You’re ready to sell your business. You’ve shown steady revenue growth with expanding market share. You’ve cut costs, you are practically debt-free, and you even have an interested buyer, only to discover that you haven’t filed your annual business report. What about your other legal obligations? Deborah Sweeney, owner and CEO of MyCorporation.com, tells us why it’s critical to stay on top of your documentation and corporate filings, or run the risk of substantial financial losses that could put a major dent in your company’s value and prevent the sale of your business.
That's our mission really, to convey that we are too entrepreneurs and business owners and we understand what it's like to be in that situation, and to let the customers know that we're there to help.
- Deborah Sweeney
From the IRS to the FTC, to the FCC, to the US Patent Office, there are countless bureaus, agencies, and organizations that need to know a little bit about you and your business. And as long as you communicate with them, send them the paperwork, then everyone's happy, and you can go about operating that business of yours and taking care of your customers, right? Well that's what we're going to talk about today with my guest Deborah Sweeney, owner and CEO of mycorporation.com in Los Angeles, provider of business services to small businesses nationwide. Deborah Sweeney, thank you so much for agreeing to join us on Deal Talk, good to have you.
Deborah: Jeff, thank you for having me. It's my pleasure to be here.
Jeff: Well, we were looking forward to chatting with you Deborah, and what I'd like to do just to maybe whet everybody's appetite into what we're going to talk about today, I was hoping you might be able to take just a moment here at the top to tell us a little bit about you. Give us some background, some insight into what you're up to and what your company does and who it serves.
Deborah: I'm an attorney by trade focusing on intellectual property and trademark, copyright law, as well corporate law. And my practice was in that area before we became in-house counsel for the company I now own. About nine years ago we were acquired Intuit, which everyone knows as the makers of QuickBooks and TurboTax. And about five years ago I was fortunate enough to purchase the company out of Intuit, so it's now privately held and I'm the owner. And I love to be an entrepreneur. I run this business because we work with other entrepreneurs and business owners. By nature they're reaching out to us to help them to incorporate and form LLC's, as well as to help them maintain their annual filings and annual reports. If they end up growing then going to multiple States and filing form qualifications, or trademarks, and copyrights. So we provide all of those services in a non-legal capacity, primarily in a filing capacity. But certainly what we do is stay on top of all the legal law, the law filing requirements, and everything that's needed to ensure that small business owners and entrepreneurs are able to get their business off the ground and do it right.
We're hyper focused on customer service, and I thought that it was an opportunity to spin the business out, and sort of treated it as an entrepreneurial business rather than one of a larger corporate organization.
Jeff: Deborah, one thing that I have been wanting to ask you because we're talking the last couple of days, setting up the things for this program. I know that you've been with the organization for a long time and then you turned around five years ago, I think I remember you saying. And you've actually bought the company, MyCorporation. Tell me, was this on the block at the time that you went in, or did you just say, "I like working here so much I'd like to own the company?" How did that all work out?
Deborah: I'd say it was a little bit of a hybrid. Truthfully I loved working here. I really saw that there was an opportunity to take this business from an entrepreneurial perspective, as opposed to a large corporate perspective. It was hard, and we're a nimble business. Our laws and rules change daily. We're hyper focused on customer service, and I thought that it was an opportunity to spin the business out, and sort of treated it as an entrepreneurial business rather than one of a larger corporate organization. What helps me in that was that it was 2009 and Intuit was focusing more on what they did back then, which was their QuickBooks and TurboTax products. So our product is sort of a side product and when I offered to purchase it, it wasn't easy, but certainly I was able to convince him that this is the best way for us to remain partners and for me to be the owner of the company, and they agreed.
Jeff: Exciting indeed. I kind of get the sense too. You talked about taking it from more of a corporate to an entrepreneurial type of business, or one that would appeal a little bit more with... Maybe it's a little bit more intimate, a little bit more personal rather than kind of the broad shouldered, corporate look that many businesses like yours might have. And I kind of got that sense by visiting your website. It looks like something that would welcome small business owners, so that it would kind of take some of that fear factor or intimidation out of the play.
