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TURBOCHARGE YOl R BUSINESS THROUGH OUTSOURCING

RICHARD HOOKER STEVE MONAS Shoestring Venture The Startup Bible

RICHARD HOOKER

STEVE MONAS

iUniverse, Inc. New York Bloomington Shoestring Venture TheStartupBible

Copyright ®2008 by Steve Monas

Allrights reserved. No part ofthis book may beused orreproduced byanymeans, graphic, electronic, ormechanical, including photocopying, recording, taping orby any information storage retrieval system without the written permission ofthe publisher except in the case of briefquotations embodied in critical articles and reviews.

The views expressed in this work are solely those ofthe author anddo notnecessarily reflect the views ofthe publisher, andthe publisher hereby disclaims anyresponsibilityfor them.

iUniverse books may be ordered through booksellers or by contacting:

iUniverse 1663 LibertyDrive Bloomington, IN 47403 www.iuniverse.com 1-800-Authors (1-800-288-4677)

Because ofthe dynamic nature of the Internet, anyWeb addresses orlinks contained in this book mayhave changed since publication andmay no longer bevalid. The views expressed in this work are solely those ofthe author anddo not necessarily reflect the views ofthe publisher, andthe publisher hereby disclaims anyresponsibility forthem.

ISBN: 978-0-595-50651-4 (pbk) ISBN: 978-0-595-61597-1 (ebk)

Printed in the United States of America

iUniverse rev. 11/07/2008 Chapter 1 • Startup 1 Chapter 2 • Finance, Taxes, andBanking 43

Chapter 3 • Hardware and Software 77

Chapter 4 • Bring Your Productto Market 177

Chapter5 • BackOffice 231 Chapter 6 • Information Technology 289

Chapter 7 • Web and Ecommerce 331 Chapter 8 • Promotions: Marketing and Sales 431 about the authors xix a notefrom theauthor Xxi a note about URLs xxiii a noteabout prices quoted %xv introduction xxvii the last word. 481

Chapter 1: Startup .,,, .1

1.1. What's Your Goal? 3

1.1.1 SCORE: Counselorsto Americas Small Businesses 4 • 1.1.2 The Entrepreneurs Reference Guide toSmall Business Information 5

1.2. Business Structure 5 1.2.1 FindLawfor Small Business: Incorporation &Legal Structures 9

1.3. Business Plan 10 1.3.1. Palo Alto Software 15 • 1.3.2 SCORE: How to Develop a Business Plan 16 • 1.3.3. Startup Nation 17 • 1.3.4. U.S. Small Business Administration 17 • 1.3.5. Entrepreneur Magazine Online Business Plan Center 18

vn viii CONTENTS

1.4.Naming Your Businessand Designing Your Logo 19

1.4.1 Creative Marketing Solutions—Business Nameand Tagline Gen erator 23 • 1.4.2All Graphic Design—Logos 24 • 1.4.3LogoBlog. org 24 • 1.4.4Logoworks 24 • 1.4.5Logo Yes 25 1.5.Naming YourWebsite—Findinga Domain Name 25

1.5.1 WHOIS 27 • 1.5.2Domain Name Registrars-Network Solu tions, Dotster, GoDaddy 28 • 1.5.3Domain NameBrokers andMar ketplaces 30 • 1.5.4 Web 2.0NameGenerator 32

1.6. Business Licenses 32

1.7.Incorporate Online 33 1.8.Trademark, Patents, and Copyright 38

1.9. Law, Reference, and Small Business 41

Chapter 2; Finance, Taxes? and Banking ,43

2.1. Financial Structure 46

2.1.1. SCORE 48 • 2.1.2. Inc.com How To: Finance & Capital 48 2.1.3. CCH FinancialPlanningToolkit 49 2.2. Financing YourBusiness 50

2.2.1. BusinessFinance.com 55 • 2.2.2. Second Venture Corporation 55 • 2.2.3. University ofMichigan Libraries: Fundingfor Business and Economic Development 56 • 2.2.4. Angel Capital Association 56 2.2.5. National Association of Seed and Venture Funds 56 • 2.2.6. vFinance, Inc. 57 • 2.2.7. FundingMatch.com 57 • 2.2.8. Circle Lending 57 • 2.2.9. Prosper 58 • 2.2.10. Venture Capital Finance Online 58 • 2.2.11. VCFodder.com 59

2.3. Grants 59 2.3.1. Catalog of Federal Domestic Assistance 60 • 2.3.2. Grants, gov 61 • 2.3.3. The Amber Foundation: Grantsfor Women-Owned Businesses 61 2.4. FinancialManagement 61 2.4.1. ManagementHelp.org 65 • 2.4.2. BusinessTown: Basic Ac counting 66 • 2.4.3. AmericanExpress Open For Business: Financial Ratio Calculators 67 CONTENTS IX

2.5. General Financial, Business, and Economic Information 67

2.5.1. Bloomberg 68 • 2.5.2. CNN Money 68 • 2.5.3. Business Wee\ 69

2.6. Taxes 69

2.6.1. Tax Information for Businesses 71 • 2.6.2. TaxAnalysts 72 2.6.3. Entrepreneur Magazine Online Tax Center 72 • 2.6.4. U.S. Chamber ofCommerce SmallBusiness Center Tax Toolkit 73 2.7. Business Banking 73

2.7.1. CitiBan\ 74 • 2.7.2. Ban\ ofAmerica 74 • 2.7.3. Wells Fargo 75

2.8. Online Bill Payment Services 75 2.8.1. MSNBillPay 75 • 2.8.2. Billeo 76 • 2.8.3. MyCheckFree 76

Chapter 3; Hardware and Software ,... , ,79

3.1.Desktop versusLaptop 81 3.2.The Desktop Computer 81

3.2.1 PC World 87 • 3.2.2 MacWorld 88 3.3.The Laptop Computer 88 3.3.1 PCMag: Laptops: The Essential Buying Guide 2007 93 • 3.3.2 CINet 93 • 3.3.3 Laptop Magazine 94 3.4.Proprietary Softwarevs.Open Sourcevs.Web-Based 94 3.5.Operating System 97

3.5.1. Windows Vista 97 • 3.5.2. OSX 99 • 3.5.3. Linux 100

3.6.Productivity Software 103 3.6.1. Microsoft Office 2007 104 • 3.6.2 iWor\ 106 • 3.6.3 Ope- nOffice 107 • 3.6.4 NeoOffice 108 • 3.6.5 Scribus: Open Source Desktop Publishing 108 • 3.6.6 Powerbullet Presenter: FreePresen tation Software 108 • 3.6.7 SmartDraw 109 • 3.6.8 Web-based Productivity Software 109 3.7.Graphics and Image Editing 114 3.7.1. Adobe Photoshop 116 • 3.7.1.1. The Photoshop Guru's Hand- boo^ Photoshop Tutorials 118 • 3.7.2. GIMP 119 • 3.7.2.1 Gro\- king the GIMP 119 • 3.7.3. Web-Based Image Editors 120 CONTENTS

