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Starting a Business Aged 50 Plus

by Sentient
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Setting up a business when you are older can seem like a crazy idea. Friends and family might even tell you that. But there are some real pros to being an older person and setting up a business, as long as you have the dedication to keep going with it. Here we will give you the lowdown on starting a business aged fifty plus.

That One Big Idea

If you have that one big idea that you have been considering for years, why not just go for it? Chances are your idea is brilliant and people will love it. Make sure to check that someone else hasn’t beat you to it. Also don’t worry if they have, adapt it a little give it a new spin and see what you can come up with. It is likely if you have had that idea in your head for many years, it is a good one and what is the harm in giving it a go?

Get Help

A great way to be as savvy as possible is to get some external help you can trust. Come at it from a business perspective. Do not just employ your niece as she made a great PowerPoint once, ensure that you are getting professional help. When it comes to business you know your strengths, but it can be difficult to see your own weaknesses, especially if you don’t know what you are meant to be strong or weak at! On freelancer sites like Fiverr and UpWork, you can hire freelancers to help you write a business plan. This is a great start. Ensure you read over their reviews before entering a contract. You can also get mentored with online business support and coaching, which can be very helpful for new entrepreneurs.

DIY Business

Once you have a plan and know where you are going, you can start to look around for free to use resources to help you set up your business. A brilliant example of this is to create your logo. A business logo does not need to come from an expensive designer nowadays but can come from an online logo creator tool just as easily and without the hefty price tag.

Social networks are a must-have for new businesses. Sign up to them and fill your pages with your branding. There are many socials that when you sign up to them as a business that you can use for free to market yourself to your chosen demographic.

Starting a business when you are fifty plus is a great chance to renew your life, live your dreams and enjoy yourself. It’s also a great way to earn more money before you retire. However, it does not always work out so make sure you are cautious while having fun and don’t invest too much money before you know it is already working!

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Should My Company Issue Stock Appreciation Rights (SAR)?

by Sentient

Why Should I Offer Stock Appreciation Rights?

Two of the most common benefit plans companies offer their employees are employee stock option plans (ESOP) and stock appreciation rights (SAR). While both have unique benefits, for the employer and its employees, there are differences and financial considerations that must be addressed before choosing the right benefit incentive plan for your company. Whichever plan you choose, each method motivates employees to increase shareholder wealth and offers compensation for their hard work and commitment. In this article, we will focus on SAR. Read our article on ESOP to compare options and follow up with business startup expert, attorney, Matthew Rossetti. 

In the know – key terms

  • Grant date is the date that the employer and employee agree to the terms and conditions of a stock option, or equity-based award. Once agreed upon the stock appreciation right is granted to the employee and the date is recorded as such. The grant date also determines the exercise price.
  • Vesting date is the date an employee is eligible to exercise a specific number of options. Typically, starting on the date of vesting to the ending on the SAR’s expiration date, a vested SAR may be exercised, in whole or partially. Prior to this date, no payout will be granted. Note, exercising your rights may be dependent on how long an employee works for the company, employee performance, or based on the overall performance of the company.
  • Expiration date refers to the last day an employee can exercise stock appreciation rights, and only if the market price exceeds the exercise price. However, if the SAR’s market price is below the exercise price, the shares are worth nothing and can never be exercised. Furthermore, If the terms and conditions of the bonus agreement are not met by this date, the employee will lose the SAR.
  • Exercise price is the market price of the stock on the grant date, and the price an employee is able to purchase shares, once options are vested. There is also an exercise period, which is the time in between the vested rights and the expiration date, wherein the employee may exercise their appreciation rights. 

Unpacking SARs

Offering a SAR is a great benefits plan for startups, especially if you are an S-Corp, LLC, partnership, or other business entity that is unable to award stock. A SAR allows a business to reward its employees without exhausting any cash reserves or giving up any equity and they can usually fund the rights through the organization’s payroll system.

Stock appreciation rights are essentially a bonus – usually paid out in cash, sometimes stock, or a combination of the two – to a company’s employees. These bonuses are issued with a grant date, an exercise price, a vesting date, and an expiration date. This type of benefit plan enables an employee to cash-in on appreciating stock prices, after a specified vesting period, between the grant date and the exercise date. However, this payout is only accomplished if the employer’s stock price rises. 

Planning is key

The ability to create a customized benefits plan, structured for the betterment of a business and its employees, is what makes SARs a popular option amongst many businesses looking to incentivize their employees. Depending on how a company is set up, employers have a lot of flexibility when planning because there are few to no restrictions. 

