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		<title>Using LegalZoom to Set Up your Delaware LLC</title>
		<link>http://www.startupnextdoor.com/2011/08/using-legalzoom-to-set-up-your-delaware-llc/</link>
		<comments>http://www.startupnextdoor.com/2011/08/using-legalzoom-to-set-up-your-delaware-llc/#comments</comments>
		<pubDate>Mon, 01 Aug 2011 15:40:01 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[Tools & Resources]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[legal]]></category>
		<category><![CDATA[resources]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2011/08/using-legalzoom-to-set-up-your-delaware-llc/</guid>
		<description><![CDATA[This is Part III of the Delaware LLC series. Start series here. OK, this is where the real action happens. Once you’ve got your business and personal accounts separated, it’s time to take the plunge and get your LLC.&#160; There are any number of companies that would jump to help you: The Company Corporation and [...]]]></description>
			<content:encoded><![CDATA[<h3>This is Part III of the Delaware LLC series. Start series <a href="http://www.startupnextdoor.com/2011/07/protect-your-startup-with-a-delaware-llc/">here</a>.     </p>
</h3>
<p><img style="margin: 10px auto; display: block; float: none" title="LegalZoom Logo" alt="LegalZoom Logo" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/legalzoom-logo.jpg" width="401" height="84" /></p>
<p>OK, this is where the real action happens. Once you’ve got your business and personal accounts separated, it’s time to take the plunge and get your LLC.&#160; There are any number of companies that would jump to help you: <a href="http://www.incorporate.com/">The Company Corporation</a> and <a href="http://www.legalzoom.com/">LegalZoom</a> are just two.&#160; But since I’ve had good experience with LegalZoom in the past I used them.</p>
<p>I’ll guide you through the whole process, which takes about 30 minutes.&#160; Let’s go!</p>
<p><span id="more-565"></span>
<p>Whether you’re here to incorporate or do an LLC, they can handle either, and for just about every state. But for the purposes of this, we’re going with a Delaware LLC.</p>
<h4>Step 1:</h4>
<p>Get to LegalZoom’s LLC <a href="http://www.legalzoom.com/limited-liability-company/limited-liability-company-overview.html" target="_blank">start page</a>.</p>
<p>There are <a href="http://www.legalzoom.com/limited-liability-company/limited-liability-company-pricing.html">three packages</a> you can choose, but you don’t have to worry about picking which until checkout.&#160; There’s something here for everyone from the budget-conscious to the impatient high-roller.&#160; I chose the middle package (Standard), because I wasn’t in a huge hurry, and because I’m a sucker for fancy stuff like leather-looking binders and company seals:</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="LegalZoom &quot;standard&quot; package swag" border="0" alt="LegalZoom &quot;standard&quot; package swag" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/imageProductDetailLLC.jpg" width="407" height="295" /></p>
<p>Before we go too much further, here’s a rundown of the price I paid for the whole deal:</p>
<p><img style="background-image: none; border-right-width: 0px; margin: 0px 0px 0px 10px; padding-left: 0px; padding-right: 0px; display: inline; float: right; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px; padding-top: 0px" title="Cost rundown for Delaware LLC" border="0" alt="Cost rundown for Delaware LLC" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-9a.png" width="248" height="312" /></p>
<p>I chopped off the part where it states that the purchase price is tax deductible, subject to IRS limitations.&#160; Also, if you are a little queasy on the total, they offer an installment plan over 2 months.&#160; It also mentioned that a typical lawyer would charge $1839 for a LLC. Wowzers.&#160; Anyway, enough with narrow filler. On with the show.</p>
<p>I’ll hit on some of the screens you’ll see and give you some extra info on what they are asking. The little help parts on the forms were quite helpful in making informed decisions about which paths to take.</p>
<h4>Step 2:</h4>
<p>I won’t go over every screen (although almost all are here), but some key ones.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="LLC membership and units of share" border="0" alt="LLC membership and units of share" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-1.png" width="425" height="251" /></p>
<p>The answers you see above are my answers, and not necessarily the defaults. See the “How did most people answer this question?” parts? Those were helpful, but I sometimes went against the wisdom of the crowd.&#160; The main question here that I had to think on was whether to use percentage for membership share or business units. Business units are arbitrary and not tied to a dollar amount.&#160; So you could express 2 members sharing 50/50 ownership by 50% each, or in terms of half the business units. I went with business units since I viewed them like shares, and are easier to divide in large numbers or small numbers without needing to go into 5 decimal places.&#160; I think in the big picture it may not matter as much, but do your own research to see what works best for you.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Business units and initial investment" border="0" alt="Business units and initial investment" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-2.png" width="427" height="252" /></p>
<p>On this screen where you add members, enter your initial investment in the LLC, and what percentage of the business, or how many business units it represents. Here I chose one million business units as the entire business unit pool, since I am the only member.&#160; You can choose the initial size of the business unit pool at whatever you like, but I chose to go large on the number, since I view them as shares.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Me = CEO" border="0" alt="Me = CEO" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-4.png" width="421" height="170" /></p>
<p>I decided to go with officers, and as such crowned myself CEO.&#160; That’s right.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Ownership decisions" border="0" alt="Ownership decisions" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-5.png" width="427" height="395" /></p>
<p>Below the officers you must define rules on how decisions for the company will be made, and who the IRS contact will be.&#160; Think hard about the decision on how ownership interests will be handled.&#160; As soon as you add one more member to your LLC, this decision could make or break you.&#160; And don’t get too hung up on getting everything perfect here. You can change these my amending your company articles later, but I wanted to have it solid from the beginning.</p>
<h4>Step 3: Taxation and the EIN    <br /></h4>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="LLC taxation questions" border="0" alt="LLC taxation questions" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-6.png" width="421" height="376" /></p>