3.8.Bookkeeping, Finance,and Accounting 122 3.8.1. QuickJ3ook§ 124 • 3.8.2. Microsoft Money &Microsoft Account ing 125 • 3.8.3. Peachtree Accounting 126 • 3.8.4. FreeAccounting Software 127 • 3.8.5. AdminSoft Accounting Software 127 • 3.8.6. OneStep Accounting 128 • 3.8.7. GnuCash 128 • 3.8.8. KeepMore 128 • 3.8.9. Intacct 129 • 3.8.10.JunoAccounting 129 3.9.ProjectManagement 130

3.9.1. Microsoft Project 132 • 3.9.2. dotProject 132 • 3.9.3.Intuit QuickBase 133 • 3.9.4. Basecamp 133 • 3.9.5. AceProject 134 3.9.6.eLoops 135 3.10. Contract Management and Digital Signatures 135

3.10.1. Sertifi 137 • 3.10.2. EchoSign 138 • 3.10.3. Verisign My- Credential™ 138 3.11. Human Resources Management 139

3.11.1. MYstaff 140 • 3.11.2. ADP PayLine Solution 141

3.12. Calendars and Schedules 142

3.12.1. Google Calendar 142 • 3.12.2. AirSet 142

3.13. Browsers 143 3.13.1. Internet Explorer 144 • 3.13.2. Mozilla Firefox 145 • 3.13.3. Opera 146 • 3.13.4. Flock, 147 • 3.13.5. Google Chrome 147 3.13.6. Safari 147 3.14. Instant Messaging 148 3.14.1. AOL Instant Messenger 149 • 3.14.2. Yahoo! Messenger 150 3.14.3. MSN (Windows LiveMessenger) 150 • 3.14.4. Jabber 151 3.14.5. Twitter 151 3.15. Web Conferencingand Collaboration 152 3.15.1. WebEx 153 • 3.15.2. GoToMeeting 153 • 3.15.3. Yugma 153 3.15.4. Mr. Web Office 154 • 3.15.5. HyperOffice 154

3.16. Internet Voice Portals 155 3.16.1. Vonage 156 • 3.16.2. Skype 156 • 3.16.3. Yahoo! Voice 157 3.16.4. Google Talk 157 CONTENTS I xi

3.17. Virtual Fax Services 158

3.17.1. MyFax.Com 160 • 3.17.2. Innoport 160 • 3.17.3. Green- Fax.com 162

3.18.Virtual Private Branch Exchange (PBX) 163

3.18.1. GotVMail 169 • 3.18.2. RingCentral 169 • 3.18.3. Virtual PBX 170 • 3.18.4. Inteliphone 171 • 3.18.5. PhoneFusion 172 3.18.6. Virtual Telecenter 172

3.19. Virtual PBX Software 173

3.19.1. Axon Virtual PBX Software 173

Chapter 4s Bring Your Product to Market, ,...... 175

4.1. Getting Your Product to Market 178 4.1.1. SCORE 182 • 4.1.2. DonDebelak 183 • 4.1.3. The Launch Doctor 185

4.2. Idea Generation 186

4.2.1. MindTools: Essential Skillsfor an Excellent Career 187 4.3. Idea Screening 189

4.3.1. Techno-Business Solutions: How to Screen an Idea 191 4.4.Concepting and Testing 191

4.4.1. Arteology: Developing an Industrial Product 194 • 4.4.2. Zoo- merang 195 • 4.4.3. QuestionPro 196 4.5.BusinessAnalysis 196 4.5.1. Marketing Teacher: Pricing 199 • 4.5.2. Bradley University: Planning Issuesfor Small Businesses: Breakeven Analysis 200 4.6.Prototyping and BetaTesting 200 4.6.1. Prototyping 201 • 4.6.1.1. CFA Design 202 • 4.6.1.2. The Harshaw Research Group 202 • 4.6.1.3. San-Tech 202 • 4.6.1.4. McLellan Engineering 203 • 4.6.1.5. Slingshot Product Development Group 203 • 4.6.2. Beta Testing 203 4.7. Implementation 206

4.7.1.Market-Ability, Inc. 206 • 4.7.2. Studio Productions, Inc. 207 4.7.3. TheOxford Group 207 xii CONTENTS

4.8. Roll Out 207

4.8.1. MRO Today: The Five-Step Approach to Product Launch 207 4.8.2. Baltimore BusinessJournal: Launch Product Carefully 208 • 4.8.3. ChiefMarketer: SixSteps toa Successful Product Rollout 209 4.9.Licensing 210

4.9.1. LIMA: International Licensing Industry Merchandisers Associa tion 212 • 4.9.2.Inventor Fraud: Companies Lookingfor Inventions 213 • 4.9.3. Patent Value Predictor 213

4.10. Manufacture 213

4.10.1. Thomas Register of'American Manufacturers 214 • 4.10.2. Har ris InfoSource 214 • 4.10.3. Hoover's Online 215 • 4.10.4. OneSource 215 • 4.10.5. Industry Search Online 215 • 4.10.6. TradeEasy 216 Appendix:Don Debelak: 15 StepsTo BringYour Productto Market... .217

Chapter 5: Back Office 227

5.1. What is a Virtual Back Office? 230 5.1.1. TutorialReports.com 235 • 5.1.2. Sourcingmag 236 • 5.1.3. OffshoreExperts.com 237 • 5.1.4. Outsourcing.org 238 5.2.Outsourced Back Office:Marketplaces and Job Boards 239

5.2.1. Guru.com 240 • 5.2.2.Elance 240 • 5.2.3. Contracted Work 241 • 5.2.4. Craig's List 241 • 5.2.5. Monster 242

5.3. Virtual Assistants 243

5.3.1. International Virtual Assistants Association 245 • 5.3.2. In ternational Association of Virtual Office Assistants 245 • 5.3.3. VA Networking 245 • 5.3.4. Virtual Assistance U 245 • 5.3.5. Creative Resources 246 • 5.3.6. Suburban Office Services 246 • 5.3.7. Elec tric Quill Virtual Assistant Services 247 • 5.3.8. Virtually Yours 247 5.3.9. In-a-Pinch Administrative Services for Small Businesses 247 5.3.10. Virtual StaffSolutions 248 • 5.3.11. Word Processing Plus 248 5.3.12. Virtual GalFriday 249 5.4. Virtual Staffing Services 250 5.4.1. Benchmark Support Services, Inc. 250 • 5.4.2. Business Office Support Services 250 • 5.4.3. The Virtual Office Center 251 • 5.4.4. Business Ordertakjng 251 • 5.4.5. InteleANTS 252 CONTENTS XIII

5.5 Word Processing 252

5.5.1. Type-Write Word Processing Service 253 • 5.5.2. Compudex 253 5.5.3. Type-Righters 254 • 5.5.4. RJ's Word Processing Services 254 5.5.5.A2Z Word Works 254 • 5.5.6. KCO, Inc. 255 5.6.ProjectManagement 255

5.6.1.BasuTechnology 257 • 5.6.2. PM Solutions 258 • 5.6.3. CH2M HILL IDC 258

5.7.Data Entry and Processing 259

5.7.1. DataEntry Group 260 • 5.7.2. OpenWorldData 261 • 5.7.3. Tab Service Company 261 • 5.7.4. Techspeed 261 • 5.7.5. Axion Data Services 262