  • Employers have the ability to offer their employees options to exercise their SAR when they choose to.
  • Vesting schedules provide a performance-based retention tool, structured in a way that bonuses are only paid out if an employee lives up to the original terms and conditions agreed to on the grant date. 
  • Predetermined plans can be agreed upon as to what an employee will receive if he/she resigns or is terminated, if anything at all.
  • Non-compete clauses can be implemented into the employer/employee agreement in order to ensure employee loyalty.  
  • Employers can further incentivize top performers by offering some of the net proceeds if the company is sold.
  • Companies that already have an ESOP in place can offer SAR as an additional incentive for its employees.
Caveat

While stock appreciation rights do have their advantages, such as tax deductions for corporations, and no upfront cost to employees to exercise rights, there are a few things to understand in advance. 

  • An employer is required to withhold taxes, either by withholding cash or shares.
  • Publicly traded companies may require shareholder approval when issuing stock appreciation rights.
  • A company may need to follow retirement plan rules if it wishes to cover all employees and offer benefits after termination.
  • Employees will not receive dividends or voting rights.
  • Upon exercising rights, employees must report any income on the fair market value of the amount of the right received at vesting – even if it is a share and is not sold.
  • If employees receive cash upon the sale of the company, it will be taxed as ordinary income tax

When planning, many decisions must be made carefully and strategically. Employers must consider vesting rules, liquidity concerns, eligibility, rights to interim distributions of earnings, tax implications and so much more. It is always advisable to discuss any plan to issue SARs with a knowledgeable attorney. Sentient Law is here to assist you.

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Is An ESOP Right For My Company?

by Sentient

Win-win

An Employee Stock Ownership Plan (ESOP), is the most popular form of employee ownership in the U.S. ESOPs helps businesses establish a transition plan by creating a market for their company’s stock. This method of ownership transfer or sale can be a sound strategic move for business owners to ease the burden of retirement and to sell in a way that is advantageous for tax purposes. The benefits of an ESOP are not mutually exclusive, it is also a great way to spread the wealth amongst dedicated employees and promotes an ownership culture within a company, making this a win-win benefit plan. After all, giving employees a sense of ownership can make them feel like an important part of the company, incentivizing them to work harder and fostering loyalty and productivity.

The implementation of an ESOP can be extremely complicated, Matthew Rossetti is an expert in this area of practice and will confidently guide you through the process. Let’s take a deeper look into it to determine if an ESOP is the best option for your company.

ESOP simplified

Stock options give employees the opportunity to own parts of the company they work for. In an employee stock option plan a company sets up a trust and this trust can acquire, hold, and sell the company’s stock. An ESOP (employee stock ownership or employee share ownership) is a kind of employee benefit plan offered by employers. In most cases, ESOPs are a contribution made from the company to the employee, rather than an employee purchase. It is a defined-contribution (employees do not pay income tax on the amount contributed by their employer until they withdraw money from the plan) similar to profit-sharing or a 401(k) employee benefit retirement plan. Company shares are allocated to individual employees’ accounts annually. Upon retirement, disability, termination, or death the employer must buy back the stock at fair market value from the employee unless there is a public market for the shares. 

With an ESOP an owner of a company can sell parts or all of its shares and continue to maintain control of the company and its business operations. It is important to note, while this plan is referred to as employee stock ownership, the employees don’t actually own stock in the company. The ESOP is an organized retirement account, held by a trustee for the benefit of the employee. That person, or trust company, will negotiate a closing deal on behalf of the employees and hold the sold stock in trust. Although employees have an ownership stake in the company, they don’t actually have a right to vote the shares, to elect the board of directors, or any say as to how the company should or will be operated. When the employees retire, then, they reap the rewards and get a payment based on what the shares are worth.

Why is it advantageous to an employer?

Choosing to sell a business to an ESOP requires much consideration for a business owner. While establishing an ESOP has its advantages, an ESOP is not the proper course of action for all corporations, and particular entity formations do not meet the requirements for this type of employee benefit plan. For example, an S corporation and a C Corporation have the ability to establish an ESOP. However, an LLC is not permitted to have an ESOP because it does not have stock, it has memberships or units, therefore it can not offer ESOP stock options. That being said, an LLC that is taxed as an S corporation does qualify for an ESOP. Rather than stock, the unit shares will have the same rights to distribution, dividends, and liquidation proceeds.

For those companies that do qualify and opt for an employee stock option plan, there are substantial tax advantages. Not only is it a tax-exempt trust, transferring to an ESOP allows a business owner to defer or bypass capital gains taxes. Moreover, contributions of stock and cash are tax-deductible, and when an ESOP is used to borrow money both the loan repayments and interest are tax-deductible. The benefits of an ESOP will vary depending on the type of entity a business owner chooses for their company. Many companies choose to convert LLC taxed partnerships into an LLC taxed as a corporation, S corporations into C corporations, and C corporations into S corporations after having more clarity as to the benefits of each. A popular choice of entity selection for businesses aiming to offer an ESOP is choosing an S corporation, due to its significant tax advantages.