<p>These next questions determine how you wish your LLC to be taxed.&#160; The big question is if you want to be taxed as a sole proprietor, which I do for simplicity’s sake, and so I don’t contribute too much profit to Uncle Sam.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="EIN questions" border="0" alt="EIN questions" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-7.png" width="415" height="386" /></p>
<p>The questions above pertain to the SS-4.&#160; I decided in an earlier step to spend an extra $30 and have LegalZoom prepare my SS-4 form, which is how you get your EIN (Employer Identification Number) which acts kind of like your company’s Social Security number.&#160; It turns out that you don’t really need an SS-4 for requesting it since I ended up requesting the EIN over the phone with the IRS, but you’ll still need your signed and dated SS-4 in your records. And it also makes it easier to request the EIN over the phone since they will ask you questions from the form.&#160; Nice to have it handy so you don’t fumble on the phone with the IRS.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Primary business activity: Internet services" border="0" alt="Primary business activity: Internet services" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-8.png" width="305" height="69" /></p>
<p>That’s a short one, also pertains to the SS-4.</p>
<h4>Step 4: Pay Up</h4>
<p>Pick the <a href="http://www.legalzoom.com/limited-liability-company/limited-liability-company-pricing.html" target="_blank">package you want</a> and lay your money down. This was the total for the “Standard” package with overnight delivery and Tax ID number form preparation.</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Grand Total: $480.95" border="0" alt="Grand Total: $480.95" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot-9.png" width="369" height="109" /></p>
<p>Post-pay instructions:</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="Post-order instructions" border="0" alt="Post-order instructions" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-shot10.png" width="314" height="365" /></p>
<p>There is a bit of time built in to the delivery process, since LegalZoom must prepare papers for the Delaware Secretary of State and send and get approval.&#160; See the 35 days above? If it really took that long the overnight shipping might have been a waste, but maybe I was lucky because it didn’t take long at all.&#160; Check out the status page:</p>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px; padding-top: 0px" title="LegalZoom delivery timeline" border="0" alt="LegalZoom delivery timeline" src="http://www.startupnextdoor.com/wp-content/uploads/2011/08/Screen-Shot12.png" width="431" height="242" /></p>
<p>Was ordered July 7th.&#160; Took only 14 days to process and was delivered on the fourteenth day. So I don’t feel too dumb for paying for overnight.&#160; Go LegalZoom!</p>
<h4>Step 5: Aftermath</h4>
<p>Once you get the package from LegalZoom there will be a few things to sign and you’ll need to get on the horn and call the IRS to get your EIN.&#160; That takes about 10 minutes, mostly wait time on hold.&#160; Once you get your EIN, it’s immediately effective.&#160; Now you’re in business!</p>
<p>At this point, you can set up your business account. Your bank will need your copy of the letter from Delaware Secretary of State showing that your LLC was recorded.&#160; LegalZoom will send you this with your packet. If you get your Delaware LLC through LegalZoom, you’ll need to call LegalZoom’s business assistance number and request a “bridge letter”. This letter connects you, your LLC, and your registered agent so that your bank will know that you are a representative of your LLC.&#160; The reason they need this is because they will check the Delaware Secretary of State’s <a href="https://delecorp.delaware.gov/tin/GINameSearch.jsp">website and do an entity search</a>.&#160; Since LegalZoom is responsible for maintaining your registered agent, the registered agent will show up in this search, and not your name.&#160; This bridge letter fills in the gaps by connecting you with the business.&#160; They will email it to you soon after as an attachment.&#160; Print it out and take it to the bank.</p>
<p><strong>Note:</strong> Keep in mind that LegalZoom will set you up with a Delaware registered agent, and will bill you $159 per year a month later and every year afterwards on the anniversary of your LLC’s inception.     </p>
<p>I hope you enjoyed this short series. I hope it helps many of you in protecting yourselves and also legitimizing your business in the business world.&#160; Now let’s kick some tail.    </p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2011/08/dont-worry-about-the-3-percent/">Don’t Worry About the 3 Percent</a></p>
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		<title>Separate your Business and Personal Accounts</title>
		<link>http://www.startupnextdoor.com/2011/07/separate-your-business-and-personal-accounts/</link>
		<comments>http://www.startupnextdoor.com/2011/07/separate-your-business-and-personal-accounts/#comments</comments>
		<pubDate>Wed, 27 Jul 2011 16:26:36 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[Getting Started]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[legal]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2011/07/separate-your-business-and-personal-accounts/</guid>
		<description><![CDATA[This is Part II of the Delaware LLC series.&#160; Start series here. In order to protect your personal assets, it’s vital to separate your personal money, expenses, and debt from those of your business, or you may forfeit the legal protections that LLCs and corporations offer. Failure to separate business and personal accounts can lead [...]]]></description>
			<content:encoded><![CDATA[<h3>This is Part II of the Delaware LLC series.&#160; Start series <a href="http://www.startupnextdoor.com/2011/07/protect-your-startup-with-a-delaware-llc/">here</a>.</h3>
<p><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto; padding-top: 0px" title="The sign at Barclays Bank Limited" border="0" alt="The sign at Barclays Bank Limited" src="http://www.startupnextdoor.com/wp-content/uploads/2011/07/2922764682_9b931696101.jpg" width="414" height="275" /></p>
<p>In order to protect your personal assets, it’s vital to separate your personal money, expenses, and debt from those of your business, or you may forfeit the legal protections that LLCs and corporations offer.</p>
<p><span id="more-548"></span>
<p>Failure to separate business and personal accounts can lead to, should your business be brought up for litigation, a judge finding that your LLC or corporation’s liability should be bound to you personally. This is called “piercing the corporate veil”.</p>
<p>Read more on <a href="http://en.wikipedia.org/wiki/Piercing_the_corporate_veil">piercing the corporate veil</a> at Wikipedia.</p>
<h4>Bank Account</h4>
<p>The first step is to start a bank account for your business. The account can be at the same bank you do your personal banking with, but it should not be your personal account.&#160; Also, if your personal account has a savings and checking account, do not reserve one for personal and one for business. It’s not good enough.&#160; </p>
<p>Many banks will upgrade your account for free if you add a business. This can save you money in fees. So even though it’s bundled, you’ll still separate personal and business.</p>
