for the book. To write examples and ideas. Promoted this on his Twitter. Has got terrific results so far.
Few words about the agency: success is measured by sales, not brand, awareness or those kind of things. Typical clients — either risk takers or those who're risking to loose business.
Next speaker coming, double-Stanford, Gina Bianchini, co-founder and CEO of Ning. Opens nc.ning.com to show a few videos. Doesn't work so far.
New media takes 10-15 years to be acquired.
Each company takes different approach to organizing people. In example, Gina brought her friends to the company, starting from university, ending up with school (or even pre-school).
Why people create their own networks when there are a lot of them already? Finally the video works to give us an answer. Hell, no, it's broken again. So now we're switching to Q&A, as Web presentation never worked.
Shows an example of lostzombies.com, a Ning social network with 10,000 of users that pretend to be zombies. Apparently, lost. Very nice.
How big networks are they targeting for? No specific numbers, don't care about the size. But there is a conclusion of if a social network hits 150 people, it will sustain itself. Ning guys are working on ideas and thoughts how they can brought this number down.
Launched Ning platform in October 2005 with 26 very simple social applications, sent out emails to friends and got covered very well. The initial momentum is very important. Direct invitation mechanism worked better for them then typical PR.
Next speaker is Hayagreeva (Huggy) Rao, professor of Graduate School of Business at Stanford University. As he characterized himself "The guy how takes the idea of food very literally." :) Usually teaches MBA students, came today from 8am-3pm MBA classes to talk on CIA conference.
Market Rebels: How activists make or break radical innovations?
Two examples:
1. Micro-brewing movement. Theory — hard to enter new markets where is high concentration. However, US ended up having more independently owned breweries (1,273) then Germany (1,234) even if market concentration in germany is 3 times lower. Professor's favorite beer is DogFish — I've got try that one. :) Social movements need two things B2B — beliefs to behaviors and behaviors to beliefs. Changing beliefs will affect behaviors.
WUNC - create by hot causes and cool mobilization (Worthiness x Unity x Numbers x Commitment).
Make complicated things extremely simple to get people mobilized.
"Enough shovels of earth — a mountain, enough pails of water — a river."
2. Anti-sprawl movement and Wal-Mart.
Formal models of protest suggest that protest is likely to be rare.
Hot cause is sprawl and our town. Professor Rao mentioned James Howard Kunstler and his Web site which he likes to read. Sad, but I missed the name.
Cool mobilizations are petitions, marches, pledges, our town organizations, popular votes on Size-Caps for stores.
Market Rebels matter — create markets but also restrict markets.
I really loved Huggy's talk.
The CIA mini conference is ending up with a panel. The panel features Leslie Kilgore who is CMO in Netflix, DJ Patil, Chief Scientist in LinkedIn and Jason Goldman, VP of Product in Twitter. Chamath Palihapitiya, the Facebook's VP of User Growth was announced by didn't come it this time.
Leslie: Free is important, but it is important to what extent are you going to make things free. If you really think you have a superior product, it should be able to survive on its own.
DJ: Professional social network needs to respect the quality of network. First of all, LinkedIn is an analytics product, eventually provide more values.
Jason: There is a lot of interesting stuff you can do when you have access to numbers. It's important what numbers you choose. But be ready to people who want to game the numbers. It's important to model the behavior correctly. See a big picture.
How do you find party starters?
Lesli: You can't pay somebody to evangelize your product.
DJ: LinkedIn is 46% international, but they did nothing for that. Not agree with Malcolm Gladwell model. There is a place for initial spinout and extension spinout.
Jason: Celebrity usage of Twitter made a big difference.
Thursday, April 30, 2009
Thursday, April 23, 2009
The other side of Sumo Lounge
I want to tell you a story about the a real purchase from Sumo Lounge from a person, who actually paid for the bean bag himself. (Unlike many bloggers, mostly in the gaming space, who use to receive a promotional sample from the company, to be featured later in the blog. You can find a plenty of such posts all over the Internet.)Well, the Sumo Lounge sells bean bags. I think they're in the middle of the price ladder. There are definitely much more expensive ones on the market, but there are a lot of much cheaper ones as well.
I wanted one for myself, so after a quick lookaround and research, I decided to get the Sumo's one. Originally, I was thinking about Omni, but I'm not tolerant to the type of cover. So I ended up with SumoSac Couple.
The first thing I want you to know — the girl on the image is freaking extremely miniature. For a guy like me (about 6 ft and 200 lbs of fat & meat :), the "chair" is fine, okay, but that's it. I wouldn't dive into it, and I can't actually laid down, as there is always something is missing or dropping out. The price ($230!! though I got it for a little bit cheaper) is making the purchase pretty expensive. Come on, there are leather chairs with back and leg rests for $99 at Macy's Furniture outlets.
But you're crazy about bean bags, aren't you? I've got a small kid at home, who (I knew for sure) would be happy about having something he can jump on, be dropped into or just go crazy with. :)
It was easy to place an order, however, it was the only easy thing.