5.8.Accounting, Bookkeeping, Payroll, and Taxes 262

5.8.1.1 DoYourBooks 263 • 5.8.2. PayCycle 264

5.9. Human Resources 265

5.9.1. H-R Guide 266 • 5.9.2. HR.Com 267 • 5.9.3. ADP 267 5.9.4. Taleo 267

5.10. Internet Research 268

5.10.1. Marcos Research 268 • 5.10.2. Informa Research Services, Inc. 269

5.11. Telephone Reception 269 5.11.1. American Executive Centers 272 • 5.11.2. Agent Phone, Ltd. 272 5.11.3. Real Time Reception 272 • 5.11.4. Ruby Receptionists 272 5.12.Customer Support 273 5.12.1. SupportSave 273 • 5.12.2. Ybrant Technologies 274 • 5.12.3. WebGreeter 274

5.13. Call Centers 274

5.13.1. EasyCall Call Center Solutions 276 • 5.13.2. Entel Call Center 276

5.14. Online Shipping and MailingServices 277

5.14.1. USPS(United States Postal Service) 277 • 5.14.2. FedEx (Fed eralExpress) 277 • 5.14.3. DHL 277 • 5.14.4. UPS (United Parcel Service) 278 • 5.14.5. Endicia Internet Postage 278 xiv I CONTENTS

Chapter 6: Information Technology ..... 281

6.1.Information Technology: Introduction 284

6.1.1. CIO Magazine 285 • 6.1.2. Information Week 286 * 6.1.3. TechWeb 286 • 6.1.4. CIOIndex 287 • 6.1.5. TutorialReports. com 288

6.2.Outsourcing Information Technology:Directories 288

6.2.1. Sourcingmag 291 • 6.2.2. CIO Index 291 • 6.2.3. OffshoreEx- perts.com 291 • 6.2.4. Outsourcing.org 291 • 6.2.5. Russ Soft 292 6.3.Outsourcing Information Technology: Marketplaces&Job Boards.. .292

6.3.1. Guru.com 295 • 6.3.2. Elance 296 • 6.3.3. Contracted Work 296 • 6.3.4. Rent-A-Coder 297 • 6.3.5. GetACoder 297 • 6.3.6. oDesk298 • 6.3.7. Craig's List 298 • 6.3.8. Dice 299 6.4.Computer Help Tech Support 299 6.4.1. iTOK 299 • 6.4.2. ComputerHelpSOS 300 • 6.4.3. Plum Choice Online PC Services 301 6.5. ApplicationService Providers(ASP) 302

6.5.1. ASPStreet.Com 304 • 6.5.2. ASPNews.Com 304 • 6.5.3. All Business: Application Service Providers 305 6.6. Database Development 305 6.6.1. Foraker Design 309 • 6.6.2. Database Development Services, Inc. 309 • 6.6.3. Virtual GalFriday 309

6.7. Database Administration 309

6.7.1. Virtual-DBA 311 • 6.7.2. PICS 312 • 6.7.3. Firetower Tech 313 6.7.4. Ntirety 314 • 6.7.5. Remote DBAExperts 314 6.8. Data Mining and Analysis 315 6.8.1. Statoo Consulting 317 • 6.8.2. Drayton, Drayton andLamar, Inc. 317 • 6.8.3. JMP 317 • 6.8.4. Analyse-it 318

Chapter 7: Web and Ecommerce ,, 321

7.1. Web Designand Development 324 7.1.1. Website Magazine 327 • 7.1.2. Digital Web Magazine 328 7.1.3. Practical ECommerce 329 CONTENTS I xv

7.2. WebDesignand Development: Marketplaces and JobBoards 330 7.2.1. Guru.com 332 • 7.2.2. Elance 333 • 7.2.3. Contracted Work 334 • 7.2.4. Craig's List 335 • 7.2.5. RentACoder 336 73. Website Design and Development: Outsource Companies 337 7.3.1. WebDesigners-Directory 339 • 7.3.2. Heritage Web Solutions 339 7.3.3. IMC Sites 340 • 7.3.4.123Triad 340 7A.WebsiteHosting 341

7.4.1. IX Web Hosting 345 • 7.4.2. HostExcellence 345 • 7.4.3. Dot5 Hosting 346 • 7.4.4. HostMonster 347 • 7.4.5. Blue Host 348 7.4.6. Pow Web 348 • 7.4.7. HostGator 349 • 7.4.8. GoDaddy 350 75. Dedicated Hosting 352 7.5.1. RackSpace 353 • 7.5.2. Completely Dedicated 354 • 7.5.3. Host Gator 355 • 7.5.4. GoDaddy 356 7.6. Domain Name Registration 357 7.6.1 WHOIS 359 • 7.6.2 Domain Name Registrars—Network So lutions, Dotster, GoDaddy 360 • 7.6.3 Domain Name Brokers and Marketplaces 361 7.7. Search Engine Optimization andCopywriting 363

7.7.1. Editorial Freelancers Association 366 • 7.7.2. The WriteCon tent 366 • 7.7.3. Custom Copywriting 367 • 7.7.4. Web Copywriters 367 • 7.7.5. Dot Com Copy 368 • 7.7.6. Ascent Copywriting 368 7.8. Search Engine Optimizationand Submission 369 7.8.1. TopSEOs 370 • 7.8.2. SubmitExpress 371 • 7.8.3. AddMe 372 7.8.4. AddPro 373 • 7.8.5. WebPosition Gold 373 7.9. Ecommerce: Shopping Carts andCatalogs 374

7.9.1. Google Checkout 375 • 7.9.2. osCommerce 376 • 7.9.3. Miva Merchant 377 • 7.9.4. Agora Cart 377 • 7.9.5. Zen Cart 378 7.9.6. Volusion 379 7.10. Ecommerce: Payment Gateways andMerchant Accounts 380 7.10.1. Authorize.net 381 • 7.10.2. PayPal 382 • 7.10.3. iTransact 383 • 7.10.4. Shift4 383

7.11. Ecommerce: SSL Certificates 384 7.11.1. Verisign 386 • 7.11.2. Thawte 386 • 7.11.3. GoDaddy 387 xvi CONTENTS

7.12. SiteAnalytics: Software 388 7.12.1. AWStats 390 • 7.12.2. Google Analytics 391 • 7.12.3. Clickalyzer 392 • 7.12.4. Stuffed Tracker 392 • 7.12.5. HitBox Professional 393 • 7.12.6. ClickTracks 393 7.13. ContentManagement Systems 395 7.13.1. Mambo Server 398 • 7.13.2. Joomlal 399 • 7.13.3. Drupal 400 • 7.13.4. PHP-Fusion 401 • 7.13.5. PHPNuke 402 • 7.13.6. FCKeditor 403 7.14. Blogging Software 403 7.14.1. WordPress 406 • 7.14.2. Movable Type 406 • 7.14.3. b2Evolution 406 • 7.14.4. Serendipity 407 • 7.14.5. Performancing Metrics 407