<p><strong>One important note</strong> is that your bank will likely NOT allow you to change your sole proprietorship account to an LLC. You will have to pay for getting your LLC expenses paid for out of a personal account. Once your LLC is registered on the Secretary of State’s website and you have an EIN, you’ll be able to make your business’ bank account.&#160; In addition, if the state of your LLC and the state your bank is in are different, your bank may not allow creating a business account for it.&#160; Just something to check.</p>
<h4>Domain Registrar</h4>
<p>If you have domains for personal use, like for your personal blog or website, you’ll need to create a new account at your registrar and move your personal domains to it. <a href="http://www.startupnextdoor.com/2010/11/ditching-godaddy-for-hover/">Hover</a> did this for me on request. Was a piece of cake.</p>
<p>When setting up your account for personal and business domains, make sure you use a non-domain related email for the account.&#160; This means if your domain is mysite.com, make sure you’re not using a @mysite.com email address on your account.&#160; Just use a free gmail or hotmail account.&#160; This is just good practice in case you lose control of your domain and need to get it rectified.&#160; This is not a personal vs. business thing. It’s just a smart thing to do.</p>
<h4>Web Host / Server Host</h4>
<p>If you have a personal site or blog hosted on your business’ servers, it’s best to move it off to its own account.&#160; The exception to this is if your blog is an extension of your “brand”.&#160; Many social media personalities and famous persons fall into this exception. If you are running your email through your server, you should use a non-domain related email, just as with domain registrar section above.</p>
<h4>Phone Number</h4>
<p>Make a phone number for your business and use it in your contact info instead of your personal number. I use <a href="http://www.startupnextdoor.com/2010/03/get-a-phone-number-for-your-startup/">Kall8</a> for this. It’s only $2 a month for an 888 phone number.&#160; You can always forward that number to your cell phone or voicemail until your business gets big, but it’s smart to have all your expenses (no matter how small) and contact info as business-centric as possible.</p>
<h4>E-mail Host</h4>
<p>I use Rackspace Mail for my personal and business email accounts, <a href="http://www.startupnextdoor.com/2010/04/e-mail-for-your-startup-part-i/">instead of running my own mail server</a>.&#160; </p>
<p>If you are using the same email for both business and personal, you should create one for personal that does not use your business’ domain. This may mean buying a domain just for personal use, or switching to a free email host. </p>
<p>The same advice for using a non-domain related email domain is applicable here, in case there is an issue with your mail host’s account, you’ll still be able to communicate with them.</p>
<h4>Rule of Thumb</h4>
<p>If in doubt about an expense, think of it this way.&#160; You should have business and personal separate enough that if a company came along and wanted to purchase your business and all accounts outright, it would be easy to hand it all over without going in and changing everything.</p>
<h4>Other</h4>
<p>Other types of accounts you should consider separating from personal use:</p>
<ul>
<li><font size="2">insurance</font> </li>
<li><font size="2">credit cards (get you a card for your company)</font> </li>
<li><font size="2">email sending systems, like <a href="http://sendgrid.com/">SendGrid</a></font> </li>
<li><font size="2">newsletter mail systems, like <a href="http://www.startupnextdoor.com/2010/07/email-marketing-and-newsletters-part-ii/">MailChimp</a></font> </li>
<li><font size="2">payments to outsourced services (design, coding, etc)</font> </li>
<li><font size="2">legal services</font> </li>
<li><font size="2">marketing services (PR, Google Adwords, etc)</font> </li>
<li><font size="2">payroll</font> </li>
</ul>
<p>There could many more, so before you whip out your personal credit or debit card to pay for something business related, think twice.</p>
<p><font size="2" face="Verdana"></font></p>
<p><font size="1" face="Arial"><em>Photo courtesy </em></font><a href="http://www.flickr.com/photos/dominicspics/2922764682/"><font size="1" face="Arial"><em>dominicpics</em></font></a><font size="1" face="Arial"><em> &#8211; </em><a href="http://creativecommons.org/licenses/by/2.0/"><em>Creative Commons BY 2.0</em></a></font></p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2011/08/using-legalzoom-to-set-up-your-delaware-llc/">Using LegalZoom to set up your Delaware LLC</a></p>
]]></content:encoded>
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		<title>Protect your Startup with a Delaware LLC</title>
		<link>http://www.startupnextdoor.com/2011/07/protect-your-startup-with-a-delaware-llc/</link>
		<comments>http://www.startupnextdoor.com/2011/07/protect-your-startup-with-a-delaware-llc/#comments</comments>
		<pubDate>Mon, 25 Jul 2011 16:02:50 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[Getting Started]]></category>
		<category><![CDATA[Tools & Resources]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[legal]]></category>
		<category><![CDATA[resources]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2011/07/protecting-your-startup-with-a-delaware-llc/</guid>
		<description><![CDATA[Part I: Why you need one, and your options This is the first of a three-part series on how to set your startup with a Delaware LLC. I recently did this, and will guide you through the process. Let’s get started. Sole Proprietorships are good if you are very small When you&#8217;re first starting your [...]]]></description>
			<content:encoded><![CDATA[<h3><img style="background-image: none; border-right-width: 0px; padding-left: 0px; padding-right: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px; padding-top: 0px" title="ReadyPrompt, LLC" border="0" alt="ReadyPrompt, LLC" src="http://www.startupnextdoor.com/wp-content/uploads/2011/07/IMAG1096.jpg" width="416" height="164" /></h3>
<h3>Part I: Why you need one, and your options</h3>
<p>This is the first of a three-part series on how to set your startup with a Delaware LLC. I recently did this, and will guide you through the process. Let’s get started.</p>
<h4>Sole Proprietorships are good if you are very small</h4>
<p>When you&#8217;re first starting your business and you&#8217;re making a few bucks, you don&#8217;t have to worry too much about getting sued. For one, you may only have a few customers, you&#8217;re making them happy, and they are paying you. But as time goes on and your customer base grows, it&#8217;s realistic to expect that something will go wrong.</p>
<p><span id="more-541"></span>Perhaps you host websites for businesses and you have a few hours of downtime due to an outage or something similar outside your control. Or perhaps you infringe on a patent you didn&#8217;t know existed. Or you lose a customer&#8217;s data that they deemed vital and irreplaceable. By damaging others, even in ways you may consider insignificant, you open yourself up to the greater possibility of a lawsuit.