Deborah: That's right. That's our mission really, to convey that we are too entrepreneurs and business owners and we understand what it's like to be in that situation, and to let the customers know that we're there to help. So many of our competitors are similarly situated businesses have focused exclusively on automation. And while automation is critically important to get everything done in a timely fashion, we also feel that that customer service and high touch points are really important with customers who are starting businesses and wanting to make sure that they're doing everything right in terms of the ongoing maintenance of their business. So our position is to be there for the customers for the life cycle of their business.
And while automation is critically important to get everything done in a timely fashion, we also feel that that customer service and high touch points are really important with customers who are starting businesses and wanting to make sure that they're doing everything right in terms of the ongoing maintenance of their business.
Jeff: I'm really glad to hear you say that. So customer service is in fact not dead, it's alive and well with MyCorporation. And the people who are listening today to this program are in the right place at the right time. Is there a specific competency that your company is particularly known for, perhaps one or two things Deborah Sweeney that businesses seek your help for most of all?
Deborah: Sure. So our most common product of course is the corporation or LLC, and the LLC outweighs corporation about two to one at this point. When we first started the corporation was king and now more often than not people are forming LLC's. But what we're known for as I've mentioned with the customer service, and that plays into our most popular product such as the annual reports that we do. So when someone's forming a corporation they know, "Gosh, I need to file that paperwork at this date, and I need to get this documentation to my accountant to open my bank account." But when they get lost it's what do I need to do annually. And so what we're really well-known for is making sure that we maintain the annual filings for our clients. And it's usually $99 a year, not that the pricing matters per se. But it's really about for a low price they can make sure that all of the filing needs are handled for them. They've got their annual report files, we make sure that they know the deadlines for their taxes, etc. And that’s a critical differentiator with our company and something that we're definitely known for in terms of our customer service and our relationship with our clients.
Jeff: Throughout you career Deborah in MyCorporation you've probably spoken to thousands of business owners all over the country and certainly your people have. What do you see as being a few of the most important issues that many small growing businesses seem to face time and time again? These might be issues that quite frankly could be costing these companies a lot of money.
Deborah: Sure. I think the number one thing is that when people are getting started, they're focused on their product or service. They're focused on what their company name is and how they're going to get customers, and how they're going to grow their business, and how they're going to turn a profit. They're not focused on the legal nuances to protect themselves. So incorporating or forming an LLC provides you with separation of your personal assets from those of your business. It also creates a measure of professionalism about your business, for your consumers. So I think when a lot of businesses and entrepreneurs are getting started, there's a gap between I know what I want to do, I know what my product or service is, and I think I know how to get customers, but they don't know how to get established. And we've seen a lot of opportunities to help educate customers in that way.
The second thing that I mentioned as part of my first list of things, establishing their brand and really developing what it is that that they're going to become to their consumer. And customers get confused about forming a trademark or filing a trademark; both the difference between getting their corporate name and their trademark, and also what it means to protect your brand in commerce. And so we find that those are the two most common obstacles that small business owners face. And what are the risks and roadblocks? One is lack of knowledge, they're just not sure what's what. The second is their fear that it's just really expected that they have to talk to an attorney that says it’s a couple of thousand dollars to incorporate, or $4,000 dollars to figure out if their trademark is available on file with the US Patent and Trademark office. So it's those barriers to entry where they just think, gosh, I don’t even have that money to get started yet. And I don't have the time and energy to put into it and so they push it off until something becomes an issue and what can happen is someone else comes up with your brand or they started using something highly similar to you in the market or industry. And then you're stuck facing a lawsuit, or someone does sue you and you're stuck protecting your personal assets because you haven't filed an official corporation. So those are the two biggest things that stand out the most when a small business is growing. They're focused on growth and consumers but they're not always focused on the legal nuances to help protect them in the long run.
Those are the two biggest things that stand out the most when a small business is growing. They're focused on growth and consumers but they're not always focused on the legal nuances to help protect them in the long run.
Jeff: Tell me, if someone has to speak to an attorney and they were to call your company for example Deborah, I'm assuming that not everybody on board is an attorney. But depending on where they are in their country they may have special needs. How do you put them in touch? Are you able to take and and connect them with the people they need to speak with.?