7.15. Wikis 408 7.15.1. WikiMatrix.org 409 • 7.15.2. MediaWiki 409 • 7.15.3. Doku- Wiki 409 • 7.15.4. TWikj 409 • 7.15.5. bitweaver 410 • 7.15.6. Tikiwiki 410 • 7.15.7. MoinMoin 410 Appendix: CMS Features Comparison 412

Chapter 8: Promotions; Marketing and Sales 415

8.1. Promoting Your Company, Product, orService 417 8.1.1. American Marketing Association 422 • 8.1.2.12Manage: Mar keting 424 • 8.1.3. Marketing Profs 425 • 8.1.4. Entrepreneur Magazine: Small Business Marketing and Advertising 426 • 8.1.5. Marketing Sherpa 426 8.2 Web Marketing 427 8.2.1. ClickZ 429 • 8.2.2. Awecomm Web Strategies 429 • 8.2.3. USWeb 430 • 8.2.4. WebAd.Vantage 430 8.3. Search Engine Marketing 430 8.3.1. SEMPO: Search Engine Marketing Professional Organization 435 8.3.2. Web Logic Group 436 • 8.3.3. InfoSearch Media 436 8.4. LinkExchange Management 437 8.4.1. AutomateLinkExchange 439 • 8.4.2. LinksMaster 440 • 8.4.3. Link Wrangler 441 CONTENTS XVII

8.5.Web Advertising 441 8.6.Search Advertising/Paid Placement 446

8.6.1. Google AdWords andGoogle AdSense 447 • 8.6.2. Yahoo! Search Marketing 448 • 8.6.3. Ask-com 449 • 8.6.4. Microsoft Office Live adManager 450

8.7. Pay-Per-Click Networks 451

8.7.1. Miva 451 • 8.7.2. Bidvertiser 452 8.8.Banner Exchanges 453 8.8.1. 1800Banners 455 • 8.8.2. Click4Click 455 • 8.8.3. eBan- nerTraffic 456 • 8.8.4. E-BannerX 456 • 8.8.5. Exchange Ad 456 8.8.6. Neobanners 457 • 8.8.7. SkyscraperAds.com 457 8.9.Exit Exchanges 457

8.9.1. ExitExchange 459 • 8.9.2. w3exit 460 8.10. Widget Advertising 460 8.10.1. Intelligent Web Marketing 461 8.11.Virtual Adservers 462 8.11.1. AdvertServe 463 • 8.11.2. Zedo AdServing 464 8.12. Affiliate MarketingNetworks 464 8.12.1. Azoogle Ads 466 • 8.12.2. LinkShare 466 • 8.12.3. Direct- Leads 467 • 8.12.4. ShareASale/FineClicks 467 8.13. AffiliateMarketing Software 468 8.13.1. DirectTrack® 468 • 8.13.2. My Affiliate Program (MyAP) and Kolimbo 469 • 8.13.3. Affiliate Shop 470 • 8.13.4. AffiliateRunner 470 • 8.13.5. Interneka 471 8.14. Email Marketing 471

8.14.1. EMG Marketing Solutions 474 • 8.14.2. Constant Contact 474 8.15. Customer Relationship Management (CRM) 474 8.15.1. Salesforce.com 476 • 8.15.2. Microsoft Dynamics CRM 476 8.15.3. SugarCRM 477

Index _ eo,437 about the authors

Richard Hooker heads up a Los Angeles marketing and advertising agency that specializes in start-ups and turnarounds. With both doctoral work at Stanford University and an MBA with honors (valedictorian) at USC, Hooker spent eight years as a faculty member first at Stanford and then Washington State University before moving on to become a Director ofInteractive, Creative Director, and marketing strategist at a Los Angeles marketingcommunications firm. Asan international consultant, Hooker has worked with the entire gamut ofcompanies across theglobe—from Fortune 500 firms to one-person start-ups.

Steve Monas, established author andInternet entrepreneur, has developed and operated several highly successful start-ups. Monas, a Marketing and Ecommerce executive as well as aWeb and Business Development Strategist, earned his BA from Newport University. He regularly serves as a Marketing Consultant for Pepperdine University, drawing on his experience in a wide variety of industries. The author of YourSpace and Chemistry and Numbers, Monas resides in San Diego, California, and enjoys an active lifestyle while working on variouspublishing, video, music, film, and web businesses. Ever since I owned my first laptop, I dreamt of having a virtual office and, from that office, running a company that could run itself—everything from accounting to manufacture to delivery. All I would have to do is fire up my laptop every morningand "goto work." I made that dream come true. And I learned that there is nothing in this Internet-connected world tostop anyone else from realizing thesame dream. It was not, however, a dream that was easy to realize ... at first. It took a mountain of digging and research to find all the tools and services I would need to make itwork. It also required making mistakes, many ofthem costly, all ofthem aggravating, and a few that came close toruining me. So I compiled all my research and packed it in with all my experience, good and bad, into this reference guide for other entrepreneurs. Whether you're realizing the same dream entirely green or thoroughly tested and experienced, our goal in this book is to reduce as much of the clutter—and as much ofthehard knocks—for you and other entrepreneurs as possible. You may bea single individual who has always wanted to runa complete business from your home with just some computer equipment.

xxi Or you may already be running a successful business but want to know how to exploitthe outsourcing opportunities in software,marketing, or manufacturing that can increase your profitability or decrease your headaches. Or youmayberunningastart-upwithasmall staffand limitedresources wondering how to get more with less. In any case, this book's information will help you understand the unlimited opportunities our brave new wired world offers you. This book, however, serves as more than just a reference; it will help you understand and evaluate the strategic business decisions you will face in outsourcing much of your business. I never set out to write an extraordinary book, just a useful one. Almost everything I learned, I gleaned from newspaper, magazine, and Internet articles. Where I can, I give credit to these sources. But much of this book comes from myownexperience with Web-based and offline business; allthe best research, after all, is information filtered through practical experience. WhileI cannotpromise yousuccess, myhopeisthat thisbookwillmake your way much easier.

Fondly, Steve Monas a note about URLs

This book is intended as an indispensable resource for nearly every challenge you face in starting a new business on a limited budget. At least half the book covers online resources you can use in each aspect of your endeavor—resources, information, articles, directories, software, services, and vendors. Unfortunately, ifyou're holding the print copy ofour book, you have no choice butto peck out these URLs on your keyboard. While some URLs are pretty easy (www.citibank.com), others are darn near impossible with endless strings ofnumbers and nonsense. Ifyou can successfully type in story-lengthURLs ofthe nonsense sort, well, we want tohire you. We anticipated these problems and have put all the linked resources online for you at

http://www.shoestringventure.com/resources

So all you have to do is type in one URL—that one, the one you're looking atright above this sentence—and bookmark it. You will be required to register andlogin, butthat's a small price topay for saving you the slog of typing http-something-or-other. Throughout this book, we provide pricing for a variety of services, from one-shot prices to monthly subscription prices. Many of these prices and the packages they purchase may have changed between the publication of this book and now. We verified all prices one last time on September 15, 2008; any changes after that are not reflected in the book. Most importantly, wedecided nottoplay the$9.95 game. Asyou probably know, most firms like to price products and services near a dollar amount, not over—$9.95 rather than $10. Why? F'eoplepsychologically perceive $9.95 to be nine dollarsand they perceive $10 to be,well, ten dollars. We're not here to play that psychological game with you (although we certainly encourage you to play that game with your customers!). A price of$9.95 is, for all practical purposes, ten bucks out ofyour pocket, so that's how we write it. A price of$199 is two hundred vanishing from your overly- stressed bank account to some other schmoe's bank account. It is our editorial policy, therefore, to round up the "pennies off or "dollar off prices to the price they most closely represent. We're not here to market other people's products, just to give you a good, honest appraisal of those products, how useful they are to your venture, and how much they're really going to cost you. It's easier for you, easierfor us, easierfor the proofreaders, and, well, it's more accurate. So, chances are that when you encounter a price that's a nice round number, it's actually a few pennies less.Don't sweat it. introduction