<p>If your business is a sole proprietorship and your business is sued, the judge can go beyond the assets of the business and a judgment can extend into your personal income and savings. You could lose every penny you have, and perhaps even future earnings. A judgment that your business funds can&#8217;t cover could even mean having to sell your car or home. The reason a sole proprietorship is so weak in terms of protecting your assets is that a sole proprietorship, by its name, indicates that you are the sole owner. That includes sole owner of the liability and debt. In addition, whether your sole proprietorship&#8217;s bank account is intertwined with your personal account or not is irrelevant. The business is all you and that&#8217;s all the judge will see. In a sole proprietorship there is no legal distinction between the owner and the business.</p>
<h4>Enter corporations and LLCs</h4>
<p>Once you move into the realms of corporations and LLCs, the business transforms into its own entity in the eyes of the law. It is separated from you, and is taxed appropriately. <em>There is a work-around coming ahead, so don’t let the tax thing scare ya.</em></p>
<p>Both corporations and LLCs protect their investors/shareholders/members from liability should the company become a target of litigation.</p>
<h5>Corporations</h5>
<p>Read more on <a href="http://en.wikipedia.org/wiki/Corporation">Corporations at Wikipedia</a>.</p>
<p><strong>C-Corp</strong></p>
<p>A C corporation has the advantage of having multiple levels of stock: preferred, common, etc.&#160; There is no limit on the number of members who can join the company as shareholders. Profits made by the C-Corp are taxed separately from dividends paid to shareholders.&#160; Therefore, the corporation is taxed on profits, then the dividends are paid to shareholders, who then pay capital gains taxes on the dividends. This is referred to by some as double-taxation.</p>
<p>C Corporations are typically a better fit than LLCs for startups seeking investors such as venture capitalists and angels, due to the flexible share types. You could always convert to a corporation from an LLC if needed.</p>
<p><strong>S-Corp</strong></p>
<p>In contrast to a C-Corp, an S corporation is not subject to income tax. The shareholders pay tax on their share of the profits. This is similar to an LLC from a tax point of view.</p>
<p>S Corporations can only have up to 100 members and one class of stock.</p>
<h5>LLC (Limited Liability Company)</h5>
<p>A Limited Liability Company, or LLC, is a special type of business that can have one or many members with voting privileges in the company. There is no limit on the number of members, and depending on the state the LLC was formed, members could be individuals, corporations, and partnerships.&#160; Each member is granted either a percentage of the company or a share of the total business units. I’ll discuss business units in part three of this series. An LLC has the advantage of pass-thru taxation. It can be taxed like a corporation, partnership, or even as a sole proprietorship, where the taxes are paid easily on the single owner’s personal tax form. The method is declared on form <a href="http://www.irs.gov/pub/irs-pdf/fss4.pdf">SS-4</a> when applying for an EIN (Employer Identification Number) from the IRS (and if you wish your LLC to be taxed like a corporation, file form <a href="http://www.irs.gov/pub/irs-pdf/f8832.pdf">8832</a>). More on this also in part three.</p>
<p>LLCs also have it easy compared to corporations as far as the paperwork and maintenance of the business. Read more on <a href="http://en.wikipedia.org/wiki/Limited_liability_company">LLCs at Wikipedia</a>.</p>
<p><strong>     <br />Why Delaware?</strong></p>
<p><img style="margin: 0px 0px 0px 5px; display: inline; float: right" title="Great Seal of the State of Delaware" alt="Great Seal of the State of Delaware" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2011/07/seal2.png" width="240" height="240" />Delaware LLCs (as more and more states do nowadays) allow for single-person membership.&#160; In addition, under the business-favorable Delaware LLC law, LLCs do not have to have annual member meetings. And the paperwork needed to maintain the business is minimal.</p>
<p>Some states such as California have steep annual fees to maintain an LLC. The Delaware LLC franchise fee is only $250 per year.</p>
<p>To maintain a Delaware presence, should you live in some other part of the country, you will need a registered agent. Fees for this can range from around $100 per year to close to $300 per year depending on the agent you use. The agency I’m with costs $159/year.&#160; For this you get an agent who will contact you should any paperwork come from the Delaware government or in the event your business is sued. They are your business’ representative in Delaware.</p>
<p>Also, Delaware has no sales tax or intangible personal property tax.&#160; Delaware also allows the owners and managers of an LLC to remain anonymous.</p>
<p>Whether you decide to go Corporation (C or S) or LLC, you’ll find that Delaware is a favorable choice for either.</p>
<p><span style="font-size: x-small"><strong>Legal disclaimer:</strong> I’m not your lawyer and I’m not your mom, and you shouldn’t believe everything you read on the internet. Make sure you do your own research.&#160; And eat your vegetables.</span></p>
<p>In the next post, I’ll go over the first step in protecting your personal assets &#8211; separating all your personal accounts from your business. It’s vital to do it and do it right, or you may forfeit the legal protections that LLCs and corporations offer.</p>
<p><strong>     <br />Next post:</strong> <a href="http://www.startupnextdoor.com/2011/07/separate-your-business-and-personal-accounts/">Separate your Business and Personal Accounts</a></p>
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		<title>Solo Focus: Gabriel Weinberg&#8217;s DuckDuckGo</title>
