Is Buying a Shelf Company a Good Strategy?

As a startup business owner you might find yourself overwhelmed by all the new information you need to assimilate. This is especially true if you have designs incorporating your business and eventually taking it public. Just because you’re starting a business doesn’t automatically mean you need a business degree, but it will help to familiarize yourself with the basics. One business model concept you should be looking into is whether or not to buy a Shelf Company as part of your business strategy.

So, what exactly is a Shelf Corporation?

A Shelf Corporation or Aged Corporation is an official corporation that has been created but is not being used by that creator. There are many reasons why a corporation could still be idle but that doesn’t mean they don’t have any inherent value. Think of these as “instant” corporations as it pertains to helping your business start up. How can your business benefit from taking over a Shelf Corporation? Consider the following:

·         Time Saver

Buying a Shelf Corporation allows your business to get up and running a lot faster. The incorporation process can often drag on for months. With a Shelf Corporation that work has already been done. It would be like stepping into a franchise business. All the equipment and supplies have been purchased; you’re just taking over control.

·         Faster Access to Credit

Many vendors would prefer to do business with an established corporation. Therefore, a new startup might find obtaining lines of credit a challenge. An additional hurdle for a new business is being asked to provide a personal guarantee for loan. That could greatly hinder your chances to secure immediate financing. A Shelf Corporation can establish the kind of corporate longevity that can open up a lot more credit possibilities.

·         Instant Credibility

A Shelf Corporation allows your business to obtain instant credibility. This is important to potential investors. You’re not fooling anyone because the history of the corporation will be a matter of record. Instead, you’re stepping up your professional game and establishing your credentials.

·         Access To Government Contracts

Depending on your business, you might have the opportunity to do work for the government whether that is a local municipality or on a national level. These can be a very lucrative asset for your business. However, some government agencies require a business to be already be operational for a specific amount of time. You can meet that requirement with a Shelf Corporation.

How to Understand Canadian Small Business Taxes

Starting a small business means you’ll have the opportunity to become your own boss and make some of your dreams come true. It also means you’ll have to pay business taxes. For some small business owners paying taxes turns that dream into a nightmare. There are numerous resources you can tap into that can guide you through the completion of the tax forms if you decide to make it a DIY project. Many business owners prefer to bring in outside help like an accountant or tax attorney. Whichever option to choose, it will be helpful to begin with a basic understanding of small business taxes.

What Type of Business Are You?

Entering into a business means you have to pick which type of business you’ll be operating as. Your choices are:

1)      Sole Proprietorship

2)      Partnership

3)      Corporation

A sole proprietorship means you are the only owner and you’re not incorporating your company. With a partnership, there will be at least two owners (could be more) who contribute to the business. Any profits you make in a partnership will be divided based on the rates established in your partnership agreement. A corporation is a standalone legal entity that is allowed to sign contracts and own property. Many business owners choose the corporation option because it provides a level of protection for personal assets. In other words, if your corporation is sued then only the corporation’s assets are in play.

What Are the Filings Dates and Forms?

As sole proprietorship business owner you will be filing a personal income tax just as you would if you were working for someone else. You’ll pay taxes on all your business earnings that will be included on the T2124 Statement of Business Activities form. The fiscal year for a sole proprietorship ends on December 31^st. If you want to select a different end of the year in fiscal terms you’ll need to use form T1139. With the December 31^st end you’ll need to file by June 15^th.

With a small business partnership, the partners will file their share of the business earnings on their individual tax returns. The same filing deadlines as the sole proprietorship business apply.

A small business that has incorporated will use form T2 for corporate income taxes. That form needs to be filed within six months of the end of the business’ fiscal year. All tax forms for any type of business need to be kept for six years.

What Are the Earnings and Expenses?

Here’s where it gets a bit complicated. When a business records any type of earning or expense they need to use the Accrual Method. Translation: You’ll record revenue when you have delivered the good or service not when you’re paid for it. Same for expenses; you record when you incur the expense, not when you pay for it. This is why thorough record keeping is so essential for a small business. To make a business expense deduction, you need to prove that whatever you purchased was used exclusively by your business. As for earnings, that is considered as any money you take in that is a result of your business services.