Deborah: Yes, we always suggest that it's wise to talk to attorneys. And most of the people who come to us have been referred to us by attorneys, CPA's, financial advisers, etc. However, we do have resources for contacts for both lawyers and accountants in all 50 States. So if someone said, "I really need to solve this problem and I really don't understand." We cannot engage in legal advice because we're not all attorneys where you said that, and that's true. But what we can do is provide them with information on what the process is and what to expect in terms of the filing and filing times. A lot of people when they're reaching out to an attorney, and getting clarification for example on whether they should be an S Corporation or an LLC, and then they turn around and work with us to get that filing actually completed. So we are really fantastic at the process but we always work with attorneys and financial advisers to make sure that the client knows what to expect and what to do in the whole process.
Jeff: For most small companies, what have you seen in terms of your experience and the traffic coming through in your particular business? Most companies file for the LLC designation, is that correct? Lately over the last few years it seems that that's probably exceeded the number of companies filing for a corporate status. Is that right?
Deborah: Exactly, it's becoming more and more a common entity type and not just more common, they're really and truly there are two to one more LLC's filed than corporations. And the reason for that is that so many of the entities are not anticipating going public. They don't need to sell shares or stock ownership, so they don't need to be a formal corporation. They're using it for asset protection to make sure that there are tax savings associated with it, for example. But also the LLC has a simpler corporate structure. So when you're forming an LLC or after to the same filing at the Secretary of State. But what you don't have to do is have the annual meeting, and minutes, and make sure you hold your meeting, these ongoing requirements are less significant. Most small business owners find that it's just loss onerous than forming a formal corporation. Also, from a tax standpoint an LLC taxation-wise passes through to the individual owners of the LLC. If you have a corporation on the other hand, they're taxed at the corporate level and then again at the individual level. So many times the standard corporation is not solving for the best tax situation for a small business owner.
Non-compliance on any given year is not fatal for a business. If they're not in business anymore they need to take action to close the business, or the State still thinks they're going. So it's important to make sure that you do your annual filings and that you pay your taxes every year.
Jeff: Another thing that you probably witnessed, and by the way we're talking with Deborah Sweeney. She is CEO and owner of MyCorporation. You're listening to Deal Talk, my name is Jeff Allen. Again, with so many people that you see and talk to Deborah. And you've probably seen and heard it all. And you probably also heard about the stories of people not filing the proper documentation in a timely fashion. And then all heck can break loose. A number of different things can happen, including people actually losing their businesses. But how can not filing the proper documentation hurt a business in most cases? Is it a matter of fines, is it a matter of actually people being told that they have to close their doors and totally get compliant? How does this all shake down and just to give us a sense of how important it is to stay on top of this?
Deborah: Sure. So non-compliance on any given year is not fatal for a business. I think a lot of people give up and say, "Oh my gosh, I forgot to file this year. I missed my deadline. I didn't pay the minimum franchise tax for example, and they just say I'm done. I can't handle this anymore." And then they just let it spiral year after year not paying taxes, not dissolving. If they're not in business anymore they need to take action to close the business, or the State still thinks they're going. So it's important to make sure that you do your annual filings and that you pay your taxes every year. What are the two entities that are looking at that? It's the Secretary of State in the State in which you're filed, and the IRS is looking of course for your tax filing. However, but you just mentioned, sometimes it's just literally making the filing and paying the taxes. In many cases there aren't penalties for the first few months and in some cases the penalties are less than $100. So it's not that someone needs to absolutely freak out if they haven't done it timely. But one of the best things is to make sure that they do, and every business knows that they have annual filing requirements, most people know tax deadlines, so it's just important when a small business establishes themselves a corporation or LLC that they make sure to know when they have to do their annual filings. Fortunately as I mentioned earlier a company like ours for example tracks that for you and can do the files so that you don't have to worry about and you’re filed every year.
Jeff: The details in the documents on this edition of deal talk. I'm Jeff Allen and I'll be back with my guest Deborah Sweeney, CEO of MyCorporation after this.