It took them almost a week to actually ship an order. More then that, I wasn't given anything, but the notice that the order was shipped. I tried to get a tracking number for the whole next week (it happen to be at the same time during my move from Southern to Northern California, and I wanted to be more informed about the status of the shipment).
They never answered to any of my email, so decided to pick up the phone and give them a call. After a few tries, I was able to reach someone. The lady on the phone wasn't very happy to discuss the details of my order (it looks like she never had an access to the information at all), but she told me that they're working exclusively with FedEx, the shipment should be delivered shortly and the "boss" will get back to me later. To my question "How later?" I've got a pretty straight answer "I don't know, whenever she'll have a time for it, within a week or so". Nice.
Within a week or so the shipment came. With UPS. At this moment, you can refer to many of other posts, they're pretty truthful about the look and feel of package. With the exception, that I didn't like fillings. I would prefer something more beanbag'ish, but this is just a question of preferences. I found paper with instructions to be a little bit confusing, but unpacking the bean bag is not a rocket science, right?
Now, I found the color to be of the different shade and absolutely with no logos. More then that, it's takes a lot of static, and you've got to be tolerant to the thing, which keeps you "electrified" all the time. ;) While keeping static is not a huge deal (well, I don't think they can do much with that), the brandless cover and color of it did really disappoint me. I saw a plenty of regular (under $100'ish) beanbags with pretty much the same cover.
So I gave them a call. I happen to talk to the same lady, who immediately asked me if I'm going to return the shipment. Well, you know, after you've unpacked all that, the idea of sending everything back is scaring. It grows in size very fast. You're responsible for the shipping costs and she told me that I might have to pay some restocking fee. I thought, that's a question only a bout a color, so why wouldn't they send me a right cover now, and I'll send this one back. The lady seemed to be confused, as she had only two options: leave or return. She told me that she needs to talk to the mysterious boss again. Again, I asked her, when the boss will be able to talk to me, as I'm not going to unpack everything. She told me I should her back within a few days (wtf?).
Well, it's almost two months after my last conversation with them. They do not return calls and I had no chance to catch the lady during next few calls I made (the answering machine all the time). (Of course, I have unpacked everything a while ago already.)
Am I going to fight back? Well, yes and no. But I have not many options anyway. You do though. Shop better and think twice now. Hope it helps. ;)
Saturday, April 11, 2009
GMAT SC
I just finished my GMAT Sentence Correction part and (sadly) should say that this is still one of the hardest piece to be done and, I guess, the least coachable one as well. I had the highest deviation of my correct percentage rates for the questions from this section.
Here comes the final difficulty equation for the GMAT sections:
CR < RC < PS = DS < SC
Okay, so I'll take a day or so for AWA theory practice and will start working on different techniques of "cracking the GMAT".
Here comes the final difficulty equation for the GMAT sections:
CR < RC < PS = DS < SC
Okay, so I'll take a day or so for AWA theory practice and will start working on different techniques of "cracking the GMAT".
Business and passions
During many years I developed many passions. And I also tried many (and, sometimes, very different) ideas. Some of them [ideas] worked well and some of them don't.Passions allowed me to acquire some skills. Trying out ideas gave me priceless experience.
Roughly, the business is about skills and experience.
I'm a tech person. I started into tech by reading books at the age of 10 or so. We couldn't afford a personal computer, but I compensated it with the theory. The tech became my life now (in very wide meaning). The forms of it can change, but never the meaning.
I like numbers. I'm not good with them, but I like them. The numbers are all around and the more comfortable you're with them, the most advantages you'll get in life.
I like interaction with user (through UX and UI). I find it very challenging to approach different problems and come up with solutions that people love. (Sometimes, it really works out.)
I like both business markets and consumers. And I believe that good consumer-based market always has an application for business. So I prefer consumers.
Whatever I'm busy with, I am always aware about generalism. Generalism is dangerous. It can even be suicidal, especially when you don't know what risks are you taking when approaching general markets.
And to crown it all, let me tell you this. Experience matters. Passions matter. Intellect matters. But this is not enough. We've got to be honest with ourselves about one true desire for entrepreneurship. It could be either making a fortune, going out public or building serial companies. And this is what will be driving us through the life.
As for me, my true desire is to be the part of the big thing and my real passion is building things.
Tuesday, April 7, 2009
Why am I an entrepreneur?
So why am I an entrepreneur? Good question to ask yourself. (And frankly, there is no right or wrong answer to this question.)
I've started my professional career early enough (around 14) and always was a lot about the technology — programming and networking. So I think that I got to know the pleasure of building something very early. And this is one of the most essential entrepreneurial habits and enjoyments — to build things from the scratch and guide them to solid and independent state.
