Protecting Personal Assets With a Limited Liability Company

When clients approach me about forming a new Limited Liability Company (LLC), they usually mention the desire to “protect personal assets” as a reason for wanting the new formation.  While LLCs can be great vehicles for protecting assets (and great entities in general for many reasons), the key to truly protecting assets is in how you operate.  Simply having LLC attached to your business name protects nothing. 

Generally, sole proprietors and partners have unlimited personal liability for business debt or lawsuits against their company. Without taking the right steps when funding and structuring your company, business creditors can seek to attach homes, cars and personal savings.  Forming a LLC is the first step to take to separate your personal identity from your business identity. However, additional steps are required to make sure that you are protected.  For instance, if you continue to use personal bank accounts for business assets, or pay vendors with personal checks, you are eliminating the separation and making it easy for an attorney to pierce the corporate veil and attach your personal assets.  Likewise, if you are signing business contracts using your name and not the name of your entity, you are raising a question of liability. 

Personal asset protection can take many forms, including complicated asset protection trusts.  However, there are basic steps you can take to take advantage of the the protection of your LLC.  Here are some of the basics:

• Don’t co-mingle personal and business funds
• Make sure all business revenue goes into a business account
• Never use a personal check to pay a vendor or business creditor
• Always sign contracts with your LLC name or as an agent for the LLC
• Try to avoid personal guarantees in business contracts
• Never move personal assets into business accounts unless you are documenting a contribution to a capital account
• Comply with all filing and reporting requirements for your LLC
• Carry adequate business insurance coverage

Revisiting the Principles of Social Media Marketing for Business Growth

You cannot think about business development and brand building today without thinking about social media.  Although 2011 will likely be the the year that nearly all businesses adopt some type of social media strategy, the fact remains that many businesses (large and small) still have no idea how to approach social media marketing and community building, and often apply old ideas to new platforms.  The only thing worse than not having a social media strategy is having one and not understanding the principles.  This thought prompted me to dig out something I wrote back in 2008 about the fundamental differences between old media and new media.  Although the platforms have changed and evolved somewhat since then, the basic concepts remain the same.  These are some of the basics to consider, and an excerpt of what I wrote back in 2008 (I have used this as an outline for presentations to numerous groups on the topics of starting and growing a business). 

• Eliminate the old gatekeeper mentality
• Be transparent and bring something to the table
• Don’t be a shameless self-promoter

Excerpt From October 2008:  Let’s get right to the point: New Media and Social Media Marketing is important to the success and growth of just about any new business today.  When you think about the growth of your business long term (which any business should), then these marketing platforms become vital.

What is new media?  Maybe this is best answered by revisiting what old media is.  The old rules of marketing were that you either had to buy expensive TV or print advertising or somehow get the media to write about you.  In the old system, a few media outlets acted as gatekeepers (sometimes brick walls) to growing your brand.  It amazes me that some companies still center marketing around old media.

It’s About Community

The rules have changed. New media centered on the Web, including Web-based advertising, blogs, podcasts and message boards often bypass the gatekeepers altogether. New media is content-based and has the potential to sometimes reach a huge market at a low cost.  But beware!  New media requires a new approach to marketing.  It is not about hitting people over the head with hammer.  Rather it is about giving people access to your content and allowing a community to evolve openly around you, your brand, products and services.  Old marketing was about self-promotion and selling.  New marketing is about building a community, and allowing that community to engage in a free exchange of feedback and discussion about you, your industry and your content.  Be transparent and bring something to the table!  It’s about getting people enthusiastic and engaged.

It is becoming clear that one of the best ways to create communities and relationships is by way of social media platforms such as facebook, twitter, digg, del.icio.us, and linkedin.  Social media sites can be networking sites (facebook, twitter, linkedin, myspace), content bookmarking sites (del.icio.us) or content rating sites (digg).  However, all of these sites are based on the same idea: communities sharing information.  If you’re able to build or become part of a community, don’t be a shameless self-promoter!