If the ESOP holds shares in an S corporation, the earnings from the ESOP shares are not taxable. Furthermore, an S corporation can avoid tax distributions all together and hold on to the cash in the company, for reinvestment into the business, if the ESOP owns 100 percent of the company. This is because S corps don’t pay tax on their profits, their profits and losses are passed through to their shareholders based on the percentage of their ownership. If an ESOP owns the company, there is no federal tax due because the ESOP is in a trust, which is tax exempt, allowing companies to retain more of its earnings. With the increase of cash flow, corporations are able to quickly reduce debt, enhance employee benefits, and have funds for greater capital investments and acquisitions. This is a huge tax advantage for S corporations. Do keep in mind,  Any changes that are to be made to your business entity should be done after consulting a qualified attorney, due to possible adverse consequences. 

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3 Ways to structure multiple businesses

by Sentient

Multiple Business Structures

It’s very rare to come across an entrepreneur that has only one great business idea. Most, have a list of business ideas hiding away in some random notebook or in a forgotten computer file, who knows where. If you are able to locate that list of wonderful money-making ideas, there’s good news, you’re not limited to implementing just one. There is no limit to the number of companies one can form. Whether this is your first startup, you’re thinking about starting a second business, or perhaps you are already currently in the process of running multiple businesses; diversifying your income is a wonderful strategy for growing your brand and financial success. 

Let’s examine multiple business structures a little so that we can help you in choosing a structure that works best for you and your business. Generally speaking, there are three different ways to structure multiple businesses: one can create individual corporations/LLCs/partnerships for each business, create fictitious names/DBAs under one corporation/LLC, or a holding company can be formed in which all businesses operate under. There are advantages and disadvantages to each approach. Here, we will explain and offer some general knowledge for you to consider. You should always discuss your specific needs, the details of your business, and its goals with a qualified attorney.

1.  Creating Individual Corporations

Since there is no limit to the number of corporations/LLCs a person can legally form, many business owners choose to file articles of incorporation for each individual business venture. However, having separate business entities can prove to be an expensive undertaking. Each business is responsible for paying its own incorporation fees, will be required to pay state maintenance fees, and the individual corporations will file separate taxes and pay a CPA per business for its tax filings. If that doesn’t put one off, the paperwork alone may do the trick. You will be bombarded with forms of incorporation, annual maintenance forms, business licenses, and EINs, as well as tax forms for each one of your companies. As overwhelming as all of that may seem, the additional fees and paperwork are well worthwhile to many entrepreneurs who value the protections that come with keeping their business entities separate from one another. This separation isolates the risk to the individual businesses, shielding each from financial losses, lawsuits, and other liabilities, protecting the individual corporations’ assets. 

2. Fictional Names Or Doing Business As (DBA)

Another, and quite possibly more simple, way of structuring multiple business entities is to file one corporation/LLC and then set up multiple fictional names or DBAs. When a corporation/ LLC/partnership files for a DBA, the state gives permission to the business to use a different name. A fictitious name is not the same as an LLP it simply allows a business owner to legally operate under a trade name, rather than the business entity’s legal name. Using DBAs has the advantages of having the protection of the main corporation/LLC or partnership, privacy protection, simplified fees, and paperwork, a shared EIN, and at tax time you’ll only need a single tax filing under the main corporation/ LLC/ partnership. While this structure model may offer great ease and simplicity, it is important to consider its disadvantages as well. DBAs lack exclusive rights to their business name, have less liability and legal protections, selling one of the lines of business may be challenging – especially if the business books were not kept separate from one another, and no LLC member shares or corporate stocks can be sold.

3. Holding Company

A holding company – sometimes called an “umbrella” or “parent” company – is usually a corporation that owns a controlling interest in one or more companies. Its sole purpose of existence is to manage the companies under its umbrella, called subsidiaries. Another option for structuring multiple businesses is to create individual corporations/LLCs for each of your businesses and put them under one main holding corporation/LLC. The holding company can fund new ventures and protect the assets of each individual business. When a holding company controls several companies, each of the subsidiaries is considered an independent legal entity. This is hugely beneficial in that, if one of the subsidiaries were facing a lawsuit, there would be no rights to claim the assets of the other subsidiaries. Furthermore, if the subsidiary being sued acted independently, the parent company would not be held liable either. It is important to consider, the workings of a holding company can have extremely complex tax and legal challenges, so it is always best to work with a knowledgeable attorney to determine the best way to structure a holding company and its subsidiaries.

Sifting Through The Muck With An Expert

Having multiple business ventures can be both exciting and overwhelming. Attorney Matthew Rossetti is an expert when it comes to entity planning, selection, and formation, contracts and agreements, dynamic equity agreements, arbitration, and mediation, as well as Chicago’s own Slicing Pie authority. Helping you sift through the complex nuances of entrepreneurship is a task he performs with skill, precision, and one that he does not take lightly. Having a clear understanding of your business needs and goals, Rossetti is prepared to assist and advise you. He will cover all of the bases ensuring the protection of your and your businesses. Working together, you will create a solid strategy that will bring your visions of success to fruition. 