		<link>http://www.startupnextdoor.com/2010/10/solo-focus-gabriel-weinbergs-duckduckgo/</link>
		<comments>http://www.startupnextdoor.com/2010/10/solo-focus-gabriel-weinbergs-duckduckgo/#comments</comments>
		<pubDate>Thu, 21 Oct 2010 18:54:06 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Solo Focus]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[solo]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/10/solo-focus-gabriel-weinbergs-duckduckgo/</guid>
		<description><![CDATA[Successful angel investor and hacker Gabriel Weinberg developed DuckDuckGo as one of his many side projects over the years. DuckDuckGo is a search engine, but beyond being a great search engine, it adds extra features, and is more of a command line tool. Mighty impressive for a solo effort, and no venture capital was needed. [...]]]></description>
			<content:encoded><![CDATA[<p><img style="border-right-width: 0px; margin: 0px 15px 0px 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="Gabriel Weinberg" border="0" alt="Gabriel Weinberg" align="left" src="http://www.startupnextdoor.com/wp-content/uploads/2010/10/mom133b_bigger.jpg" width="142" height="143" /> Successful angel investor and hacker <a href="http://www.gabrielweinberg.com/">Gabriel Weinberg</a> developed <a href="http://duckduckgo.com">DuckDuckGo</a> as one of his <a href="http://www.gabrielweinberg.com/blog/2010/10/a-history-of-failed-projects.html">many side projects</a> over the years. DuckDuckGo is a search engine, but beyond being a great search engine, it adds extra features, and is more of a command line tool. Mighty impressive for a solo effort, and no venture capital was needed. </p>
<p>  <span id="more-523"></span>
<p>Features of note:</p>
<ul>
<li>zero-click info – get the most common, informative result in a red box at the top </li>
<li><a href="http://duckduckgo.com/bang.html">!bang shortcuts</a> – try “!amazon paris” </li>
<li>regex checker – try “regexp /hel+o/ hello” </li>
<li>generate random password &#8211; <a href="https://duckduckgo.com/?q=pw">pw</a> </li>
<li>As you scroll the results it loads in more results. </li>
<li>keyboard shortcuts </li>
</ul>
<p>Just check the <a href="http://duckduckgo.com/goodies.html">goodies</a> list – it’s nuts!</p>
<p>The video is cued so <strong>just push play</strong>. Thanks “<a href="http://thisweekin.com/thisweekin-startups/">This Week in Startups</a>” for the free blog fodder.</p>
<p> <object width="420" height="255"><param name="movie" value="http://www.youtube.com/v/AWJAkjF9qnY&amp;hl=en_US&amp;feature=player_embedded&amp;version=3&amp;start=1237"></param><param name="allowFullScreen" value="true"></param><param name="allowScriptAccess" value="always"></param><embed src="http://www.youtube.com/v/AWJAkjF9qnY&amp;hl=en_US&amp;feature=player_embedded&amp;version=3&amp;start=1237" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="420" height="255"></embed></object>
<p>DuckDuckGo has already caught on in the programmer community as a laser/toolkit to go directly to what you need immediately.</p>
<p>I’m looking forward to seeing more about DuckDuckGo in the news in the near future.    </p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/11/ditching-godaddy-for-hover/">Ditching GoDaddy</a></p>
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		<title>Don&#8217;t Be a Content Punk</title>
		<link>http://www.startupnextdoor.com/2010/10/dont-be-a-content-punk/</link>
		<comments>http://www.startupnextdoor.com/2010/10/dont-be-a-content-punk/#comments</comments>
		<pubDate>Sat, 16 Oct 2010 01:52:48 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[philosophy]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/10/dont-be-a-content-punk/</guid>
		<description><![CDATA[I was dumb.&#160; There was once a thriving forum on zKorean.&#160; In an attempt to make some money from the heavy forum traffic I announced I would charge members a monthly charge to use it.&#160; This was met with protest, as many people had contributed a lot of time helping others on the forum.&#160; I [...]]]></description>
			<content:encoded><![CDATA[<p>I was dumb.&#160; There was once a thriving forum on zKorean.&#160; In an attempt to make some money from the heavy forum traffic I announced I would charge members a monthly charge to use it.&#160; This was met with protest, as many people had contributed a lot of time helping others on the forum.&#160; I analyzed this to mean that people would not pay to use the site because I’m just a guy, not a business.&#160; But I was wrong. It was just a dumb thing to ask users to pay for.</p>
</p>
<p> <span id="more-519"></span>
</p>
<p><font size="3" face="Georgia">Why dumb? Because once you’ve had people contributing to your site with their hard work and diligence, you decide to sell or rent all the work they did.&#160; Even though you may continue to let those who built it use it for free, it’s still a jerk thing to do.</font></p>
<p>I was going to write an analogy about a farm and community garden, but, like most analogies, turned out to not mimic the scenario.</p>
<p>Here’s the bottom line. Don’t be a content punk. Don’t try to make money off the hard work of your visitors. You wouldn’t expect Wikipedia to all of a sudden put up a paywall?</p>
<h3>What about sharing in the profits?</h3>
<p>Now that’s a business model! This has been done before.&#160; There are a number of topic sites where people write on different topics and get paid for traffic that their pages generate. It depends on the site and the philosophy of the site. If users know they are writing content to get paid, it’s quite different than writing content to help others.&#160; The reason? It crosses the line from a social transaction into a monetary transaction.</p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/10/solo-focus-gabriel-weinbergs-duckduckgo/">Solo Focus: DuckDuckGo</a></p>
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		<title>Don&#8217;t Let Your Startup Get You Sued</title>