The Google Patent Search Tool - Does This Affect Your Intellectual Property?

A patent is all about protection for your intellectual property. The United States provides patents to give inventors the right “to exclude others from making, using, offering for sale, or selling their invention throughout the United States or importing their invention into the United States.”

Every country can grant a patent which would govern that property in that country. It is conceivable that a patent granted in the U.S. or Canada doesn’t necessarily offer protection against infringement in a country like China or Russia.

Still, it is advisable for a business that has a piece of intellectual property to have it patented in as many countries as possible.

Google has created a patent search which is becoming a huge asset to many businesses. When you consider that there are 8 million approved patents and 3 million pending patent applications in the U.S. alone then you can see the need for a search engine. Now Google has put that database of the United States Patent and Trademark Office online for easy access. How can this help you protect your intellectual property? Consider these benefits:

Clearing the Field

The first obvious benefit of a Google patent search is to see if somebody beat you to the punch. In other words, has your brilliant idea already been developed? This is a search that really should be conducted once the plans for an item are ready to go to the prototype stage. If you find that your idea has been patented you’ll either have to rethink it entirely or scrape the project. Better to learn that in the early stages of development.

Borrowing Innovations

Suppose you’re in the kind of business that needs to create a machine to make the perfect widget. You’re really selling the widget but it has to be mass produced to be cost effective. That special machine you design to make the widget could be patented. However, you might find that another business has a similar machine you can adapt. There’s no need to go down the expensive patent review process when you can license the right to use that technology from the original patent holder. Remember, you want to get to your “widget” and the most affordable and stress free path to that goal is the way to go.

Getting Inspiration

There aren’t a lot of secrets when it comes to granting a patent. If you’re working through a challenging design you might do a patent search for similar products to see how other inventors overcame their hurdles. Who knows? You could be inspired to take your idea in a new direction that no one has thought of.

Inventor 411

It could be that you’re so impressed with a particular product or piece of intellectual property that you want to know more about the originator of that idea. The patent search will let you trace the inventor and find out what other ideas they’ve worked on.

When Saying No is in Your Best Interest

If you’ve ever worked as a salesman you were probably coached to take “No” as an incentive to keep pushing for a “Yes.”

In the world of sales that’s a good philosophy to adopt, but as a business owner you might be faced with many instances where you’ll have to say “No” and some of those “No’s” could be directed at a potential client.

Is there a right time to say “No?” Consider the following potential factors:

Company Standards

That would be your company standards. Every company builds its success upon a strong reputation. In today’s 24/7 news cycle, that reputation is as fragile as ever. One negative review can zip around the globe and become a viral infection that puts a dent in your business reputation. You don’t want a client bringing your company quality standards down by asking for compromises. There could be many reasons why a client might be in a hurry to close a deal or in need of a product shipment. However, if you rush to cater to those clients and your business suffers, who is the real loser? Don’t let the promise of a big payout be the reason why you compromise on your standards of excellence.

Over-confidence

 “I can do that.” It’s what every client wants to hear and it’s a phrase you should be able to deliver with confidence but suppose it’s not true? If you take on an assignment or promise of a delivery that you can’t meet then your overconfidence could be your undoing. You might have to hire extra workers or pay for overtime which cuts into your profit margins. There might be additional training that is required which can impede the deliver. For instance, if you were asked to deliver a Power Point presentation in four hours and you’ve never created a power point presentation the answer shouldn’t be “I can do that” but “no.”

Strong Objections

There is a learning curve associated with entering into a relationship with a new client. You both are going to be finding out about each other’s company practices. Suppose you uncover something that goes against your own ethics? What if the client asks you to falsify invoices to make them look good? Yes, they can promise additional business but you’ll be selling out your own standards and more than likely get in trouble with the government. You might also find that some members of your staff have objections about a client’s business practices. If you trust your staff then you should consider their view points on this matter. This is a perfect time to say “no” to a client.

Saying “no” isn’t the end of your business. In many ways, it can make your business stronger.