However, I should say that I shared the disappointment (and stress) of nonrecognition also very early. And this is good, as far as entrepreneurs are forced to face it [stress] very often — when they either look for team, develop client base or pitch investors. This is the next important thing which is important to develop — how to deal with the downs (and ups!). (I can't take too much credit for this, though. I still take a lot of things very personal, but constantly learn how to ignore emotions and keep the pure pate.)
But entrepreneurship is not always about balancing good and bad (otherwise, it'd drive you mad). It [entrepreneurship] also has a golden mean, when you're far enough from success, but still on the right track and every day brings you closer to happiness.
And to crown it all, let me tell you my main reason of being an entrepreneur (and I'll use an allegory for that). Our world is full of dirt and dust. Fortunately, the wind cleans up the mess around. (Current state of economy is a good example of such a wind coming up.) But when the sun returns, one can see strong and healthy things around. Not everything will survive, but the ones who will — are going to leave a mark in this world. Leaving something meaningful after yourself is the best bonus I'm expecting from entrepreneurship.
P.S. While starting up a company is similar to raising a kid, there is still a significant difference between them. When you try to fix your (life) mistakes using your kid, it rarely works well. With startup, you have to fix your mistakes.
I've started my professional career early enough (around 14) and always was a lot about the technology — programming and networking. So I think that I got to know the pleasure of building something very early. And this is one of the most essential entrepreneurial habits and enjoyments — to build things from the scratch and guide them to solid and independent state.
However, I should say that I shared the disappointment (and stress) of nonrecognition also very early. And this is good, as far as entrepreneurs are forced to face it [stress] very often — when they either look for team, develop client base or pitch investors. This is the next important thing which is important to develop — how to deal with the downs (and ups!). (I can't take too much credit for this, though. I still take a lot of things very personal, but constantly learn how to ignore emotions and keep the pure pate.)
But entrepreneurship is not always about balancing good and bad (otherwise, it'd drive you mad). It [entrepreneurship] also has a golden mean, when you're far enough from success, but still on the right track and every day brings you closer to happiness.
And to crown it all, let me tell you my main reason of being an entrepreneur (and I'll use an allegory for that). Our world is full of dirt and dust. Fortunately, the wind cleans up the mess around. (Current state of economy is a good example of such a wind coming up.) But when the sun returns, one can see strong and healthy things around. Not everything will survive, but the ones who will — are going to leave a mark in this world. Leaving something meaningful after yourself is the best bonus I'm expecting from entrepreneurship.
P.S. While starting up a company is similar to raising a kid, there is still a significant difference between them. When you try to fix your (life) mistakes using your kid, it rarely works well. With startup, you have to fix your mistakes.
Sunday, April 5, 2009
Blogger's bug
I just discovered a funny bug in Blogger's rich editor.
Try to type:
Make sure to make it italic now.
RC < PS = DS
How do you like it now?
Just in case, you don't want to try it yourself, that's how it looks like. (Make sure to either post it, or switch between Edit Html and Compose modes.)
Looks like an easy fix, but could be misleading. Hopefully, somebody from Google's Blogger team will have a chance to read it.
Try to type:
RC < PS = DS
Make sure to make it italic now.
RC < PS = DS
How do you like it now?
Just in case, you don't want to try it yourself, that's how it looks like. (Make sure to either post it, or switch between Edit Html and Compose modes.)
Looks like an easy fix, but could be misleading. Hopefully, somebody from Google's Blogger team will have a chance to read it.
GMAT: complexity equation
Following up.
This is going to be a short post about my current observation on questions complexity. Well, now I can probable draw it like this:
I found CR to be a little bit more time-consuming then RC, but I think this is normal, as you have a separate block of text in each question instead of (bigger) one, but for 3-5 questions. It requires to change the topic more often and it can be a valid reason for many careless errors.
This is going to be a short post about my current observation on questions complexity. Well, now I can probable draw it like this:
CR < RC < PS = DS
I found CR to be a little bit more time-consuming then RC, but I think this is normal, as you have a separate block of text in each question instead of (bigger) one, but for 3-5 questions. It requires to change the topic more often and it can be a valid reason for many careless errors.
Friday, April 3, 2009
GMAT CR
Okay, so I missed a day of study (was too sick for that, and I didn't think going over the questions in that condition can make any good for me) and next day (instead of problem solving) I had a few hours preview class on Manhattan GMAT. They're telling people about what GMAT is and were pitching their courses. I didn't really solve a lot of questions that day, but got a pretty good intro to the actual exam process, and what computer adaptive tests are. I never had CAT before so it's going to be a pretty new experience for me.
Well, as for now, I just turned over to GMAT part which is called Critical Reasoning (CR), and (from the first sight) it felt to me pretty easy. I was able to score 80% without even paying enough attention and being constantly distracted by my little son, whom I've got to babysit for whole weekend. (And you know, he knows how to distract you from studying.) The most of my mistakes were pretty careless. (Not an excuse though.) And I completed only 40 questions today. I'll try to make at least 50 or 60 tomorrow.