If every brilliant business idea succeeded the way it should, most of us would be billionaires. If every entrepreneur focused most oftheir energies on the things they are best at, nine outoften new businesses would succeed wildly, rather than nine out of tenfailing. In 2006,1 started buildingScourEvents.com, scheduledto make itsdebut on the Internet stage in mid-2008. It was not thefirst business I built, but it was the first virtual organization I built. I focused my energies on what I did best and built an entire staff located all over the world to do the work that needed to bedone. As thehead ofa virtual organization, I controlled dozens of "employees" who performed hundreds ofdifferent job functions. And I made this all happen ona shoestring budget. My virtual organization designed and developed a sophisticated Web site for ticket sales, tested the site, prepared all the launch materials, put together the PR blitz, and created and implemented all the promotions. All the while this major business venture was coming together, I held down a normal 9 to5 job. AndI took allmy weekends off. Andallmy vacations. xxviii INTRODUCTION

To finance the site, I developed Web sites for other clients by trolling Craig's List for jobs. When I first went looking for projects on Craig's List, I was strapped for money. And then a light went off in my head. I wanted to see if I could turn around Web projects by fully outsourcingthem. I scoured the Craig's List "Computer Gigs"dailyin eachmajor Americancity. I emailedprospects with a small bio and receivedseveral responses. Once they hired me to build a site, I immediately outsourced the work to companies in India and China. Within twenty-four hours, I would havedesigns to show my clients. Within a few days or weeks, I'd have sophisticated, database-driven sites completed and quality-assured. My profits ranged well above 70% of my costs. It's not that I didn't do anything: I built specifications based on the client needs, project managed the outsource company, and performed final quality assurance. But I didn't do the heavy lifting) that's what I outsourced. And everyone in the picture—I, my clients, and my outsource companies—walked away happy with the value they received. By concentrating on whatI did best—strategizing Websites, translating strategy into doable specifications, and project managing design and development—I spent my time on activities designed to bring the greatest value to myclients and to me. By outsourcing whatI did not do better than anyone else—designing, coding, andprogramming—I made huge profits by finding people who could do these activities better and more cheaply than anyone else. If I canbuilda powerful, successful business using only mylaptop, then anybody can. However, caveat emptor. I'm hereto tellyouit'snot easy. I literally had to learn amillion things tomake itwork—and takemorethanmyshare ofhard knocks. And so will you and any other entrepreneur. That's why we wrote this book, distilling all the knowledge, hard work, sweat, and mistakes that go into building a successful virtual organization into a reference that can help entrepreneurs like you succeed justa little more quickly, a little more easily, and with fewer hard bumps.

This is the Century for Small Business

Corporate leviathans appear tohave every advantage over small business— big bank accounts, armies of Harvard-educated MBA's, fleets of lawyers, wallets filled with powerful politicians, and access to the biggest, baddest, priciest media on the planet. And what do you have? A great idea, a laptop, and a stressed-out checking account. What chance do youhave? INTRODUCTION xxix

If every successful start-up venture required MBAsand more cash than can be counted, we would never have things like Web browsers, search engines, or even McDonalds. So even though you can't fill an oil tanker with your moneyor wouldn't know an MBAfrom a hole in the ground, you might havethe nextgreat billion dollarbusiness or product. Your shoestring venture could be the next Google, the next Bratz, or the next McDonalds. Most importantly, you—and all others like you who are starting out with a great ideaand a ton of passion—have an advantage that previous generations of entrepreneurs could never even imagine. Information technology allows you to easily start a business and find all the resources, skills, and materials you need simply byfiring up yourlaptopand connecting to the Internet. Roy Crock had to hire staff and rent a building to make McDonald's work. Bill Gates had to hire staffand rent a building to turn Microsoft into a going concern. You just need a computer. That's what this book isallabout. You have the tools to builda powerful start-uporganization, fromfinancing to product development to marketing, without ever really having to walk out your front door. We're here to give you thetools youneed tostartyour newventure or takeyourcurrentbusiness several levels higher by exploiting the resources our interconnected world offers you. Using global communications anddatanetworks, youcanstaffan entire organization with every human resource and skill you need at rock-bottom prices. Your corporate office canbea room in yourhomeor a table at a coffee bar. All the parts of your business, from bookkeeping to manufacturing, can be done by staff all over the world. Even the physical and technological infrastructure can bedistributed all across theglobe. Your phone exchange lives somewhere inMinneapolis while your faxing service sits in Milwaukee. Your phone receptionists work in Manila. Your customer service reps handle all customer concerns from an office in Mumbai. Your Webmaster manages your entire Web site—from development to maintenance—from Moscow, but your site sits on a server in Moline. All your word processing isdone by a virtual assistant working from her home inMarietta. Andyour laptop computer is periodically tuned up by some tech dude in Montreal. People from all over the world shop at your store without ever leaving their kitchen table ... and a warehouse inMountain View ships all the orders. You are, in short, running a virtual organization using only a computer. That's all you need. Well, not quite. You also need a very generous helping ofbusiness sense, dedication, ideas, planning, organization, and sound decision-making, but that's thesubject foranother book andanother day. xxx INTRODUCTION

The advantage communications technology gives you, an advantage entrepreneurs like you never had before the twenty-first century, is outsourcing. Newspapers and politicians allpanicand screamthat outsourcing means that your job is going somewhere else—India, China, or some other far-flung and foreign place.That could be true. But outsourcing has another face. It also means that you can be a pretty formidable player in the business world; and you don't need much more than you, a laptop, and an Internet connection. Why? Because outsourcing permits you to focus your energies on what brings real value to your business—whatyow do best.The rest—you know, the stuff you don't do well or profitably—that's what your outsource partners do.