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Does my Start-Up need an EIN?

by Sentient

The long and the short of it.

Many entrepreneurs waver on the decision to obtain an Employer Identification Number (EIN). With the seemingly insurmountable research and paperwork that a new business owner will undoubtedly face; it is understandable that the thought of applying for an EIN is something one might want to put off until a later date. If you are one of the several entrepreneurs wondering if you need an EIN for your startup, let this article be your guide.

It is always wise to work with a savvy and knowledgeable attorney from the very beginning of your startup endeavors. Setting forth a plan, that takes into consideration not only your current circumstances but your short and long-term business goals, with an expert in startups, will be the bedrock on which your company is built. Entity planning, selection, and formation will be one of the main determining factors in deciding if your business will need an EIN. Although certain business formations do not require an EIN, it is highly recommended to have one. This nine-digit number is much like a social security number, which identifies your business and allows organizations to safely perform many tasks. Whether you make the decision to file for an EIN or the decision is determined for you, based on the type of entity your business requires, having an attorney will ease the burden of the decision making and application process.

Who doesn’t need an EIN? 

Like a lot of bootstrap startups, you may hit the ground running as a sole proprietor or an individual owner with a limited liability company (LLC). LLCs and sole proprietorships are not required to have an EIN. Using your social security number to set up a business bank account, complete the paperwork necessary to work for clients, and file your business taxes is perfectly acceptable. While using your social security number may seem like a more simple method for getting one’s business off of the ground, there are many other factors to take into consideration when opting not to obtain an EIN. 

It is inevitable that unexpected circumstances will arise, no matter how well you try to prepare. Having the foresight to plan for complications, that may interrupt business, will shore up the success of your company. It is important to think about the direction in which you would like to take your organization. Future plans to take on partners or hire employees will require an EIN. Furthermore, doing business under your name and social security number may leave you vulnerable to identity theft, and a poor credit rating due to criminal activity. There are also benefits to take into account. Having an EIN can make you more appealing to potential clients by establishing an independent contractor status. Companies often rather hire an independent contractor versus an employee. This saves companies money and minimizes their liability. Additionally, an EIN legitimizes your business helping potential clients trust your commitment to any possible project.

It is important to keep in mind, whilst having an EIN has its benefits by validating your credentials, making doing business easier, and protecting your personal identity and credit, a sole proprietorship EIN will still be tied to your social security number. This means that your personal credit will be taken into account when applying for a business loan or credit card, in the same regard, the IRS will tax any revenue as personal income. 

Who does need an EIN?

As a business owner you are legally obligated to use either your social security number or business EIN as an identification source for tax authorities, potential lenders, and creditors. Any business formation, that is not a sole proprietorship or an LLC operated by one individual, is required to create an entity separate from the individual owner(s). Even so, there are certain circumstances that will call for an LLC or sole proprietor to procure an EIN. Similar to a person having a social security number, an EIN works in the same manner, in that it is an identifier for that entity. This separates the organization from the entrepreneur.

There is no getting around having an EIN if your company is a partnership, corporation, or an LLC that is taxed as a partnership or corporation, If your business has employees, is involved with certain types of trusts, estates, real estate mortgage investment channels, nonprofits, farmers’ cooperatives, provides a 401(k) and other nuances which should be sorted through with a knowledgeable startup attorney. 

How do I obtain an EIN?

There are multiple ways of applying for an EIN, by mail, phone, fax, or with today’s technology many entrepreneurs opt to apply online. The process is fairly simple if you are well-prepared. It is crucial that you are equipped with all of the details needed to fill out each form completely and properly. The applicant must be an owner, principal, or officer of the business, and have a social security number. Have at the ready, the founding date, legal name of your business entity, and the trade name if any, provide the complete address including the street number and name, county, and state where your business is located. We understand that the application process can easily become complicated and time-consuming process if your paperwork is not in order. Not only are we here to assist and guide you in your entrepreneurial endeavors, Sentient Law is here to help you make sense of the startup process and build a cohesive plan for the success of your organization.

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The Best Way to Fund a Startup

by Sentient

Put in the work

Many factors play a role in the ability to create and run a business, and the road to entrepreneurial success can be quite daunting. Having enough capital to get your organization off of the ground and maintain momentum during challenging times is critical. After several months of creating a solid business plan, many entrepreneur’s enthusiasm will quickly wane upon being confronted with the bottom line. Don’t store your plans away in your desk drawer – in the abyss of other long-forgotten dreams – just yet. Good news, there are excellent resources that can help you meet your goals and establish a solid foundation for your business. You just have to be willing to put in the work. The return on the time invested will pay off big, considering startup funding can transform your business plans into an achievable reality. 