		<link>http://www.startupnextdoor.com/2010/07/dont-let-your-startup-get-you-sued/</link>
		<comments>http://www.startupnextdoor.com/2010/07/dont-let-your-startup-get-you-sued/#comments</comments>
		<pubDate>Wed, 07 Jul 2010 20:34:00 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[philosophy]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/07/dont-let-your-startup-get-you-sued/</guid>
		<description><![CDATA[As I mentioned a few months back in I’m a Startup Rancher, I tend to create startups, let them run for a while, and see if they have any traction.&#160; Some flop due to difficulties in the business model, or in the marketing, or just because I didn’t solve a problem that many people had.&#160; [...]]]></description>
			<content:encoded><![CDATA[<p><img style="border-right-width: 0px; margin: 0px 15px 0px 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="Come to Order!" border="0" alt="Come to Order!" align="left" src="http://www.startupnextdoor.com/wp-content/uploads/2010/07/3320082984_731a1b1e8a.jpg" width="193" height="231" /> As I mentioned a few months back in <a href="http://www.startupnextdoor.com/2010/03/im-a-startup-rancher/">I’m a Startup Rancher</a>, I tend to create startups, let them run for a while, and see if they have any traction.&#160; Some flop due to difficulties in the business model, or in the marketing, or just because I didn’t solve a problem that many people had.&#160; So the failed startups get taken offline and are heaped onto the compost pile.&#160; But once you have paying customers, turning off a service that people depend on can have big consequences.</p>
</p>
<p> <span id="more-468"></span>
</p>
<p>Let’s say you’re hosting web sites for customers.&#160; You can’t just turn it off.&#160; Your customers may have their business running on their site.&#160; This situation is one of the hardest.&#160; You have to work with the customer and help them migrate.&#160; If you just shut down their site with little warning you’ll be getting calls from lawyers.</p>
<p>You may be wondering, if a site actually has customers, why would you shut it down?&#160; Good question.&#160; Sometimes it’s just not financially feasible to have a handful of customers.&#160; You’ll have to do the math for your situation.</p>
<p><img style="border-right-width: 0px; margin: 0px 0px 0px 10px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="Powering up" border="0" alt="Powering up" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2010/07/4366067207_1623be7048.jpg" width="224" height="389" /> The site shutdown scenario doesn’t affect just web hosts.&#160; What about a <a href="http://flickr.com">Flickr</a>-style site?&#160; Are you going to do one last backup then turn it off?&#160; If your site has the only copies of the photos from some kid’s third birthday party you’re going to have some anger heaped upon you should you take it away.&#160; In this case, where you’re storing items for little or no cost, and you can’t make enough to afford the scaling issues, you’ve got to give plenty of warning to customers and make a way to get them their files.</p>
<p>Any startup that holds information for a customer, whether it be images, a social graph, transactions, even links (like tinyurl or bit.ly), can create legal troubles if taken away.</p>
<p>The safe thing to do is to never start this way.&#160; Make sure your business model can support itself.</p>
<p>For small self-startups, <a href="http://en.wikipedia.org/wiki/Freemium">freemium</a> can wipe you out.&#160; You may overestimate the ratio of free vs. paid customers you’re going to get.&#160; Then you’re stuck with a crippling amount of data to manage/store/serve and the costs involved.</p>
<p>With the right business model where revenue from paying customers dwarf your operating costs, you’re in the clear.</p>
<div>Photos courtesy <a href="http://www.flickr.com/photos/cjsorg/3320082984/">CJ Sorg</a> and <a href="http://www.flickr.com/photos/roens/4366067207/">roens</a> <a href="http://creativecommons.org/licenses/by-sa/2.0/deed.en">(CC BY-SA)</a></div>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/07/professional-design-at-a-bargain/">Professional Design at a Bargain</a></p>
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		<title>Payment Models</title>
		<link>http://www.startupnextdoor.com/2010/06/payment-models/</link>
		<comments>http://www.startupnextdoor.com/2010/06/payment-models/#comments</comments>
		<pubDate>Thu, 03 Jun 2010 19:53:03 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Getting Started]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[philosophy]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/06/payment-models/</guid>
		<description><![CDATA[When you set out to build your startup, coming up with a business model is one of the qualifiers, and hand-in-hand with that decision is what payment model to use. If making money solely using ads is your revenue model, you may skip this article. Today I&#8217;ll touch on how customers will pay you. I [...]]]></description>
			<content:encoded><![CDATA[<p>When you set out to build your startup, coming up with a business model is one of the qualifiers, and hand-in-hand with that decision is what payment model to use. If making money solely using ads is your revenue model, you may skip this article. Today I&#8217;ll touch on how customers will pay you.</p>
<p> <span id="more-437"></span>I use three methods:
</p>
<p><strong>Pay by the Month</strong></p>
<p>This is an example of a SaaS payment model. Customers may use your product daily, but they pay on a monthly basis. Customers may get unlimited use of your service, or it could be metered in some way (5 faxes per day, for instance).</p>
<p>This model is lucrative when businesses are your customers, since they tend to review products they pay monthly subscriptions for on a quarterly or yearly basis. Many times your business customers won&#8217;t be using the product at all, but will still be paying about $15 to $100 a month (or more). Conversely, individuals are more likely to use what they are paying for more often and you&#8217;ll get a lot more turnover, especially when your subscription fee is less than $10. Individual customers tend to be fickle.</p>