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Jeff: Welcome back to Deal Talk, I'm Jeff Allen with my guest Deborah Sweeney, CEO of MyCorporation and we're understanding why we need documentation, why businesses need to file it in a timely fashion, and if they can't do it themselves there are companies that exist to help them. Deborah, thank you for staying through the break. I was wondering if we can talk maybe a little bit about some ways that companies might be able to save a tremendous amount of money, maybe able to save money that they didn't even know that they could save over the long run and increase the value of their business by the way, simply by filing the right documentation. Can you provide us with any kind of ideas that you may have about ways that they can do that?
Deborah: Absolutely. Many people come to us and they think. "I really didn't file my corporate paperwork and I'm not prepared." And someone comes to them and says that they're ready to invest in a growing business. They want to have a few shareholders buy in, or there's venture capital, or different investors, even personal friends and family. And when there has not been a corporation or LLC is established, it's very difficult to issue ownership of the corporation or LLC to third parties. And therefore it's also difficult to take on investment money. The time and then establishing the corporation or LLC right when you need it, becomes exorbitant because you're really figuring, I could be taking on my investors, I could be moving on to the next step. But instead you're back to basics dealing with a basic incorporation or LLC. There's another very obvious example, and that's the reason most people incorporate or form an LLC from the outset, and that is because they're trying to avoid any risk of legal issues against their personal assets. For example we've had clients who contacted us and have said, "I am getting sued as an individual owner and I never formed a corporation." And so that means they're now suing me against my assets. And we say at this point, as you mentioned with a tremendous amount of money savings. It's too late. You kind of scrimped in the beginning by not forming a corporation because you felt that you didn't need to, you were a sole owner. And now you're somewhat fell on your property and they're taking action against your personal home or your car. When you have a corporation and you've maintained your corporate compliance and done the right thing in terms of forming a corporation. There's what's called a corporate veil. And that separates the individual assets from those of the business.
If there were an issue, someone had an injury or there was an employee matter, you could tender that to your business insurance and you would be protected under your business corporate veil. The veil of the corporation would separate the business from personal. That is a really good example of where, if you're short-term worried about the cost of incorporating or forming an LLC, the truth is that it really pays off dividends when you are thinking about growing the business, taking on investors, or if there's any risk or issue with customers, with a partner, with employees, etc. But really it pays back to make sure that you have your I's dotted and T's crossed in terms of forming your corporation.
Another really good example I can think of in terms of overall, as you mentioned increasing the value of your business, are trademarks. When people start their brand they often don't think, gosh, this could be really something big, or they're thinking it in their head but they're not executing on it from a trademark standpoint. So making sure that you file for a trademark with the US Patent and Trademark Office is a really big factor that needs to be taken into account when you're starting a business. Many times when investors come in and they want to buy your business, they want to know what kind of intellectual property you have. Do you have any patents, do you have trademarks, do you have copyrights, how you've thought of things appropriately? And if you have, then the investors are more serious about the opportunity of buying into your business.
Many times when investors come in and they want to buy your business, they want to know what kind of intellectual property you have.
Jeff: How much by the way does Deborah does a trademark actually cost? If you're filing for that, it's on your name or it's a slogan that you have. Typically speaking for a small business owner right out of the gate, they want to go ahead and trademark their name or maybe a slogan. How much would something like that cost someone?
Deborah: Sure. The US Patent Trademark Office charges $325. And so if you go to a lawyer and you do a full trademark search and the works and make sure they get if filed for you, etc. I used to be an intellectual property attorney. So it's around $3,000 - $4,000. On the other hand, you can get advice and make sure you have background information, but our company can help file a trademark for someone and do the search for $199. So there are opportunities for you to kind of take a hands on approach to doing the filing which might not involve a lawyer but you could certainly use a service that can help you navigate the US Patent and Trademark Office.
Jeff: And save a bunch of money, and this also too goes back to what you said, it's a matter of really paying now or... which should probably be a lot less money than you might think, or paying later which could really be quite devastating in terms of the longevity of your business.