Multiple funding options are available for you to choose from. Preparation and research will be essential in finding the right method for your business. Ultimately, your best choice for funding will depend on the needs of your organization. Some determining factors that may help to narrow down your selection will include: whether or not you qualify for particular sources of funding, if you prefer to acquire debt- allowing you to maintain full control of your company, alternatively you may rather exchange capital or services for equity.

Real talk

Before you begin your campaign to raise capital, the first thing you will want to do is revisit your business plan. Get a realistic idea of how much money you will need to pull together on your own and/or how much you will need to request from outside resources. Aim to cut any unnecessary costs. Your goal should be to acquire enough capital to start and maintain your organization, not to luxuriate with all of the bells and whistles. You will earn that in time. There are benefits to keeping startup costs low: it may inspire you to invest your own personal savings, perhaps it will make you a more favorable candidate for a business loan, and it will certainly appeal to any potential investors. Also, be sure that your financial projections are pragmatic; idealistic financial projections can easily halt your company’s growth down the line, if not bankrupt your business. 

Choose your method

Once you have a firm grasp on a viable dollar amount, it’s time to consider sources of capital to pursue. Essentially, there are two types of funding options: debt and equity, unless you will be using your own personal funds. Of course, there are advantages and disadvantages to each method.

  • Debt: An advance of funds is a great way to ensure that all profits and assets remain with you and your business. Although you will initially go into debt, once your debt is paid all profits go directly to you and you will remain in full control of your business. However, the inability to repay your debt could cost you your business, reputation and more. In addition, not everyone has the ability to obtain a loan, whether that be via a financial institution or from friends and family. If obtaining a loan appeals to you, try reaching out to these potential sources.
    • Friends and Family
    • Financial Institutions
    • Angel Investors
    • Venture Capitalists
    • SBA: matching small businesses with lenders
  • Equity: Selling shares in your company in exchange for capital or services is a popular method for raising funds. In lieu of qualifying for a loan, an innovative idea and well laid out business plan can get you the financial resources needed to accelerate the momentum of your startup. Avoiding debt helps to reduce personal risk and increases peace of mind. Note, some may consider sharing in profits and ideas on how the business should be managed, to be a drawback when choosing this approach. The amount of resources available to you are numerous. Here is a list of potential investors that could believe in your vision so much, they want a piece of the action.
    • Friends and Family
    • Crowdfunding
    • Angel Investors
    • Venture Capitalist
    • Business Partner(s)
    • Other companies or individuals willing to trade their services for a stake in your company
  • Personal savings: If you are fortunate enough to have personal savings that will allow you to successfully create, run and sustain your business, this is a wonderful option. Not only will you avoid accruing any debt, you will also be able to solely reap the rewards of your time and financial investment. Many entrepreneurs enjoy the full control that comes with using their own financial resources to fund their business. Keep in mind, with this method the control is yours but the personal risk is yours as well. Many startups do not make it to the fifth year of business. It is quite possible to lose your nestegg. 

Don’t go it alone

The search for funding can be extremely competitive and you will face rejection, many times. Don’t give up. The funds are out there, all you will need to do is figure out how to get them. Whether you decide to use your personal savings, secure a loan, exchange equity or utilize multiple methods of raising capital for your business, bringing in the right attorney for your startup is paramount. Sentient Law is your resource for all startup legal services. Matthew Rossetti is here to guide you though taking the proper steps and precautions that will ensure your business is built on a solid foundation and is prepared to withstand any internal shifts and external pressures.

  • Entity Planning, Selection, and Formation
  • Contracts and Agreements
  • Dynamic Equity Agreements
  • Deferred Compensation Plans (Employee Stock Ownership Plans, Stock Appreciation Rights, etc.)
  • Alternative Dispute Resolution (Arbitration and Mediation)
  • Labor and Employment
  • Slicing Pie Lawyer 
  • Executive Estate Planning
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Top 3 Asset Protection Strategies

by Sentient

Startup Asset Protection

Best-laid plan

We all dream of our chance at success. For many American people today, this dream isn’t limited to owning a home, having a couple of vehicles in the garage, mounds of wealth, and raising a big family. Though, success may still include some, if not all of the previously mentioned, owning a business and being your own boss is the new standard for success. There is nothing more thrilling than taking life by the reins and directing it towards one’s own vision. Many hopeful entrepreneurs are jumping right in, taking brave steps, starting their own companies. And while there are no limits to the success that could be achieved, there are also no guarantees either. Most startup businesses fail because their plans never included planning to fail. It is only when we truly take into consideration the possibility that all may not go according to plan, that we can plan accordingly. If you are in the beginning stages of planning your business, this is great news. you can safeguard your company and personal assets from the very start. For those that are already well into the day-to-day grind of running your company, rest assured, It is never too late to take action in protecting your business assets. It is always advisable to consult an attorney before making any major business decisions. Attorney, Matthew Rossetti, is an expert in startup business formation and asset protection. He will assist you in creating the ideal strategy for your organization’s specific needs. Here are three top asset protection strategies to give you a solid start in safeguarding your assets.