New Turnkey Lab and Operations Support on Buffalo Niagara Medical Campus

The Life Science Link, headed by Vic Nole, is planning to launch a laboratory supply and contract commercial operations business that will be housed in the Innovation Center at 640 Ellicott Street on the Buffalo Niagara Medical Campus.  I have worked with Vic, and highly recommend the services that his company offers. 

This is another great infrastructure and support option for virtual companies, for those with limited operational infrastructure or expertise, for established companies looking for cost effective outsourcing options, or for international companies that need a U.S. operations presence. 

All services will be modular – clients can choose individual services or bundle multiple services for “turnkey” solutions.  Proposed services include procurement and vendor management, receiving and incoming inspection of materials, inventory management, light assembly, packaging, warehousing, internet marketing, order fulfillment, and product distribution (local delivery, national and international shipping).   

If you or your company would find any or all of these services useful, contact Vic Nole directly at vic@theLifeScienceLink.com.  I am also happy to make an introduction.

From Vic - “I believe that operational infrastructure is a key need to enable our young companies to grow quickly and cost effectively, and I would like to begin to build that infrastructure in Buffalo to provide custom solutions to the companies that need them.”

A Good Initial Business Plan is for Clarity and Focus

I believe that most start-up businesses that fail end up that way from either a lack of clarity and focus, or poor cash flow management (or a combination of both).  Taking the time to draft a good initial business plan before jumping into operations is the only way to make sure you’ve addressed these issues.  Unfortunately, many entrepreneurs and small business owners don’t place adequate (or any!) emphasis on this crucial step in the start-up process. 

I am always happy when clients ask advice on how to draft a business plan, or how to look at financial estimates - it tells me that they are on the right track in thinking about their venture.  Much has been written about what makes a good business plan, but I always advise clients that the importing thing is just spending adequate time to clearly define what the business opportunity is and how they intend to convert the opportunity into a profitable venture.  Most resources on drafting business plans tend to focus on how to appeal to outside investors (if this is your goal, then style does matter).  However, I find that many small entrepreneurs require a sound business plan more for their own clarity and focus.  Don’t jump into a risky venture unless you have clearly defined what your business is and how it is going to operate. 

When I recognized an opportunity to form City Wine Merchant, a local and web relationship-based wine retailer, I spent nearly a full year drafting and revising our business plan and financial projections.  I knew we had a great opportunity and concept, but it wasn’t until the later part of that year-long process that I had a clear idea about how we were going to put it all into motion.  Here are the main sections of City Wine Merchant’s initial business plan:

• Executive Summary
• Our Mission
• Company Overview (Founders, Structure, Location, Community Commitment)
• Industry Analysis (Sales and Trends)
• Market and Competitive Analysis (Competition by location, regional review)
• Inventory and Pricing (Initial inventory estimate, profit margin estimates)
• Social Marketing and Community Building
• Start-up Expenses and Funding
• Financial Projections (Pro-forma, 16-month cash flow projection)

Every business plan should be different and tailored to specific circumstances.  If you are a biotech company, a substantial portion of your business plan will relate to your technology or intellectual property.  If you are entering a saturated market, devote some space to discussing market penetration.  Unless you are or will definitely be seeking outside investors, don’t focus too much on style.  Rather, focus on substance and content so you have a clear picture of what you’re getting yourself into. 

Finally, you’ve heard the phrase “cash is king” once or twice.  Don’t pretend it doesn’t apply to you and your business.  You may have the greatest opportunity and idea ever, but your venture will fail if you don’t properly manage cash.  Most business plans set forth optimistic revenue and cash flow projections while claiming that they are conservative.  Take time to get this right, and splash some cold water on your face.  It feels good to look at optimistic numbers on a sheet of paper, but it feels even better to see a positive balance in your operating account after your profits and losses post every month.  It’s helpful to have others look over your numbers or any other aspect of your plan - just be careful about who you share your plans with and always remember to present a simple non-disclosure agreement (NDA) when you share your business plan. 

For small-businesses, sba.com provides some decent resources on drafting business plans.  The SCORE website also provides some reliable templates and spreadsheets, including a good 12-month cash flow estimate.