Well, as for now, I just turned over to GMAT part which is called Critical Reasoning (CR), and (from the first sight) it felt to me pretty easy. I was able to score 80% without even paying enough attention and being constantly distracted by my little son, whom I've got to babysit for whole weekend. (And you know, he knows how to distract you from studying.) The most of my mistakes were pretty careless. (Not an excuse though.) And I completed only 40 questions today. I'll try to make at least 50 or 60 tomorrow.
How to incorporate startup in CA? (and stay on the budget)
Well, we have a few startup ideas. We want to charge money. So we're about to incorporate.
But let me start from the very beginning. My partners and I have been working together for a pretty long time and we finally reached the point when we're ready to start something together. As far as the most of us based in California, we decided to incorporate here.
Yeah, I know, I know, the startups are about Delaware. But why did we decide to stay within CA? First of all, running the business from CA is a pretty solid nexus with the state, making us pretty liable to state taxes. Doing some consulting over there can add even more reasons for state to be sure about this. Incorporating in DE could be a valid reasons because of DE corporate-friendly status, but is not the best choice for us.
We're hungry people living of the budget. Any more state fees, taxes and extra paperwork (instead of building something that we can sell) is not a good choice. Remember, that running DE company in CA makes you liable to CA taxes, registering a foreign entity in CA and adding the extra amount of headache plus not taking away the minimum $800 CA franchise tax.
What type of company? S-Corp, as for now. Actually, it's a typical C-Corp, with S status election, coming after all, with some benefits on the top. Anyway, we're not about taking outside investment right now (at least, for those projects that we're on), so having limited number of shareholders plus one class of stock doesn't make a difference for us. And S-Corp can be converted to C-Corp pretty easily.
All other types of businesses, as well as LLC doesn't work for us. S-Corp gives more chances to save on taxes, which LLC doesn't. And while LLC is a little bit easier to run, I don't think it worths the money we can save on staying away from unemployment taxes (partially, though).
How to incorporate? A lot of people advise using Internet based services. I've looked at the number of them: AmeriLawyer.com, MyCorporation, The Company Corporation (Incorporate.com), LegalZoom, INCORP and IncFile. What can I say? That's an expensive thing for a startup. Besides, it's too much information over there that is repeated all over again and again, so it's so easy to miss something you might really need.
After speaking with the most of these companies over the phone, the best choice is none. I'm sorry to say that, but I didn't find one good leader. All of them do the same thing, but they put them into different type of plans and packages and sell for different numbers: some of them try to pretend to be wholesellers, selling some staff, but missing some essential tools; another ones allow you to customize yourself, but give you so many options, so your mind is about to blow out.
So, yeah, you will have to do something yourself anyway. Anyway means you can take the top package, but you still have something to do. Is it something you're willing to pay hundreds of dollars for? I doubt so.
My choice was a little bit odd, but I believe it to be the good one. I had to invest some time for understanding a process, but it's never a waste.
First of all, I need a business address. So I ordered a PO box at the close-by USPS station. Likely, I'm living pretty close to SFO, so I could get a very inexpensive one ($42/12 months) over there. (And I'm getting "luxurious" San Francisco, CA address ;). Don't take it seriously, though, but I know some startup companies think that matters, while it does not.) Anyway, I don't want to mess with my residence address, as it can change or whatever else happens - this is not my bussines suite, so PO box is the better choice for me. USPS gives you a good informative resource online for location USPS station near-by and you can even order it from the Web. But you still need to visit office for the keys and personal verification process.
For the second, I had to get a California registered agent, which is required for every company, and cannot be a PO box. There is a plenty of choice online, and it varies a lot. I chose Patel & Alumit, which provides the service for $50/year. I had several questions and contacted them online and by the phone and I was pretty happy with the care. So they've got my money ;)
Third, I need to incorporate. After considering many options, I decided to choose MyCorporation, an Intuit company. They provide a basic service for CA including 1. preparing and filing articles of incorporation, 2. publication requirement (although I don't know if it's necessary for CA), 3. personalized corporate bylaws, waivers, notices, and minutes of corporate meetings (very often charged extra!), and some other not imporant things with state fees included for $144 (with the MYFREE coupon which discounts $149 from the full price). Keeping in mind that the state fees are $115 (if I'm not wrong), I think that $29 is a fair premium paid. ;)
More things to go. While I'm waiting for actually, being incorporated, I decided to take a deeper breath and learn the process myself. While reviewing a number of books (primarily by NOLO though), I found an ultimate resource for learning about incorporating in California. This is the book How to Form Your Own California Corporation by Anthony Mancuso. $26 bucks is almost free for such amount of information included in the book and on CD.
Of course, nobody is perfect and I don't suggest limiting your understanding of the process by reading only this book. For example, Anthony pays too much attention for choosing LLC over S Corp. It could be very right for some type of ventures, however, not really for ours.
