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WEEK 2 : JAN. 26

WEEK 2 : JAN. 26. MBAX 6860 : Bootstrap Tactics for Entrepreneurs. BUSINESS FORMATION. OVERVIEW . Name selection Business entity selection Office space Bank My take on it…. NAME SELECTION. You’re going to live with it! ID key descriptors of company Brainstorm list of names

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WEEK 2 : JAN. 26

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  1. WEEK 2 : JAN. 26 MBAX 6860 : Bootstrap Tactics for Entrepreneurs • BUSINESS FORMATION BOOTSTRAP

  2. OVERVIEW • Name selection • Business entity selection • Office space • Bank • My take on it… BOOTSTRAP

  3. NAME SELECTION • You’re going to live with it! • ID key descriptors of company • Brainstorm list of names • Narrow down to top 5 • Test top 5 through informal research • Trademark/URL registration BOOTSTRAP

  4. ENTITY SELECTION • Sole Proprietorship • Partnership • Limited Partnership • Corporation • C Corp • S Corp • Limited Liability Company (LLC) BOOTSTRAP

  5. SOLE PROPRIETORSHIP • Ownership: Individual • Liability: Owner personally responsible • Continuity: Death dissolves business • Transferability: Owner has complete control • Capital: Personal funds or loans • Control: Proprietor has complete control • P&L: Proprietor receives all profits • Taxes: P&L treated as personal income BOOTSTRAP

  6. SOLE PROPRIETORSHIP • Advantages: • Simple to create • Pass-through to personal tax returns • Disadvantages • Personal liability to all debts and judgments BOOTSTRAP

  7. PARTNERSHIP • Ownership: Two or more partners • Liability: Partners all liable for business • Continuity: Death dissolves business • Transferability: Consent of all partners • Capital: Personal funds or loans • Control: Partners have equal control • P&L: Distributed per partnership agreement • Taxes: P&L treated as personal income BOOTSTRAP

  8. PARTNERSHIP • Advantages: • Simple to create • Pass-through to personal tax returns • Disadvantages • Partners personally liable BOOTSTRAP

  9. CORPORATION • Ownership: Stockholders • Liability: Limited to amount of investment • Continuity: Exists independent of individuals • Transferability: Buy/sell stock at will • Capital: Sale of stock, bonds, loans • Control: Stockholders  Board  Mgmt • P&L: Dividends, sale of stock • Taxes: Corporation taxed, dividends taxed BOOTSTRAP

  10. CORPORATION • Advantages: • Limited personal liability – corporate veil • Unlimited number of stockholders • Shelter tax liability between owners and corp.. • Disadvantages • Cumbersome and expensive • Double taxation BOOTSTRAP

  11. LLC • Ownership: “Members” own some percent • Liability: Limited to amount of investment • Continuity: Per LLC Articles of Organization • Transferability: Per LLC Articles of Org. • Capital: Sale of membership %, debt • Control: Per LLC Articles of Organization • P&L: Per LLC Articles of Organization • Taxes: Treated as partnership BOOTSTRAP

  12. LLC • Advantages • Tax choice between partnership or corp. • Limited personal liability • Disadvantages • More costly to form than partnership or sole proprietorship BOOTSTRAP

  13. S CORP vs. C CORP • These are tax distinctions only • C Corporation • Unlimited number of stockholders • Earnings taxed at corporate rates • Dividends taxed at individual rates • Double taxation • S Corporation • Profits (losses) pass through to shareholders • Profits taxed as individual income BOOTSTRAP

  14. ADVANTAGES OF S CORP • Profits (losses) treated as personal income • Retain corporate limited liability • Not subject to minimum tax (vs. C-Corp) • Stock may be voting or non-voting • May use cash (vs. accrual) accounting • Capital gains (losses) treated as individual income BOOTSTRAP

  15. DISADVANTAGES OF S CORP • No more than 75 shareholders • Shareholders must be humans • Shareholders must be US citizens • C-Corp tax rate lower for profits < $100,000 • May not deduct benefits for stockholders • Only one class of stock (no preferred) • Net loss limited to stockholders investment BOOTSTRAP

  16. OVERVIEW • Name selection • Business entity selection • Office space • Bank • My take on it… BOOTSTRAP

  17. WHERE ‘YA GONNA WORK? • Garage • Virtual office; ex = Virtual office • Incubators • Sublease • Commercial space BOOTSTRAP

  18. BANK • References from friends/family • Shop around and negotiate • Fees, amenities, contacts, online access, merchant account • Keep business & personal separate! • Need: articles of incorporation, ID, Executive Summary, EIN, and a smile BOOTSTRAP

  19. FORMS & MORE FORMS • Name • USPTO.gov ($335 per class) • Colorado Secretary of State ($10) • URL ($8), godaddy.com • Legal formation • EIN (form SS4) • Articles of incorporation ($50) • Working agreements/bylaws BOOTSTRAP

  20. FORMS & MORE FORMS • Office space • Lease • Insurance policy • Bank • Application (need EIN and articles of incorporation) ($20 per month) BOOTSTRAP

  21. MY TAKE ON IT… • Name • Be diligent and thorough and absolutely creative • Legal formation • Depends on business – overall, corporation • Office space • This grows with the business • Sublease! BOOTSTRAP

  22. MY TAKE ON IT… • Bank • Shop around, negotiate and CONTACTS • Forms • Do it well – make a SOLID foundation BOOTSTRAP

  23. OVERVIEW • Name selection • Business entity selection • Office space • Bank • My take on it… BOOTSTRAP

  24. WEEK 3 • Bootstrap founders • Speaker = Dan King • Tasks to complete: • Readings • ES • Company name • Infrastructure for business • Forms, forms and more forms BOOTSTRAP

  25. “To risk nothing is to risk everything” • --Unknown BOOTSTRAP

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