Obstacles for Female Business Owners

Despite the many advances that women have made in the business world there are still many obstacles standing in their way. This is especially true for the entrepreneur who is starting up her own business. None of these obstacles are insurmountable, but they should be taken into consideration when approaching the idea of starting a business.

1.      Discrimination

You wouldn’t think discrimination against women would still be an issue this far into the 21^st century. The fact remains that there are some investors and clients who still might give pause to a woman CEO. In some cases this discrimination can come from other women! This doesn’t mean that deals won’t get done with a woman in charge; it’s just that this entrenched perception is hard to shake. The good news is that the new generation of business professionals aren’t stuck in the past.  

2.      The Boy’s Club

Not every business deal goes down between the hours of 9 to 5. Relationships are fostered in all kinds of social situations like the golf country club or gym. In these cases, men gravitate towards men. It’s easy to imagine that a lot of business can be conducted over the course of 18 holes. Yes, women can play golf too but it’s an area that is dominated by men and unless you can play with the boys you won’t have that kind of direct access to potential new business relationships.

3.      The Family Issue

This is another of those entrenched perception issues. If a woman is a mother of younger children she is expected to make those children a priority. Forget the fact that she has a husband or a nanny; she’s still a “mom.” This is even more difficult to overcome with younger entrepreneurs who might start a family and require maternity leave. The truth is that ever since women have entered the workforce they have been fighting to strike a balance between work and family just as their husbands do. Hopefully, the woman business owner will have that support system in place to insure her success.

4.      Competition and Self-promotion

This is an area that could be more of a stumbling block on the part of women as opposed to an outside perception of them. Often, women have it ingrained in their psyche not to be competitive or to self-promote. However, both of those are important qualities for any successful entrepreneur. It’s important for women to move beyond “that’s how I was raised” and to recognize that the best approach to business is a level playing field. If the guys are going to be competitive, then you should as well. As for self-promotion there is nothing wrong with marketing yourself. Be proud of your accomplishments and share them with the world!

Best Apps for Your Small Business

It seems as though with every new technological advancement businesses flourish. The first Xerox copy machine was introduced back in 1960. And now, can you imagine any business surviving without a photocopy machine? The next major innovation was the fax machine which allowed businesses to instantly pass documents and purchase orders across the country and around the world.

Then came the internet and everything changed! Today, savvy small business owners are tapping into a vast array of resources that fit in the palm of their hand. We’re talking about mobile smartphone business applications. How can they help your business succeed?

Consider the following apps to help run your business virtually.

Bump

The number one way for business owners to connect with clients and contractors is by passing along their business card. With the Bump app you can now transmit your contact information directly by “bumping” or touching your phones together.  You can also “bump” photos and files. This might not replace your business card completely but at least you’ll be guaranteed that whoever you “bump” will be getting your info!  You no longer have to keep hanging onto hundreds of paper business cards anymore!

Expensify

Filing an expense report is essential for anyone who wants to be reimbursed by their company. But it’s also a tedious chore to cobble together receipts and mileage numbers. Now with Expensify you can take the drudgery out of writing expense reports. You can scan and upload receipts and file them by the specific business trip. The report generated by Expensify can be directly emailed to a company’s finance officer.

Square

From the founder of Twitter comes a remarkable app that turns your smartphone into a virtual payment processor. Square allows businesses to set up an account and accept credit card payments directly into the phone. This means you can receive a payment in any location and at any time. Best of all, there are no monthly fees or sign up costs. Instead, Square takes a 2.75% service charge for each swipe. That is comparable to a standard credit card machine. This is a great app for a business which sells goods or services away from an office or storefront.

InDinero

With this app you’ll be able to access and track your bank accounts and cash flows. This allows you to manage operational expenses on a day-to-day basis. The InDinero app syncs up to your business bank and credit card accounts.

Google Drive

Google has already changed the way we search the internet. With Google Docs, businesses are able to share information with staff members and clients. Now Google Drive lets those same users effortlessly upload and edit any type of files from your PC to your smartphone. This is like having a mini-cloud drive on your phone. Best of all you get 5GB of storage for free. This is perfect for business that needs to maintain email storage.

Have you discovered an app that has changed the way you do business?