As for me, the incorporation process looks pretty easy and I'd definitely consider incorporating myself next time. At least, I'll have a better understanding of where I am standing at every moment of time. The MyCorporation's process doesn't give you a good idea and requires you to call for the status update.
The incorporation process takes time. However, being too impatient and after waiting for about a week, I called MyCorporation and inquired the status of my order. They told me that it'll take about 2 weeks more and I'll be receiving an email from UPS and the whole package shipped by that time. I'm still wondering about exact list of documents that I'm going to receive from them, and how much will have to do myself.
Meanwhile, I keep reading the Anthony's book, and making myself much more confident about the process. From the other hand, I still have gaps in knowledge of tax related issues, especially, for those cases when the company is just bootstrapping and willing to save every single cent. I own a number of NOLO's book, but I don't have clear answers for some of my questions. (Are there any good self-made accountant & tax attorney book around?)
Another thing we might need to think about is choosing the bank for your small business. Keeping in mind that we're going to run very low during the first days (weeks and months), we need to be very careful about this choice. Originally, I was thinking about either Silicon Valley Bank (SVB) or First Republic. I didn't have personal experience with either one. (Some people might say: try Well Fargo, however, I'm pretty much done with them. That was one of the worsiest experience while keeping my personal banking with them, and I don't want to try it again anytime soon.) From the other side, First Republic was acquired by Bank of America (BofA), and doesn't have a very clear future plans. Besides, their rates are far from free. The SVB is not free either, but it has a pretty impressive reputation and networking, in addition to services that it can provide. You can even negotitate a pretty low (or even free!) introductory rates for a year or so, but you need to be interesting for them. (Keep in mind, that as it's always with good things, they tend to end soon. :) References are good, especially with SVB.
So, in my case, I'm not ready to bank high, and I'm not ready to be interesting for banks either. So what I need is something free. As much free, as it's possible. (Don't forget, that something that you're not paying for, is of the same quality.) So we have just a few banks on the plate right now. They are WaMu (now Chase), which still provides a free business account, with pretty much no limits, and HSBC, which limits you to 300 free transactions per month. There are might be some more, but I didn't find them.
There is also an option of local credit unions. However, more often this is not the most straightforward decision. And seldom free. (It looks Silicon Valley Credit Union has a free business checking though.)
So, as for me, I'm going to try WaMu. I've been a personal customer of WaMu and it's okay to start with. Eventually, I'm more directed towards SVB.
In about 2 weeks after registering the company with MyCorporation, I've received an email from UPS:
Message from MyCorporation:
This email is to notify you that you have been sent documents from MyCorporation. If a return label is provided, please return as soon as possible.
I should say it was rather fast. Hopefully, UPS wouldn't screw up its part now. Meanwhile, I'm going to check the POB for some mail, that I could receive.
The UPS didn't screw up this time and actually delivered the parcel even one day earlier than planned. The package was pretty simple: the yellow letter from Secretary of State that our Articles of Incorporation have been filed with the CA, we're required to file Statement of Information with the Secretary of State with 90 days (this can be done online) and business entities are subject to state and federal tax laws (what a surprise). It also includes SI-200 C form, for those who're willing to do the paper work, and self-addressed envelope with no post stamp (cheapo ;). Plus two stapled certified copies of Articles of Incorporation endorsed and filed by Secretary of State. So basically at this moment I have a C-Corp, which (after a few steps) I'll have to turn into S-Corp and start to use the power of incorporation.
The other envelope includes CORPORATION GUIDE CD, with video and documents (Corporate ByLaws, Minutes of Meetings and Stock Transfer Ledger) and printed business documents. Among this docs, you can find a pretty detailed checklist (but doesn't look to be very complete) of what you've done and what you have to do more.
You can click on the image to see it better. The bylaws included have some things to be filled in. Make sure to go through it and put whatever needed. I wish all docs would be coming stapled, but not just an unnumbered set of pages, which can be messed up pretty easily.
Also, I found instructions on filing Time Sensitive Information, what is basically SS-4 form (EIN) and 2553 (S-Corp) and five or six certificates templates (you normally give one to every shareholder).
Ok, so now it's time for Statement of Information and the fee is $25 (I barely see any reason for charging a fee for that, but California always was sorta greedy). You can do this online at https://businessfilings.sos.ca.gov. You will need to type the company name and it'll pull up the records for you. They ask for the principal business and executive addresses and don't accept POB there, so I had to put my residence. You can pay with a credit card after completing the form (and it's a pretty straight one). They will issue a receipt and confirmation after all.
Next comes applying for EIN. It's required to apply for EIN before electing S-Corp status (form and instructions). The EIN application is also very simple and basically is a set of questions. You can also do this online and it's free. After you're done with the form, you can receive the number right away in a printable format. Make sure to print it and save. (Actually, I do both - paper copy and PDF.)