Core Competencies and Outsourcing

In the MBA world, they call "what you do best," corecompetencies. Corporations understand that they succeed by doing what they do best and lettingother folks, like suppliers or vendors, do the other stuff. For instance, most hotel chains do not actually own their hotels. Why? Any moron canown a hotel. The owning part is easy; it doesn'ttake tons of talent or business acumen. In fact, it doesn't even take ounces of talent or business acumen. In the hotel business, the hard part is a.) figuring out the bestplaces tolocate hotels; b.) cuttingfavorable realestate deals; c.) managing the construction of the hotel;and d.) administering and marketing the hotel. Being able to do these things better than everyone else is what makes one hotel chain more successful than others. But owning the hotels ... no hotel chain is "better" at owning hotels than any other hotel chain. So they often don't waste their time on the owning part of the hotel business. This frees them up for the business activities that make the bigbucks. The same applies to buildingthe hotel's Web site. Hotel chains do not build Web sites better than other hotel chains, so they pay someone else to build their Web sites. What hotel chains do well is use their Web sites to find and build a loyal customer base. So they spend their valuable time and money trying todothat better than any other hotel chain. The better a hotel chain is at filling hotels through their Web sites, the more they "beat" their competition. Butactually designing, coding, and programming the site? No hotel can "beat" other hotels by designing, coding, or programming their Web site. When doing what you do best allows you to beat your competition, MBAs like to call that a competitive advantage. Justbecause you're asmall business venture onashoestring budgetdoesn't mean that you, too, shouldn'tfocus exclusively on yourcorecompetencies in INTRODUCTION xxxi

order togaina competitive advantage. In fact, because you'rea small business venture on a shoestring budget, you must focus exclusively on your core competencies to gain a competitiveadvantage! And you must outsource the rest! You have neither the time nor money to waste performing activities that others can do just as wellas youcanat a fraction of the cost. If youdon't want to jointhe Start-UpFailureClub—andnine out often start-ups join this club in relatively short order—you need to focus on the things that you dobetter than anyone else. These core competencies, if you do them well, will give you a competitive advantage over all other businesses, including the big guns thatdon't even know, or care, that you exist. Tostay focused, you,more than anyother kind of business, needto find vendors and suppliers to do all the other stuff. You may be an off-the-charts salesperson or networker. You may be a megawatt idea generator. Or you're the best engineer this side of the Mississippi. Or an inspiring leader. Or someone loaded with consumer insight. The reality is this: the more time you spend doing tasks related to what you do best, the more competitive your business will be and the more likely your venture will succeed. The more time you spend doing tasks that you re not good at, like bookkeeping, HTML, or word processing, the less competitive your business will be and the less likely your venture will take off. It's a simple principle that doesn't take a $60,000 MBA degree to figure out. But why outsource when you can doit yourself more cheaply? After all, you have to pay someone when you outsource and, for all practical purposes, you don't have to "pay" yourself. Isn't "free" a better deal than outsourcing, especially since "lots of money" isyourgoal? Wrong. Money flows in two directions in a business. It flows out, which we call expenses, and it flows in, which we call revenues. A business spends money and itmakes money. Yes, ifyou do all your own word processing and project management and advertising, your expenses will be technically zero (if you're not paying yourself). In that sense, you are, indeed, "free." However, diverting your attention and focus away from the things that make money for your business, like managing your business, building strategy, developing ideas, ornetworking, means that your business will have less money coming in. In fact, diverting your focus away from your core competencies usually means that not enough money will come into the business to even pay for "free." Businesses ma\e money when people spend their time doing the things that ma\e money. Businesses never make money by saving money. Never. It's hard to let go, though. The hardest thing for a manager to do is delegate. The hardest thing for a business owner to do is have other people xxxii INTRODUCTION perform the activities ofthe business ... and pay themforit. When,not if,a vendoror employee goes wrong, owners see their money beingflushed down the toilet—and that'sanythingbut a warm and fuzzy feeling. I onceworked at a restaurant where the owner would go through the garbage and pull out food he thought was still good. And it would end up on some customer's plate. That's right, ladies and gentleman. At Quality Cafeteria (that's the name), we would serve our valued customers food right out of the garbage. Now, normal people would consider this a few miles south of bonkers, but when the owner saw perfectly goodfood in the garbage, he sawhis money in the garbage. Remember: a business spends money and a business makes money. As a business owner, youcanlose money in twoways: byspending badly or bynot making money. Money you don't make is justas lost as money that's badly spent. Inevitably, when a business spends money, it sometimes gets a bad deal—perfectly good food gets thrown away, employees talk on the phone rather than work, vendors screw up. But youdon't make money by pulling food out of the garbage. And you almost never make money by doing the work yourself. Okay, you'reconvinced. Butwhat should yououtsource? Well, you can sitdown withyour business anddetermine alltheactivities that need to be performed in order for your business to succeed. You then look at this list of activities and determine where your time and effort will maximize yourbusiness' success. You outsource the rest. But you don't necessarily have to do this. When your business needs to perform some activity, just ask yourself a simple question. We call it the "Hire YourselfQuestion." When you see thatyour business requires a certain "job," ask yourself: "Would I hire myselfto do this job?" In other words, if your business needs someone to do word processing, would you hire someone exactly li\e you to do the job? If your business needs a bookkeeper, and someone exactly like you walked in the doorfor an interview, would you think that person was the rightforthe job? If theanswer is"You bet! I'm thebest person forthat job!" youprobably should perform the task yourself. If, instead, your answer is, "Whoa! I'm way underqualified for that job!" or "No way, I'm way overqualified for that job," you should probably think about outsourcing that task. Why? You want tofocus all your efforts on the jobs you would only hire yourself to do. As a marketer and consultant, I have seen thousands of small businesses come andgo. And I have seen thousands ofentrepreneurs essentially "hire" themselves to do jobs they were magnificently under- or over-qualified to do. And that, my friends, iswhymanyof them cameand went. INTRODUCTION xxxiii

There Are Two Kinds of Business Books

One type likes to pull out the pom-poms, jump about, and do the "success" cheer. Page after page of "Success! Success! Success!"We call them cheerleading books. You know the type. After reading the book, you feel you can take over the world, but the book ends up moldering in a box somewhere. "Rah Rah Rah! Harness the power of the Internet and make a fortune on eBay!" "Sis boom bah! Money just rolls right in when you use permissions marketing!" "1! 2! 3! 4! Purple cows! That's the way to get attention!" It istrue that these books helppeople makemoney. Twopeople, actually. The author and the publisher. Here's the bad news. Business success takes hard work. All the "success" books in the world will not and do not make businesses successful. Instead, it takes knowledge, research, intelligence, good ideas, good decisions, discipline, adaptability, leadership, organization, and planning. If you read these cheerleading books carefully, you'll find precious little practical advice. Sure, you can make tons of money through permissions marketing, word-of-mouth, or innovative advertising. But how do you get from here to there? What do you need to know} What does it cost? Who do you go to? What kind ofdecisions do you need to make? Those practical questions, of course, are for the other kind of business book. So we wrote the other kind ofbusiness book. This is a book about how to getfrom hereto there. Every step of the way. We wrote a book about the real world, not about wish fulfillment. We wrote about going into business with the resources you have, not the resources you wish you had. We wrote about the hardwork, knowledge, and decisions you have to make to transform your idea or small business into a fully-functioning, well-organized venture. We wrotea book about the tasks and processes that are critical to a business's success and how to perform them on alimited budget. We wrote a practical book about all the things you need toknow tomake those tasks and processes happen.