5 Reasons to Keep Your Minute Book up to Date

One of the many requirements of a corporation is to maintain a minute book. This is the official record of all of your company’s business dealings. Often it falls to the responsibility of the “recording secretary” of the corporation to keep the minute book up to date. Why is this important? Here are the top five reasons to keep your corporate minute book up to date.

1)      Detailed History

If for no other reason, the minute book becomes the written history of your corporation from its inception up to the last board meeting. This “open book” allows the many potential owners and their lawyers the opportunity to review all the actions taken by the corporation. It also establishes important financial milestones which will come in handy when it is time to report taxes and expenses.

2)      Supports the Corporate Structure

A current minute book record will clearly show how decisions were made and voted on. This might come into play when a minority shareholder or director questions the actions of the board. In extreme cases, a government agency might want to review how certain decisions were made. The minute report clearly lays out the corporate structure at any given time. By doing so, the authority to make those decisions shouldn’t come into question.

3)      Legal Backing

The bigger the corporation the bigger the chance that a legal opinion will have to be written to support a decision made by the board. With this record, your company’s attorneys will be able to build their opinions on a solid foundation of facts. This type of opinion could be written when a business is looking for investors and needs to establish the various banking relationships of the parent company. A corporation’s minute book can also serve as evidence in any dispute.

4)      Stock Records

The minute book should have a section that keeps track of all the company’s stock records. It’s vital that this is always kept up to date so as to establish the current ownership. In fact, a corporation’s ownership principals are only officially recorded in the minute book. This record should also keep track of stock transfers and who the original holders of the stock certificates are.

5)      Dividend Records

Just as it is important to trace ownership, it is equally important to keep track of dividend and compensation payments. A corporation cannot provide a clear financial portrait without access to these kinds of numbers. In fact, all company expenditures should be included in the minute record.

 

Accepting a Position as a Director in a Company

 

Being invited to join a promising young startup is certainly a boost to the ego. Clearly, your qualifications and experience have impressed someone enough to offer you a position as director. However, you have to think like a business professional. Put aside the compliments and ask “Do I know what I’m getting myself into?”

 

Because you might be taking a radical change in your career path it’s vital that you do research before accepting a position as a director. The following are some key areas you should thoroughly understand about the start up.

1)      Their Finances

Start with asking, “How much money do they have in the bank?” and build from there. What you should be looking for are actual funds and not the promise of investors coming on board. A line of credit is a good thing for the company to have but without working capital, that credit can quickly exhaust itself and add to the red ink in a ledger. Beyond the working capital, you also want to examine the company’s valuation. This will include income projections versus expenses. Bottom line: You need to get the complete financial picture.

2)      Their Competitors

Every startup begins with the notion that they are better than their competitors. It’s your responsibility to take off the “rose colored glasses” and garner a true look at the marketplace. Their competitors wouldn’t be in business if they weren’t doing something right. What exactly are they doing that your startup can’t do? The opposite question applies as well when asked about the strengths of your potential company’s abilities. Not only are competitor’s sales important to review but also their approach to marketing strategies. How will your startup do things differently?

3)      Their Investors

In your new position as director for a startup you might be charged with the task to bring in new investors. Hopefully, that company will already have a few investors supplying capital and intelligence. You would be at an extreme disadvantage if there were no investors already on board. That might prove to be too daunting of a challenge.

4)      Their Board of Directors

Who will you be working with in this new venture? This is crucial to understand because engaging in a startup will have your mettle tested. You might be asked to work long hours with this group in addition to making other sacrifices in your personal life. Will it be worth it? It’s hard to judge that until you have some tangible sales figures but you certainly don’t want to invest your time and energy with a group of directors who aren’t up to the task. Don’t ever forget that the solid reputation which earned you the offer to join the startup is the same reputation that will be at risk.

How to Remove a Poorly Performing Director from the Board

Any type of corporation will have a board of directors established to develop strategies, policies and implement those ideas. The board is beholden to the shareholders in the sense that it is their job is to increase the profits which are paid out as dividends. It falls under the responsibility of the board to make sure that all of the members are living up to the standards of excellence that have been established for that company to succeed.