Now we should prepare and file Notice of Stock Transaction and this can be done online as well. There is also a fee associated with this and is $25 for Value of Securities of $25,000 or less. The process starts with creating a profile on site, basically, filling the information about the corporation and mailing addresses. After you created profile, you can proceed with actual notice. The most important part is asking you about securities. In my case I have 1,000,000 of common stocks (you can't have different types of stocks in S-Corp) with $0.001 par value and I'm going to issue all of them, that is $1,000 of total transaction cost. However, I'm going to take only half in money and other half in different consideration (actually, some services that have to be done for the company). Make sure to print, manually sign and retain a copy in your records.
Now, it's time for S-Corp status election paperwork. You cannot do this online (and this sucks!). You can grab the form and instructions on the Web though. This one is editable PDF, is a little bit more complex than the previous ones, but very doable with instructions handy. I chose to fax the form, instead of mailing it. For California, the filing address and fax are:
Department of Treasury
Internal Revenue Service Center
Ogden, UT 84201
Fax (801) 620-7116
But make sure to double check it with instructions on-site. This form should include signatures of all shareholders, so it might take some time to prepare. The faxing wasn't easy either.
My next step is opening bank account. WaMu (Chase) wants everyone, but sole proprietorship to apply from the branch, and the minimum deposit is $100. (I think it can be withdrawn right away.) I've got a branch store which pretty close by. I took the whole set of papers and it was smart - they ask for as much information as I can provide. Definitely, they really wanted my FEIN confirmation and copy of Articles of Incorporation. They ask the typical set of questions, take your personal information and just in case if you have partners - make sure to show up all together, otherwise, they can't add anyone but yourself. The minimum deposit was $100 and they want it to reside on your account for 60 days (I don't know what happens if you take them out though ;). The whole process takes about 20 minutes and you're pretty much done. You'll get the temporary set of checks right away, a complimentary box of checks will be mailed in 2 weeks and a debit card should come within a week or so.
So now we're pretty much done with the brand new company, bank account and ready for my new ventures. You are welcome to ask me more questions on this matter, I know that the help is really needed, but sometimes (pretty often) attorney's or CPA's fees are way out of the question. (Keep in mind, that I'm neither CPA nor attorney.)
If you liked this post and would to say thank you, you can do that now. (And you're very welcome to! ;)
Disclaimer: I'm providing information. Use it at your own risk. Information is not a legal advice and isn't directly applicable to individual's specific circumstances. I'm not providing legal services or legal advices. Although I did my best to make my information accurate and useful, you should consult a lawyer to interpret and apply this information to your particular situation. My opinions are my own.
P.S. I was writing this post over some period of time, getting back and forth, so it might have inconsistencies in time references.
P.P.S. You can also get this post in PDF format, which is more printer-friendly. You're free to share direct links to this post, but please do not reprint or share PDF without permission.
But let me start from the very beginning. My partners and I have been working together for a pretty long time and we finally reached the point when we're ready to start something together. As far as the most of us based in California, we decided to incorporate here.
Yeah, I know, I know, the startups are about Delaware. But why did we decide to stay within CA? First of all, running the business from CA is a pretty solid nexus with the state, making us pretty liable to state taxes. Doing some consulting over there can add even more reasons for state to be sure about this. Incorporating in DE could be a valid reasons because of DE corporate-friendly status, but is not the best choice for us.
We're hungry people living of the budget. Any more state fees, taxes and extra paperwork (instead of building something that we can sell) is not a good choice. Remember, that running DE company in CA makes you liable to CA taxes, registering a foreign entity in CA and adding the extra amount of headache plus not taking away the minimum $800 CA franchise tax.
What type of company? S-Corp, as for now. Actually, it's a typical C-Corp, with S status election, coming after all, with some benefits on the top. Anyway, we're not about taking outside investment right now (at least, for those projects that we're on), so having limited number of shareholders plus one class of stock doesn't make a difference for us. And S-Corp can be converted to C-Corp pretty easily.
All other types of businesses, as well as LLC doesn't work for us. S-Corp gives more chances to save on taxes, which LLC doesn't. And while LLC is a little bit easier to run, I don't think it worths the money we can save on staying away from unemployment taxes (partially, though).
How to incorporate? A lot of people advise using Internet based services. I've looked at the number of them: AmeriLawyer.com, MyCorporation, The Company Corporation (Incorporate.com), LegalZoom, INCORP and IncFile. What can I say? That's an expensive thing for a startup. Besides, it's too much information over there that is repeated all over again and again, so it's so easy to miss something you might really need.After speaking with the most of these companies over the phone, the best choice is none. I'm sorry to say that, but I didn't find one good leader. All of them do the same thing, but they put them into different type of plans and packages and sell for different numbers: some of them try to pretend to be wholesellers, selling some staff, but missing some essential tools; another ones allow you to customize yourself, but give you so many options, so your mind is about to blow out.
So, yeah, you will have to do something yourself anyway. Anyway means you can take the top package, but you still have something to do. Is it something you're willing to pay hundreds of dollars for? I doubt so.