1. Just business, nothing personal

Bootstrapping a business is the method many entrepreneurs, with little to no outside resources, take to get their organizations up and running. Understandably so, most of these individuals start operating as a sole proprietorship due to a lack of funds. Regrettably, a sole proprietorship will not protect your assets, leaving you completely vulnerable to creditors and lawsuits. An individual may stand to lose everything, in the blink of an eye. Don’t put your house, car, savings, and other personal assets in jeopardy. It is paramount that you make a clear distinction between your personal and business assets from the very start. Limiting your personal liability is done by simply forming a Corporation, Limited Partnership (LP), or Limited Liability Company (LLC). This may cost a little more upfront but it is affordable and will be money well invested, ensuring the success of your business and peace of mind. A business entity operates as a “person” who engages in business and is put at risk doing business, it can file for bankruptcy if need be, as well as sue or be sued. Don’t let that “person” be you. If the business fails you are able to protect yourself with limited liability or a corporation.

2. Insurance + Insurance

Business insurance is crucial, regardless of the size of your business. Be sure to include it in your startup budget. This will be deductible as a business expense for the year’s taxes. There is a broad range of insurance options to choose from. Due diligence must be used when selecting the correct insurance policy for your particular organization’s needs. In your exploration, you will find options for liability insurance, property insurance, business interruption insurance, third party liability insurance, directors and officers errors, and omissions insurance, and much more. Insurance gives you the ability to take care of incidents that may arise in your business and in its dealings, as well as provide liability coverage in case of a lawsuit. Whichever type of insurance you choose, understand that it must be owned by the entity, not by you, the individual. Never mix the company’s insurance with your personal insurance. For example, the car that you use for work should be insured through the entity, not grouped in with your standard home and car bundle insurance packages. 

Once you have acquired adequate business insurance you will want to include a fail-safe plan, umbrella insurance. This type of insurance functions as an umbrella over any other insurance policies that you may carry. It is meant to provide coverage for everything that your other insurance policies missed.  When your existing policies cannot cover settlements, umbrella insurance can help you avoid wage garnishment and asset seizures. However, do keep in mind, it will not cover any negligent, criminal, or reckless activity. 

3. The backup plan

Having a risky occupation or lifestyle can increase the potential of vulnerable assets. If you have taken all of the above measures and still have some concerns about keeping your personal and business assets protected, we have listed a few alternatives for your consideration:

  • Hold valuable assets in your spouses name

In most states, assets can be shielded from a spouse’s creditors, if they are placed in the name of the other spouse. With this type of asset protection in place, the separate property of a spouse cannot be touched. Please keep in mind, this strategy can backfire when it comes to the division of property during a divorce.

  • Place them in an Asset Protection Trust (APT)

Although extremely complicated, an APT is probably one of the best moves you can make. This exists to specifically hold an individual’s assets with the purpose of shielding them from creditors. Furthermore, lawsuits and judgments will have little to no effect on your assets. There are two types of asset protection trust;

Revocable which comes with many benefits, as it can be changed and altered but this does not offer full protection.

Irrevocable which is the best choice for protecting your asset, however, it can never be changed and you will have little control over the trust assets.

  • Create separate entities to hold your assets

Businesses often hold assets in separate companies. Doing this provides liability protection and tax concessions. The holding company is not responsible for any of the business activities, making the liability of the operation less likely, thereby protecting your assets. Often, the owners of the company holding the assets are not the same as the owners of the operational business. Assets are usually being held by a group of investors or an asset holding company. That being said, you can operate your separate entity in the same way. Putting real estate or other investment assets into a limited partnership (LP), you can essentially protect your assets to the same degree.

 

Attorney, Matthew Rossetti, specializes in start-up businesses and the formation of companies. He is the premier “Slicing Pie” expert in the midwest. Rossetti uses a custom dynamic business formation model to create a perfectly fair equity split, in the early stages of a company. Set up a 30-minute consultation for guidance.

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How to be a Startup CEO

by Sentient

Laying the groundwork for success

A board of directors is tasked with making one of the most paramount decisions for their organization, selecting the chief executive officer (CEO). Although the board of directors is the supreme governing authority of the company, the CEO holds one of the most important roles within an organization. This individual will lead the institution in developing its vision, tone, culture, long-term strategy, and increasing shareholder value. Not to mention, a CEO is generally responsible for routine day-to-day business decisions that can make or break a venture. A successful CEO will need to put their ego on the shelf, roll up their sleeves, and be willing to do whatever needs to be done. As a startup CEO, prepare to be particularly hands-on and heavily involved in the day-to-day functions of the company. It is commonly said that startup CEOs wear all hats. This role will be demanding, responsibilities will be unending, and the struggles will be unexpected. 