Just because someone has been named to an executive board is no guarantee that they’ll be up to the task. In certain circumstances it might become apparent to all that a particular board member needs to be removed. Usually the reasons are that they have become ineffective or are having difficulty working with the other board members.

When it is obvious that a move needs to be made, the board of directors will be restricted by the guidelines they have established in their bylaws. Here are some examples of bylaw clauses which can determine how a poorly performing director is removed from a board.

Term Limits

A majority of corporations have built in term limits for their board of directors. Typically, a director might serve out a three-year term and then be rotated out. In some cases a board member proves to be extremely valuable. For them to outlive their term limit a special vote would have to be conducted.

On the other hand, if a board director that has been targeted for removal has only a few months left on their term it might make sense to let them simply retire as opposed to creating a potential “dust-up” in the company.

Asking for a Resignation

Often the targeted board member might not have any idea they are being looked at to step aside. This would require a personal intervention from the chairman to this director. In the meeting, the chairman would spell out the areas of concern and ask for that person’s resignation.

On many levels, this is a “face saving” gesture. It allows for a smooth transition and doesn’t automatically tarnish the reputation of the board or the member being asked to leave. To insure this is all above board, it is advisable that the company’s lawyer be present during the discussion.

Impeachment

Impeachment is the formal process by which an executive board can remove a member. The process should be clearly spelled out in the bylaws including all the specific reasons for dismissal. For an impeachment to pass you will need a 2/3 majority of the board.

It is important that any such action like the removal of a board member be supported by a unified front. A bad press report can drive the price of a company’s stock down. Board shake-ups would certainly qualify as bad news.

That is why it’s best if the company can get out in front of the story with a definitive press release explaining the transition. The goal is to insure the shareholders and the stock traders that business will proceed as normal.

Reverse Takeovers - Evaluating a Possible Alternative to the IPO Exit Strategy

From the very first business contract there were loopholes. These are ways around a particular rule or guideline that offer a more desirable outcome. It isn’t breaking the law, but coming up with an alternative approach.

That’s the best way to describe a reserve takeover: it’s a loophole to expedite the IPO strategy and provides a viable alternative for private companies to become publicly traded companies without a lot of hassle.

The Basics of a Reverse Takeover

In a reverse takeover, a private company buys controlling interest in a publicly traded company. The private company then merges with that public entity and in effect becomes a publicly traded company. The original public company is known as a shell company. That’s because all that really exists is the organizational structure and all that comes with that in terms of approved documents, corporate filings and other paper work.

The shareholders who are part of the private company assume a majority stake in this shell company and thereby are granted controlling interest. If the shell company is in compliance then this type of transaction can be completed in a matter of weeks as opposed to months (or years) following the normal course of filing for an IPO. There needs to be due diligence in terms of the proper disclosure forms filed once the merger has been enacted.

The Pros of a Reverse Takeover

On the top of the list of benefits of a reserve takeover is the potential for bigger earnings. The contributing factor is because there is less stock dilution than with a traditional IPO. There is also no need to raise capital as you would with the former IPO which makes this an affordable and streamline process.

The reverse takeover is often less beholden to the fluctuating and sometimes volatile market conditions. Even the hint of a bad review or negative earning potential can send a stock plummeting. That is not something you want released on the day of your IPO offering.

Look no further than the IPO offering of Facebook for a perfect example of this.

Finally, because a reverse takeover is less time consuming, the private company in play can focus on their business instead of all enormous “to-do” list required to get ready for a standard IPO. In the long run that’s going to be good for business all around.

The Cons of a Reverse Takeover

Think of a reserve takeover as moving your business into an established warehouse building. There might be some problems with that “warehouse” that could impact your business. The shell company might have some sloppy bookkeeping practices or pending lawsuits.

 There might even be some greedy shareholders who want to dump their shares right out of the gate. That could impact the offering. This can be avoided with a share lockup put into place before the merger.

There is also a huge learning curve for a private company to go through once it enters into the world of a publicly traded company. Sometimes those board members aren’t ready for the new game.

Is a reverse takeover right for you?