My choice was a little bit odd, but I believe it to be the good one. I had to invest some time for understanding a process, but it's never a waste.
First of all, I need a business address. So I ordered a PO box at the close-by USPS station. Likely, I'm living pretty close to SFO, so I could get a very inexpensive one ($42/12 months) over there. (And I'm getting "luxurious" San Francisco, CA address ;). Don't take it seriously, though, but I know some startup companies think that matters, while it does not.) Anyway, I don't want to mess with my residence address, as it can change or whatever else happens - this is not my bussines suite, so PO box is the better choice for me. USPS gives you a good informative resource online for location USPS station near-by and you can even order it from the Web. But you still need to visit office for the keys and personal verification process.
For the second, I had to get a California registered agent, which is required for every company, and cannot be a PO box. There is a plenty of choice online, and it varies a lot. I chose Patel & Alumit, which provides the service for $50/year. I had several questions and contacted them online and by the phone and I was pretty happy with the care. So they've got my money ;)Third, I need to incorporate. After considering many options, I decided to choose MyCorporation, an Intuit company. They provide a basic service for CA including 1. preparing and filing articles of incorporation, 2. publication requirement (although I don't know if it's necessary for CA), 3. personalized corporate bylaws, waivers, notices, and minutes of corporate meetings (very often charged extra!), and some other not imporant things with state fees included for $144 (with the MYFREE coupon which discounts $149 from the full price). Keeping in mind that the state fees are $115 (if I'm not wrong), I think that $29 is a fair premium paid. ;)
More things to go. While I'm waiting for actually, being incorporated, I decided to take a deeper breath and learn the process myself. While reviewing a number of books (primarily by NOLO though), I found an ultimate resource for learning about incorporating in California. This is the book How to Form Your Own California Corporation by Anthony Mancuso. $26 bucks is almost free for such amount of information included in the book and on CD.
Of course, nobody is perfect and I don't suggest limiting your understanding of the process by reading only this book. For example, Anthony pays too much attention for choosing LLC over S Corp. It could be very right for some type of ventures, however, not really for ours.
As for me, the incorporation process looks pretty easy and I'd definitely consider incorporating myself next time. At least, I'll have a better understanding of where I am standing at every moment of time. The MyCorporation's process doesn't give you a good idea and requires you to call for the status update.
The incorporation process takes time. However, being too impatient and after waiting for about a week, I called MyCorporation and inquired the status of my order. They told me that it'll take about 2 weeks more and I'll be receiving an email from UPS and the whole package shipped by that time. I'm still wondering about exact list of documents that I'm going to receive from them, and how much will have to do myself.
Meanwhile, I keep reading the Anthony's book, and making myself much more confident about the process. From the other hand, I still have gaps in knowledge of tax related issues, especially, for those cases when the company is just bootstrapping and willing to save every single cent. I own a number of NOLO's book, but I don't have clear answers for some of my questions. (Are there any good self-made accountant & tax attorney book around?)
Another thing we might need to think about is choosing the bank for your small business. Keeping in mind that we're going to run very low during the first days (weeks and months), we need to be very careful about this choice. Originally, I was thinking about either Silicon Valley Bank (SVB) or First Republic. I didn't have personal experience with either one. (Some people might say: try Well Fargo, however, I'm pretty much done with them. That was one of the worsiest experience while keeping my personal banking with them, and I don't want to try it again anytime soon.) From the other side, First Republic was acquired by Bank of America (BofA), and doesn't have a very clear future plans. Besides, their rates are far from free. The SVB is not free either, but it has a pretty impressive reputation and networking, in addition to services that it can provide. You can even negotitate a pretty low (or even free!) introductory rates for a year or so, but you need to be interesting for them. (Keep in mind, that as it's always with good things, they tend to end soon. :) References are good, especially with SVB.
So, in my case, I'm not ready to bank high, and I'm not ready to be interesting for banks either. So what I need is something free. As much free, as it's possible. (Don't forget, that something that you're not paying for, is of the same quality.) So we have just a few banks on the plate right now. They are WaMu (now Chase), which still provides a free business account, with pretty much no limits, and HSBC, which limits you to 300 free transactions per month. There are might be some more, but I didn't find them.
There is also an option of local credit unions. However, more often this is not the most straightforward decision. And seldom free. (It looks Silicon Valley Credit Union has a free business checking though.)
So, as for me, I'm going to try WaMu. I've been a personal customer of WaMu and it's okay to start with. Eventually, I'm more directed towards SVB.
In about 2 weeks after registering the company with MyCorporation, I've received an email from UPS:
Message from MyCorporation:
This email is to notify you that you have been sent documents from MyCorporation. If a return label is provided, please return as soon as possible.
I should say it was rather fast. Hopefully, UPS wouldn't screw up its part now. Meanwhile, I'm going to check the POB for some mail, that I could receive.