<p><strong>Pay per Use</strong></p>
<p>Your service may not warrant a pay-by-the-month charge. Perhaps you offer a one-time on-demand service or something that will be used irregularly. Charging a fee is a good way to go. In many cases you don&#8217;t even need to have the user create an account.</p>
<p>It may be the case that your service is process intensive or uses an API that you have limited use of. Offering this as an unlimited service on a monthly payment basis could put you out of business.</p>
<p><strong>Hybrid</strong></p>
<p>Some customers may not need your service every day even every month, and just need to use your product briefly. You may choose to offer both methods, offering a limited use for a slightly premium price.</p>
<p><strong>Conclusion</strong></p>
<p>However you decide to go, I recommend running some numbers beforehand before committing, because the switching cost could be painful.</p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/06/my-journey-from-blackberry-to-android/">from BlackBerry to Android</a></p>
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		<title>A Business Lesson from Dune</title>
		<link>http://www.startupnextdoor.com/2010/05/a-business-lesson-from-dune/</link>
		<comments>http://www.startupnextdoor.com/2010/05/a-business-lesson-from-dune/#comments</comments>
		<pubDate>Mon, 24 May 2010 19:55:53 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[philosophy]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/05/a-business-lesson-from-dune/</guid>
		<description><![CDATA[He who can destroy a thing, controls a thing. &#160; &#8211; Paul Atreides And if that thing is valuable, you become the monopoly. Providing a reference tool is a good business idea.&#160; I’ve been in organizations where having a large-size data repository and searching capabilities keep people coming back.&#160; This is a solid method for [...]]]></description>
			<content:encoded><![CDATA[<p><img style="border-right-width: 0px; margin: 0px 10px; display: inline; float: left; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="dune cover" border="0" alt="dune cover" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/dunecover.jpg" width="165" height="269" /></p>
<blockquote><p><em>He who can destroy a thing, controls a thing.</em></p>
<p>&#160; &#8211; Paul Atreides</p>
</blockquote>
<p>And if that thing is valuable, you become the monopoly.</p>
<p>Providing a reference tool is a good business idea.&#160; I’ve been in organizations where having a large-size data repository and searching capabilities keep people coming back.&#160; This is a solid method for building a long-term SaaS (software as a service) where you can charge a monthly subscription for its use.</p>
<p> <span id="more-413"></span>
</p>
<h3>My Experience</h3>
<p>For <a href="http://www.zkorean.com">zKorean</a>, I spent years building an online dictionary.&#160; Over time I added more entries and added features that made searching it easier, too.&#160; Now the dictionary has tens of thousands of entries (just recently added 400 and have immediate plans for more).&#160; People can use it for daily use on a limited basis (25 searches per day) and get unlimited use for $4.95/month.&#160; There are also audio pronunciations for all the Korean words (voiced by my lovely wife Suzy). </p>
<p><strong>Am I bragging or trying to make a pitch?</strong>     <br />No.&#160; The point I’m trying to make is that it takes a lot of work and you have to keep it fresh to keep competitors at bay.</p>
<p>Once you have a resource like this under your control, it gives you an advantage that your software doesn’t need tweaking or maintenance very much.&#160; A few features now and then where you see the need, but mainly your data is where you’ll make improvements.&#160; And adding data means not having to touch your code.</p>
<h3>Data is Expensive</h3>
<p>When I worked at a company that offered an online medical coding reference, we licensed data from other companies.&#160; Our technology was based on bringing multiple data sources together to give the best information display to the people that needed it.&#160; And the service was expensive, partially because of the cost of licensing the data in the first place.&#160; I won’t give numbers but once someone comes along and wants to license a data store that you have, it becomes even more profitable.&#160; They pay you for usage of the data, and they make the sales and handle their service.&#160; Your responsibility then is to deliver quality data in a timely fashion.</p>
<h3>Is It Possible for You?</h3>
<p>Take a little time and consider a hobby or area of expertise that you have.&#160; Is there a large data store that you need or that people like you need?&#160; Think about it a second.&#160; There are databases of Scrabble words (by word length), World of WarCraft game items, medical terminology, and automobile parts.&#160; With some effort and time, what interest do you have that could turn your hobby into a business?</p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/05/one-browser-is-not-enough/">one browser is not enough</a></p>
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		<title>Why Aren&#8217;t You the Leader?</title>
		<link>http://www.startupnextdoor.com/2010/05/why-arent-you-the-leader/</link>
		<comments>http://www.startupnextdoor.com/2010/05/why-arent-you-the-leader/#comments</comments>
		<pubDate>Wed, 19 May 2010 17:39:28 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Advice]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[philosophy]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/05/why-arent-you-the-leader/</guid>