Check it out: Learn more about Partnerships!

Understand the Role of a CEO

It is a popular belief that CEOs only deal with high-level corporate strategy and major corporate decision making. While that is often true for larger companies, a startup CEO must have an apt ability for both higher and lower level decision making. He/she will be held accountable for the performance and results of the company and must work to satisfy internal goals, external shareholders, and increasingly the public. This role will encompass making judgments and tough calls along with having a strong connection with the frontline of the business. Choosing the right CEO for a startup has huge benefits for the long-term success of a company. In this ever-changing work environment, the expectations of a CEO have become highly dependent on what is commonly referred to as soft skill: having strong interpersonal skills and a high EQ (emotional quotient) are now additional strengths needed to be a successful CEO. The responsibilities you will take on as a startup CEO will give you all of the tools needed to lead a successful venture while standing shoulder-to-shoulder with your team.

Does your CEO have what it takes?

  • Strong leadership skills
  • Approachable and personable
  • Communication and transparency
  • Invests time into company culture (being active and present)
  • Committed to the company mission
  • Willingness to provide leadership and professional growth opportunities for employees

Startup CEO Responsibilities are Far-reaching

The CEO of an organization is accountable for far more than ensuring substantial profits and making sound investments for the future of the company. They should have a clear perspective across the organization as well as accountability for the consumer. It is important to focus on the satisfaction of all stakeholders in the business, not only the investors and shareholders but employees, customers, suppliers, and most importantly the consumer. A successful CEO will know, it is critical to concentrate attention on both internal and external organizational factors. The ultimate goal is winning over the consumer. After all, what good are products and services that no one wants to use or be affiliated with?

Check it out: Top 5 Online Business Ideas!

Typical CEO Responsibilities

  • Provide inspiring leadership inside and outside of the company
  • Create an environment that promotes great performance and positive morale
  • Decide on a strategic direction for the company 
  • Make high-level decisions about policy and strategy
  • Develop and implement the organization’s operational policies, culture, its overall vision and mission
  • Lead in the development of the company’s short and long-term goals, making sure they are measurable and describable
  • Maintain a clear direction for the company
  • Remain focused on company goals
  • Oversee day-to-day operations
  • Be aware of competitive markets, industry developments, and expansion opportunities 
  • Find acquisition opportunities 
  • Oversee the company’s fiscal activity including budgeting, reporting, and auditing
  • Ensure risks are monitored and minimize
  • Maintain high social responsibility wherever the company does business
  • Act as the spokesperson for the company, be the public face
  • Create a business network
  • Build alliances and partnerships with other organizations
  • Communicate on behalf of the company with the public, shareholders, government entities, etc.
  • Carefully make hiring decisions (try to recruit talent who are smarter than you)
  • Report to the board of directors and keep them informed
  • Evaluate the work of others within the company including leaders, directors, vice president, and president
  • Work with senior stakeholders, chief financial officer, chief information officer, and other executives.
  • Manage your board and listen to them carefully
  • Believe in and trust the expertise of others
  • Ask questions of yourself and others, at all levels
  • Delegate effectively
  • Assure legal and regulatory documents are filed and monitor compliance with the laws and regulations
Style Shifting: The Struggles of a Triumphant CEO

While it is extremely rewarding to watch your company grow and thrive, a startup CEO will face some challenges in the shifting of their style as the business flourishes. In the company’s infancy, responsibilities seem limitless; a startup the CEO must be willing to do anything and everything. When the company evolves into an organizational ecosystem comprised of multiple departments and hundreds of team members, it is impossible to continue to maintain that role. Thus, the CEO must evolve as well. By now this individual has laid a solid foundation for the organization and a direct path for a successful venture. However, the next steps can be some of the most difficult challenges a chief executive officer will face. Stepping back, delegating responsibilities to team members, and letting go of some control can be cause for extreme consternation. Great leaders must learn to zoom out and stop doing everything. It is time to be confident in the painstaking strategizing, planning, and managing that has already been implemented. The best CEOs know or learn that, although they may make most of the final decision, those decisions should be informed by the advice of subject matter experts. Assuming a CEO has the right people in place, when in doubt delegate.

Attorney, Matthew Rossetti, specializes in start-up businesses and the formation of companies. He is the premier “Slicing Pie” expert in the midwest. Rossetti uses a custom dynamic business formation model to create a perfectly fair equity split, in the early stages of a company. Set up a 30-minute consultation for guidance.