An Ocean ofKnowledge Two Inches Deep

You are the CEO of a company, albeit a very small one—maybe even a one-person company run from your basement. No matter what your xxxiv INTRODUCTION venture's size, you are the CEO and, as CEO, you make the decisions that impact every aspect of your business. If there is one irrefutable truth about business, it is this: business success is the result of making theright decisions. The scienceof business—if there is such a creature—is the science of making good decisions. From the start of your business to the very peak of its success, you will be called upon to make very specific, detailed decisions across the entire scope of your business' activities: planning, strategy, finance, accounting, taxes, marketing, advertising, infrastructure . . . everything. And "everything" includes some of the most mundane, boring, dumb decisions imaginable, like who answers the phone. Just because you're uninterested in some issue does not exempt you from the responsibility of'making agood decision. An acquaintance of mine spent many years at the pinnacle of the corporate ladder as the President of Worldwide Marketing first at Walt Disney and then at Sony Pictures. I once asked him what it was like to do such "big" jobs. He answered, "You have to have an ocean of knowledge ... about two inches deep." AsCEO of yourcompany, gooddecision-making requires thatyoa have an oceanof knowledge two inchesdeep. When some Web developer blasts you an email and tells you that this or that page on yourWebsite should use Ajax, you shouldn't be wondering why it should need a good scrubbing. You should know what Ajax is and why anyone would want to use it.Otherwise, how can you decide? Howdo you know you're making the right decision? Because some tech guy says so? When some designer hands you a logo, how do you know it's the best logo for your company? Because you like it? What if it looks greaton your screen but looks likegarbage warmed over on a fax sheet or business card? What do you need to know to make sure your logo is right? How do you decide} That is what this book is about. We are here to help you with that ocean of knowledge that you need in order to make good decisions. We are not here to cheer youon with the virtues andpromises ofoutsourcing ashoestring venture. We arehere toarm you with the knowledge and resources that you can use to build a business through outsourcing ... on a shoestring budget. Since this bookis about knowledge—the knowledge you need to set up your organization, outsource vital functions, and make all the decisions that land onyour desk—we have written it as a reference work. You can always read it from beginning to end. Why you would do that, we can't imagine, but it's always an option. Better yet, you could get to know each section as the subject becomes important toyour business. You should, however, spend INTRODUCTION xxxv a lot of time in the index. You should definitely mark up the pages. When you're faced with a decision, just flip through the pages and find what you need. Evenif you read it through at one sitting, it'sa book we intend youto useoverand overagain throughout the lifeofyour venture.Scratchthat. We intend you to use this book over and over again throughout the long life of your venture! As a result, we have repeated some sections. Since obtaining a domain name is vitally important when namingyourcompany, we provide youwith domain nameresources in thevery first chapter onstartingup yourbusiness. Butobtaining a domainnameisalso key to developing your Website, sowe have repeated thissection in our Web site chapter. Some oftheonline resources wecite have uses across a variety ofbusiness activities, suchasSCORE,the freeconsulting service for smallbusinesses, or Craig's List, the number one online classified advertising site in the world. Sowehave repeated these resources in morethan one part of the book. Startup 1.1 What's Your Goal? This chapter covers the central issues you '11face instarting asuccessful business. Ifyou already have an ongoing business concern that you're trying to take to the next level, don't skip this section. The subjects we cover here, especially business plans, are still relevant toseasoned businesses that are ripe for transformation or launching new products. In other words, start-up issues never grow obsolete in a business. This first chapter starts at the very beginning: setting goals for your business,formulating answers tofundamental questions inabusinessplan, securing your intangible assets such asyour name, trademark, domain name, patents, and copyrights, and handling the licensing, incorporation, and legal matters necessary toget your business upandrunning.

±m±m What's Your Goal? Before you start anything, you need to determine the purpose or goal of your business. You will be surprised how many great ideas founder because of the lack of a clear business rather than personal goal. Whatever you determine your business goal to be, it will become ground zeroof your business plan whichin turn isyourblueprintfor success. Sowhatdo wemean by a business goal? Asopposed to othergoals, such as personal or careergoals? Well, anythingthat answers all or most of these questions:

1. Are you looking to create wealth through equity, income, or both? That is, are you looking to build up a successful business that you caneither sell orgopublic with, i.e., building equity? Or areyou interested mainly in theincome that your business cangenerate? Or are you looking fora healthy income and futureequity? 2. Howmuch income doyou want toearn? Howmuch equity do you want to build? 3. How will you finance your business? Will you use your own money? Investors' money? Or will you borrow money? 4. Is your primary personal goal to do work you like to do or is your primary personal goal to manage a largebusiness? 5. Who areyour customers and what value are you offering them? How are you making their livesand businesses better? 6. Can you makegood on yourpromises to yourcustomers?

Your answers to these questions will determine what kind of business structure you should use. For instance, ifyou want tomake a healthy income but you're starting your business to do what you like to do and you're not interested in selling your business in the future, you may want to consider a CHAPTER 1 STARTUP sole proprietorship. However, if you're seeking to build a highly profitable business with a sale potential sometime in the future, a sole proprietorship is the wrong way to go—you would want to set up a limited liabilitycompany or a corporation,a legalstructure that allows youto easily sellyour interest in the company. We discussbusinessstructure in section 1.2.

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1.1.1 SCORE: Counselors to America's Small Businesses http://www.score,org

SCORE is the most valuable online resource available to help you get your business started. No exceptions. SCORE is a resource you can use for every issue we cover in this book; it should always be the first place you consult. So what is it? SCORE is a nonprofit organization that has gathered together retired and working executives, business owners, and corporate leaders to provide^r^ mentoring and advice to entrepreneurs starting their own business. SCORE boasts over 10,000 executive volunteers representing some 600 business skills; these volunteers will personally correspond with you via email or sitdown with you face-to-face to give you advice based on their years of business experience. SCORE has provided free advice to over 7.5 million businesses and boasts Jelly Belly Candy, Vera Bradley, Vermont Teddy Bears, and AhiSushi asmajor successes they've mentored. SCORE offers:

Online resources and articles. Online workshops in Flash. Free advice via email from over 1,300 counselors. Face-to-face counseling in your area. 1.2 Business Structure

1.1.2. The Entrepreneur's Reference Guide to Small Business Information http://www.loc.gov/rr/business/guide/guide2 So if running your business requires an ocean of knowledge two inches deep,where's the best place to get that ocean of knowledge? Books. And more books. The Library of Congress developed this large and exhaustive reference guide compiled by Robert Jackson. While it does not provide information, it does provide a comprehensive list of important books and sources. Most of the citations include short descriptions or the book's table of contents. If you're looking for the best bookson starting your business, this is the site to bookmark.

1.2. Business Structure What people mean by the term, "business structure," is really the legal statusof the company. There'snothingdauntingly mysterious aboutbusiness structures; they essentially differ from one another based on the answers to three simple questions:

1. Who owns the business? 2. Who is responsible for the debts and damages the business may incur? 3. Who pays the taxes?

The "who" foreach ofthese questions is notalways thesame person. The type of business structure you choose has many ramifications. Your business's structure determines how much tax you pay, how much paperwork you'll need to do, how many lawyers get a crack at your wallet, how easy it is tofind investors and loans, and whether you're going to lose your house if you get in trouble. Based on the answers to these three questions, businesses are broken down into Sole Proprietorships, General Partnerships, Limited Liability Companies, and Corporations.