The UPS didn't screw up this time and actually delivered the parcel even one day earlier than planned. The package was pretty simple: the yellow letter from Secretary of State that our Articles of Incorporation have been filed with the CA, we're required to file Statement of Information with the Secretary of State with 90 days (this can be done online) and business entities are subject to state and federal tax laws (what a surprise). It also includes SI-200 C form, for those who're willing to do the paper work, and self-addressed envelope with no post stamp (cheapo ;). Plus two stapled certified copies of Articles of Incorporation endorsed and filed by Secretary of State. So basically at this moment I have a C-Corp, which (after a few steps) I'll have to turn into S-Corp and start to use the power of incorporation.
The other envelope includes CORPORATION GUIDE CD, with video and documents (Corporate ByLaws, Minutes of Meetings and Stock Transfer Ledger) and printed business documents. Among this docs, you can find a pretty detailed checklist (but doesn't look to be very complete) of what you've done and what you have to do more.
You can click on the image to see it better. The bylaws included have some things to be filled in. Make sure to go through it and put whatever needed. I wish all docs would be coming stapled, but not just an unnumbered set of pages, which can be messed up pretty easily.
Also, I found instructions on filing Time Sensitive Information, what is basically SS-4 form (EIN) and 2553 (S-Corp) and five or six certificates templates (you normally give one to every shareholder).
Ok, so now it's time for Statement of Information and the fee is $25 (I barely see any reason for charging a fee for that, but California always was sorta greedy). You can do this online at https://businessfilings.sos.ca.gov. You will need to type the company name and it'll pull up the records for you. They ask for the principal business and executive addresses and don't accept POB there, so I had to put my residence. You can pay with a credit card after completing the form (and it's a pretty straight one). They will issue a receipt and confirmation after all.
Next comes applying for EIN. It's required to apply for EIN before electing S-Corp status (form and instructions). The EIN application is also very simple and basically is a set of questions. You can also do this online and it's free. After you're done with the form, you can receive the number right away in a printable format. Make sure to print it and save. (Actually, I do both - paper copy and PDF.)
Now we should prepare and file Notice of Stock Transaction and this can be done online as well. There is also a fee associated with this and is $25 for Value of Securities of $25,000 or less. The process starts with creating a profile on site, basically, filling the information about the corporation and mailing addresses. After you created profile, you can proceed with actual notice. The most important part is asking you about securities. In my case I have 1,000,000 of common stocks (you can't have different types of stocks in S-Corp) with $0.001 par value and I'm going to issue all of them, that is $1,000 of total transaction cost. However, I'm going to take only half in money and other half in different consideration (actually, some services that have to be done for the company). Make sure to print, manually sign and retain a copy in your records.
Now, it's time for S-Corp status election paperwork. You cannot do this online (and this sucks!). You can grab the form and instructions on the Web though. This one is editable PDF, is a little bit more complex than the previous ones, but very doable with instructions handy. I chose to fax the form, instead of mailing it. For California, the filing address and fax are:
Department of Treasury
Internal Revenue Service Center
Ogden, UT 84201
Fax (801) 620-7116
But make sure to double check it with instructions on-site. This form should include signatures of all shareholders, so it might take some time to prepare. The faxing wasn't easy either.
My next step is opening bank account. WaMu (Chase) wants everyone, but sole proprietorship to apply from the branch, and the minimum deposit is $100. (I think it can be withdrawn right away.) I've got a branch store which pretty close by. I took the whole set of papers and it was smart - they ask for as much information as I can provide. Definitely, they really wanted my FEIN confirmation and copy of Articles of Incorporation. They ask the typical set of questions, take your personal information and just in case if you have partners - make sure to show up all together, otherwise, they can't add anyone but yourself. The minimum deposit was $100 and they want it to reside on your account for 60 days (I don't know what happens if you take them out though ;). The whole process takes about 20 minutes and you're pretty much done. You'll get the temporary set of checks right away, a complimentary box of checks will be mailed in 2 weeks and a debit card should come within a week or so.
So now we're pretty much done with the brand new company, bank account and ready for my new ventures. You are welcome to ask me more questions on this matter, I know that the help is really needed, but sometimes (pretty often) attorney's or CPA's fees are way out of the question. (Keep in mind, that I'm neither CPA nor attorney.)
If you liked this post and would to say thank you, you can do that now. (And you're very welcome to! ;)
Disclaimer: I'm providing information. Use it at your own risk. Information is not a legal advice and isn't directly applicable to individual's specific circumstances. I'm not providing legal services or legal advices. Although I did my best to make my information accurate and useful, you should consult a lawyer to interpret and apply this information to your particular situation. My opinions are my own.
P.S. I was writing this post over some period of time, getting back and forth, so it might have inconsistencies in time references.
P.P.S. You can also get this post in PDF format, which is more printer-friendly. You're free to share direct links to this post, but please do not reprint or share PDF without permission.
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