So there are opportunities for you to kind of take a hands on approach to doing the filing which might not involve a lawyer but you could certainly use a service that can help you navigate the US Patent and Trademark Office.
Jeff: If a business owner is on the verge of selling his business. Maybe we're getting off the subject just a little bit here and I'm kind of using your legal background a little bit here to kind of give us some guidance here Deborah. If a business owner is on the verge of selling his business and they're selling it all by themselves, and you have all the documentation to help them do this, why might you advise against this? To advise the business owner, maybe this isn't such a good idea. You shouldn't go it alone.
Deborah: I always think it's certainly good to have experts in the field who've done this before and who know what they’re doing. So I think it definitely makes a lot of sense to engage with experts who know how to sell a business and who know what the nuances are and what to expect, knowing how to manage from your corporate structure, to investors being involved, to intellectual property, nuances, all of those are important. So, certainly business owners need to bring on trusted advisers whether they're acquiring a business, or investing in a business, or getting investors involved in their business, or selling a business. I think it's always wise to surround yourself with people who know what to do and have that experience before.
Jeff: Let's say that I'm a small manufacturer. I generate about a million dollars in annual revenue. We've agreed our company has to merge with a small, local engineering company down the street. Does my merger, keeping in mind our sizes of our companies, need to be approved by a government agency?
Deborah: Not always, there are certain regulatory requirements that mandate reporting. So if a business is a certain size, under a certain a law, they do not need to be reported. For example, if a small business is acquired by a publicly traded company often it doesn't meet the regulatory minimum requirements. And many times when a smaller business like a local engineering company merging with a manufacturing company, it's really just a transfer of assets and not something that needs to be public or published. It's a different story when you're involving publicly traded companies and there are assets that need to be transferred in ownership stock shares, etc. And if it's of a certain value that's warranted, but for the most small businesses it's not necessarily a federal filing requirement.
That's where a service like ours for example comes in. Not to over preach but I do think that it's just so many things that you could do yourself but you don't have the time or bandwidth for. I can think of a million things that I could probably handle on my own but I outsource because I know I'm not the expert on those things.
Jeff: A lot of business owners, they stumble upon something to get them started on their way as a business owner, and it doesn't matter whether it's soup to nuts widgets, whatever. It could be a service related business. And they get the advice, "Hey, forget this. Think later, do now. If you've got a good idea, move forward on it and sell, sell, sell." And so they go on their way and they start earning some money, and they turn it into a full-time business, and they're busy with it. Maybe they're working on the road, and it's just them, and they're just going 100 miles an hour. But there are some things that they need to do, and they don't know that they need to do them. If I am a new business owner and I'm not sure what I need to file, how can I find out for sure what documentation I need to submit?
Deborah: Definitely. That's where a service like ours for example comes in. Not to over preach but I do think that it's just so many things that you could do yourself but you don't have the time or bandwidth for. I can think of a million things that I could probably handle on my own but I outsource because I know I'm not the expert on those things. And so really finding a trusted resource for doing that and helping educate you as a small business owner. I am an advocate of going 150% and believing in getting your business started and off the ground. But it really doesn't take much time. And I think the biggest gap is that business owners and entrepreneurs think, "Gosh, now I have to find an attorney, and I have to find a good recommendation and attorneys can't be trusted. I'm going to be paying $5,000." The list goes of reasons why people put off for tomorrow what they should be doing right away. And then by the time their business is too big or they've taken on a partner and there's some sort of partner conflict. They never got their bylaws in order to begin with. It's just about taking a pause, and recognizing that it doesn't have to be a huge investment in time and money, and really that it should be something that, when you file your first tax return, you recognize that there's a tax savings or a benefit to being a corporation or an LLC in most instances, to putting yourself on payroll for example, you would see significant savings by many S Corporations. There's just these little minor things can save you a lot of money at the get-go. And then if you look long-term and you're thinking bigger picture, you can really find benefits in terms of the investor possibilities and in terms of your branding and establishing who you are as a business. I think that's a gap to repeat. It's really about not thinking it's insurmountable. These things are doable. Small business owners can reach out to a company like ours, for example, and really get some good answers, and some very tactical approaches to how to execute on making this happen. To filing the right paperwork, we'll do that for you, and you don't have to invest in a law firm type situation, and you don't have to neglect it and put it off, and never do it as your other alternative. This is a nice middle ground for business owners, especially when I find that those business owners are action-oriented and they kind of want to know the nuts and bolts, and know how to do it, but they don't necessarily want to do it all themselves. So this is a really good hybrid opportunity.