Set up an appointment with Matt on Calendly.com

 

Dynamic Equity/entrepreneurship/Slicing Pie/startup/Uncategorized
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Business Partnerships

by Sentient

Partnerships

Partnerships can create an opportunity for your business to grow and thrive. Sentient Law knows that the ins and outs of such a venture can be challenging for many business owners. Attorney, Matthew Rossetti, is the premier “Slicing Pie” expert in the United States; he will ensure that you structure your partnership right from the very beginning. Whether you are building your business from the ground up or looking to add a partner to your existing business, he will guide you through the entire process. Here, we’ve provided some key information to help ease you through the nuances of understanding partnerships. 

Making it legal

A formal, legal agreement between you and your partner(s) will allow you to manage and operate your business as co-owners. You will also share in the profits and liabilities. It is important to be safe, be good, and be prepared. Sentient Law uses a custom dynamic business formation model to create a perfectly fair equity split in the early stages of a company. This makes sure that everyone owns the percentage of the business that they deserve. In other words, you get out what you put in.  This is achieved by calculating the input values of each partner. Monetizing and verifying the value you have brought to the company incentivizes each partner to contribute to the business. Setting up this organic agreement means you’ll never have to concern yourself with wondering how to fairly and proportionally divide your company’s ownership.

There are several types of partnership arrangements

Be sure to explore and choose the most suitable arrangement for your business. The most important types of partnerships to consider are:

  • General Partnerships:  All partners represent the company when dealing with outside parties. Each partner has equal control and the right to participate in decision-making and the management of the business. Furthermore, the risks and returns are distributed equally, unless otherwise stated in your partnership agreement.
  • Limited Partnerships (LP): A limited partner has no authority and will not earn equal returns. Their personal assets are protected by limited liability in legal situations, unlike a general partner. Not to be confused with Limited Liability Partnership (LLP). 
  • Limited Liability Partnerships (LLP): This is a popular business formation because it allows for collaboration without holding all partners responsible for one partner’s mistakes. In this type of structure, some or all of the parties have limited liability, protecting their personal assets if legal issues arise.
  • Joint Liability Partnerships: In a joint liability partnership, all partners are equal. They share in all the responsibilities of the business, including liability for financial and legal issues.
  • Several Liability Partnerships: This is a complex arrangement. The weight of responsibility can shift, depending on the specific duties and responsibilities of each partner. Liability could fall to a partner for lack of due diligence and the legal responsibilities can be divided depending on where the obligation lies. 

Who’s who and what’s what?

Going into a partnership can leave you a bit confused as to what your role is in the company. To clear things up, here are some terms that may help you understand your role and may serve as a guide when seeking out potential partners.

  • Founder: The person or persons that created the company. The owner is not necessarily the founder. Your new partner can be an owner as well, however, if you forged this entity you are the founder.
  • Investor: Any person, company, or entity that invests capital into a business and expects to earn a rate of return. An investor may put money into the business or purchase stocks from other investors. The main objective is to maximize profits and minimize risk. Investors may contribute with labor, provide loans, buy shares, or perhaps even guarantee to pay creditors.
  • Angel Investor: Typically wealthy, these are individuals that provide a startup with seed money or capital for expansion, in exchange for ownership or equity. They are often willing to invest hundreds of thousands of dollars into a business if they believe they will reap the rewards of your success. However, angel investors are not always motivated solely by making a profit. These are often professionals that are well into their careers and are inspired to give something back and driven by doing a good deed for an aspiring entrepreneur. Angel investors are often referred to as informal investors, angel funders, private investors, seed investors, or business angels.
  • Equity Stakeholder: Although stakeholders are commonly thought to be large inventors that can afford to hold a viable stake in a company, there is much more to be considered. In actuality, anyone that invests in a company and whose actions determine the outcome of its business decisions is a stakeholder.  These investors have a long-term interest in the performance of the company. They don’t have to be actual equity holders, they can be shareholders, creditors and debenture holders, employees, customers, suppliers, the government, and more. Simply put, stakeholders rely on the success of a business to keep the supply chain going.

It’s never too late to start using the “Slicing Pie” approach

You may already have an existing partnership agreement. Due to ever-changing life events, your existing agreement may no longer be the right fit for you and your partners. If you have an LLC and it is pre-revenue, amending your agreements is straightforward and simple for Sentient Law. Depending on the circumstances, almost all partnership agreements can be amended with the consent of all parties involved. Matthew Rossetti will work with you to create a perfectly fair and balanced agreement and equity split. Set up a 30-minute consultation today to discuss how he can help you.

Attorney, Matthew Rossetti, specializes in start-up businesses and the formation of companies. He is the premier “Slicing Pie” expert in the midwest. Rossetti uses a custom dynamic business formation model to create a perfectly fair equity split, in the early stages of a company. Set up a 30-minute consultation for guidance.

Set up an appointment with Matt on Calendly.com

 

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