Sole Proprietorship: To be a sole proprietor, you only need to choose a name for your business and get a business license, ifyour state requires one.

• Who owns the business? You, the sole proprietor, are the owner. 6 CHAPTER 1 STARTUP • Who is responsible for all debts and damages? You, the sole proprietor, are personally responsible for all debts and damages incurred by the company. • Who pays the taxes? From the standpoint of the law, you— walking, talking, breathing, take-out-the-paper-and-the-trash you—are the company. That means that you pay the taxes, too. You report your business' earnings as income on your personal income tax returns whether you remove funds from your business or not. You also deduct business expenses and losses on those same tax

returns.

From a financial perspective, sinceyou're the soleowner, investorsare not likely to helpyoufinance the endeavor. Therefore, youhaveto find the capital to run yourcompany eitherfromyourownfundsor byborrowingthe money. If youborrow, you'repersonally responsible for the debt. It'sjustlikeanyother personal loan, suchasa mortgage, carloan, or student loan, that youmay have. Asa result, a sole proprietorship ismagnificently easy and inexpensive to form and operate. In fact, in some states, such as California, youdon't even needa business license. Callyourselfa business and shazam! You'rea business.

General Partnership: A general partnership is just like a sole proprietorship,only there'smore than one owner.

• Who owns the business? Youand a friend, you and a spouse,you and your family, or any combination of you and one or more other peopleown the business. • Who is responsible for debts and damages? Like a sole proprietorship, one or all of you are personally responsible for all the debts and damages the company incurs (if only one partner is financially responsible for all the company's debtsand damages, it's called a "limited liability partnership"). • Who pays the taxes? From a legal perspective, you all, that is,all the partners in the business, are the business. All the owners report the business's profitand loss on personal income tax forms based on the percentage of the company they"own."

In a general partnership, the partners are liable for the actions of other partners. When one partner signs a legal document such as a lease or loan for the business, that action legally binds the other parties. Again, most general partnerships do notattract outside equity investors; they arelargely funded from the financial resources of the partners or through borrowing. 1.2 Business Structure Alternatively, some general partnerships combine passive investors with operational managers as partners (a passive investor injects capital into a business without participating in day-to-day management). One or more partners may merely be investors while other partners actually run the business.

Corporation: Corporations are essentially stand-alone legal entities separate and distinct from the owners.

• Who owns the business? Unlike a sole proprietorship or general partnership, a corporation may have an unlimited number of owners. And because a corporation is a legally separate entity from itsowners, theowners caneasily buy and sell theirownership, called shares, in the company. • Who is responsible for debts and damages? In a corporation, the owners of the corporation are not personally responsible for any debts, liabilities, or damages the corporation may incur. So if a corporation owes moneyor issued,nobody can go after the owners. Theycanonly goafterthe assets of thecompany. • Who pays the taxes? In terms of taxes, corporations are taxed as entities separate from their owners. The corporation files its own income taxes and deducts its expenses from those income taxes. If it distributes earnings to theowners, the owners have to pay personal income tax on thosedistributed earnings.

Since liability is limited to the corporation itself, not the owners, corporations easily attract equity investors; corporations, then, are typically investor- and debt-financed. Finally, a corporation is a perpetual entity—it never dies until it goes out ofbusiness. If all the owners die, the corporation lives on. Because they arestand-alone legal entities, corporations are much more difficult and expensive toform and are governed by separate laws and rules. A corporation canbepublicly tradedor privately owned; it canhave millions of "owners" or just one (that's right, just one person can own 100% of a corporation). A corporation's only distinguishing feature is that it is a legal entity separate from its owners. A subchapter "S" corporation is slightly different (the description above applies to subchapter "C" corporations). Asubchapter Scorporation's earnings are not federally taxed, only the company's capital gains and passive income. Individual ownerspaypersonal incometaxeson distributed earnings, just like for a "C" corporation. So an "S" corporation avoids the 8 CHAPTER 1 STARTUP "double taxation" of earnings that most corporations suffer (taxed once for the corporation and taxed a second time when distributed to the owners). But there's a catch: an "S" corporation can have a maximum of orrly seventy-five owners and every owner must be an American citizen. Both "C" corporations and LLC's, which we discuss below, can have as many owners as there are people on the planet. In addition, other corporations, whether "S" or "C", cannot own an "S" corporation. All this means is that it will be difficult to find investors or sell your company if you structure your businessas an "S" corporation. However, just like a "C" corporation, ownership can be traded without consulting other owners. So you can always easily sell part or all of your stake in the business, provided the number of owners never exceeds the magic seventy-five.

Limited Liability Company (LLC): A "Limited Liability Company" is a new legalbusiness structure that looks a lot like an "S"corporation. Unlike a corporation, investors don't own shares, but rather an equity interest in the company. Again, the company does not pay taxes on its earnings; rather, the individual owners pay personal income taxes on distributed earnings they receive. Capital gains, which are taxed twice for a corporation—once for the corporation and once for the shareholders—are only taxed on the shareholders. And, just like a corporation, the owners are not personally responsible for debts or damages incurred bythe company. While it is more difficult to find investors for an LLC than a corporation, an LLC permits easieraccess to investors than a sole proprietorship or a limited partnership. Unlikea corporation, however, selling allor partofone's interestmayinvolve obtaining permissionfrom the other owners. So, in manyways, an LLC isthe best ofbothworlds: youget the limited liability ofa corporation without the double taxation and allthe paperwork, regulations, and legal expenses. The downside is that laws governing LLCs are very volatile and in constant flux. If you have any intention of running your business across state lines, you have to make yourself familiar with all the relevant laws or you might be stuck with a less profitable business

structure.

Doing Business As (DBA). Finally, you'll probably have to deal with "DBA" registrations along with all the other alphabet soup of business structure stuff. A DBA is actually not a legal business structure; instead it is simply a state business registration that allows a business to use a name that does not include the name or names ofits owners. Let's say your name is Bill Smith and you run a company called "Bill Smith CookingSchool." 1.2 9 Business Structure You don't need a DBA registration. There's your name, Bill Smith, right in the business name. If on the other hand, you call your business "Bon Appetit," then you are Bill Smithdoing business as "Bon Appetit." You are required to file a DBA application. If you remember our three questions about business legal structure (who owns the business, who is responsible for the debts and damages, and who pays the taxes), then a DBA is a business name that doesn't answer these questions. With a business name like "Bon Appetit" or "Synergistics," consumersand other businesses have no idea who owns the business and who's responsible for it. So to protect consumers and other businesses, the state requires a filing that associates the fictitious name ("Bon Appetit") with the people whoare responsible for the business, its debts, and its taxes ("Bill Smith").

1.2.1 FindLaw for Small Business—Incorporation and Legal Structures http://www. findIaw. com FindLaw for Small Business is one of the most thorough and easily navigable sites concerning laws and regulations governing small businesses. Like SCORE and Entrepreneur Magazine Online (referenced below), FindLaw should become one ofyour topbookmarks in your browser; there you'll find a well-organized and complete set ofarticles covering every legal issue you will encounter as an entrepreneur, as well as an exhaustive set of links tootherInternet resources anda search engine for local small business lawyers. If FindLaw were a book,