Jeff: It just kind of speaks volumes to about the fact that there are so many resources that are out there today. It's just a matter of someone taking the time to be resourceful, and just taking a look around, and going online. There's nothing that Google can't tell you really about those companies such as your own. MyCorporation, it's available out there to help businesses be able to answer certain questions about the kinds of documentations, the kinds of filings that are important to them. And I want to thank you to because you gave me the perfect excuse to use my wife. Next time I have that Honeydew list I'll tell her, "Honey, I don't have the time or the bandwidth to execute these items today." I love that, you don't have the time or the bandwidth. I've never heard that before. Deborah, I've got just a couple more minutes left. If we're going to go out and leave this discussion right here and now, what are a few things that you want people to know, maybe not necessarily just what MyCorporation does, but what they should need to know in order to make sure that they're compliant, and that they have the right paperwork and documentation filed in a timely manner?
Deborah: Definitely. I think the first step is when you're getting started, you're thinking about establishing your corporation, or LLC. You're looking at, if you're in a partnership or you have any investors, making sure you have your bylaws or operating agreement established, this is something we didn't hit on in detail but it's critically important to make sure that business owners have an understanding of how they will manage their entity over time, how they would manage a sale or a buy-out. If one partner wants to buy-out, if one partner wants to leave, or there are distribution issues down the road. So operating agreements and bylaws are really critically important for business owners to understand and have in writing. Sometimes people think, "We'll deal with that if the problem arises. But by the time a problem arises it's already too late, and this is often your navigation or guide for you to determine how to manage different situations in your business. So these bylaws, operating agreements are critically important to making sure that your business is running in the right fashion and that you're following the rules you established at the outset of your business. And it's really, again, focusing on that intellectual property.
If you have a fabulous product or service that can be patented, making sure you protect it and doing the right thing with that, making sure that you copyright your content on your website so that if someone comes and knocks you off, that you're able to protect yourself. And I think those are some really simple nuggets that are critically important for knowing your rights, and knowing how to manage your business over the long run.
If you have a fabulous product or service that can be patented, making sure you protect it and doing the right thing with that, making sure that you copyright your content on your website so that if someone comes and knocks you off, that you're able to protect yourself.
Jeff: Deborah Sweeney, if people would like to know more about you, your company, and how you can help them with their specific questions, how and where can they reach you?
Deborah: Sure. I'll give my personal email, it's email@example.com, if anyone has any questions I'm happy to answer. We have our customer service line for questions on anything relating to starting a business, or any of the details about the filings that are required in all 50 States in the US and Canada. And the number's 877-692-6772. We also have a really good blog and we look for people to write in about content they want to hear about or read about. So we're open to educating consumers and small business owners and entrepreneurs on different things that they're wanting to hear about. So we have full-time writers who are sitting at the ready to answer questions that may be asked. And also there's fabulous content about starting a business. All types of business filings that are needed and any type of business you have throughout the US. So lots of content on our website in mycorporation.com.
Jeff: And you've provided us with some outstanding content Deborah Sweeney, so I want to thank you so much for joining us today on Deal Talk and hopefully we can have you back on again soon.
Deborah: Sounds great, thanks for having me.
Jeff: You bet, thank you. And that's Deborah Sweeney, CEO of MyCorporation in Los Angeles.
Deal Talk is presented by Morgan & Westfield, a nationwide leader in business sales and appraisals. If you'd like more information about buying or selling a business call Morgan & Westfield at 888.693.7834 or visit morganandwestfield.com. And make it a point to check in with us again soon for valuable information and insight from our growing list of small business experts on Deal Talk. I'm Jeff Allen and I'll see you again soon.