		<description><![CDATA[Before the web, everyone had a Rand-McNally map in their car.&#160; Once the web was prevalent, MapQuest was the destination for getting maps online.&#160; Then around 2005, Google began to pull market share from MapQuest and is finally now surpassing MapQuest. If you go to Rand-McNally nowadays, it looks like MapQuest did back in 2005. [...]]]></description>
			<content:encoded><![CDATA[<p>Before the web, everyone had a Rand-McNally map in their car.&#160; Once the web was prevalent, MapQuest was the destination for getting maps online.&#160; Then around 2005, Google began to pull market share from MapQuest and is finally now surpassing MapQuest.</p>
<p>If you go to Rand-McNally nowadays, it looks like MapQuest did back in 2005.</p>
<p> <span id="more-410"></span>
<p><strong>My question: Why wasn’t Rand-McNally the online leader the whole time?</strong>&#160; They had the data (the hard part) and just needed a way to get it online, then have a very small group of experienced web developers and software engineers make improvements over the years.</p>
<p><img style="border-right-width: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto" title="Rand McNally&#39;s Map UI" border="0" alt="Rand McNally&#39;s Map UI" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_440.png" width="421" height="330" /> </p>
<p>Google’s draggable maps were the rage back in 2005, using AJAX technology that was not widely supported at the time.&#160; There’s no reason why Rand-McNally couldn’t have owned this space, and run the MapQuest style maps for browsers that didn’t support AJAX at the time, and offering draggable maps where supported.</p>
<p>Now in automobiles you have TomTom and other GPS systems for navigating the road without a paper map.&#160; Rand-McNally has its own, but still nowhere near Garmin or Magellan.</p>
<p>This is not meant as a rant against Rand-McNally.&#160; It’s a rant against companies who have the resources but shallow vision.&#160; Where is the long-term vision?&#160; Or is the vision there but you’re too large to move quickly?</p>
<p>If you work in an industry that could do so much with what it has but crawls in terms of progress, perhaps it’s time to go somewhere else, or take advantage of the situation and create a competitor that blows them off the map.&#160; </p>
<p>In these days a small player can get word-of-mouth faster and more widespread than ever.&#160; MapQuest (an unknown) beat Rand-McNally.&#160; They blew their brand off the internet.&#160; Did you even know Rand-McNally had a map site? I didn’t.</p>
<p>So don’t be afraid if you’re going against a giant company.&#160; If you can deliver a better product, the brand name is inconsequential.</p>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/05/a-business-lesson-from-dune/">a business lesson from Dune</a></p>
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		<title>Advertising your Startup, Part II</title>
		<link>http://www.startupnextdoor.com/2010/05/advertising-your-startup-part-ii/</link>
		<comments>http://www.startupnextdoor.com/2010/05/advertising-your-startup-part-ii/#comments</comments>
		<pubDate>Tue, 18 May 2010 18:59:59 +0000</pubDate>
		<dc:creator>jwasham</dc:creator>
				<category><![CDATA[Tools & Resources]]></category>
		<category><![CDATA[business]]></category>
		<category><![CDATA[resources]]></category>

		<guid isPermaLink="false">http://www.startupnextdoor.com/2010/05/advertising-your-startup-part-ii/</guid>
		<description><![CDATA[In the last article on advertising, I introduced you to the complexity of Adwords and the promise of Trada.&#160; In this article I’ll go over a few more services to help get your startup marketed, this time covering display ads. Facebook Ads Facebook has recently joined the advertising game with ads that display in the [...]]]></description>
			<content:encoded><![CDATA[<p><img style="border-right-width: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto" title="Spice Route" border="0" alt="Spice Route" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/2631782483_7629203ea9.jpg" width="301" height="183" /> </p>
<p>In the <a href="http://www.startupnextdoor.com/2010/05/advertising-your-startup-part-i-adwords/">last article on advertising</a>, I introduced you to the complexity of Adwords and the promise of <a href="http://www.trada.com/">Trada</a>.&#160; In this article I’ll go over a few more services to help get your startup marketed, this time covering display ads.</p>
<p> <span id="more-406"></span><br />
<h3><a href="http://www.facebook.com/advertising/?src=aw05">Facebook Ads</a></h3>
<p><img style="border-right-width: 0px; margin: 0px 0px 0px 5px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="facebook logo" border="0" alt="facebook logo" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/facebook_logo.png" width="200" height="100" /> Facebook has recently joined the advertising game with ads that display in the right-hand column.&#160; They are basically glorified text ads but with an accompanying image.&#160; But they get your attention in a way that text just can’t.&#160; In fact, Facebook Ads have surpassed <a href="http://www.businessinsider.com/category/yahoo">Yahoo</a> in the first quarter of 2010 to become the single biggest publisher of display ads on the web.</p>
<p>Not all ads are accepted.&#160; The list of common <a href="http://www.facebook.com/ads/mistakes.php">ad types that are rejected</a> are in many ways directly opposite of Google Ads. FB doesn’t want you to capitalize every word, use incorrect grammar or punctuation, or misspellings.</p>
<p>You can advertise a Facebook page, a Facebook app, or a web site.&#160; The image you use will be scaled to 110&#215;80 pixels, so it’s best to have your image be that size so it doesn’t get stretched or squashed.</p>
<p>The targeting is where it gets cool.&#160; You can target by age, gender, likes and interests (because they know), education, etc.&#160; If you want to target people who like hamburgers or unicorns, you can.&#160; And it will determine an estimated reach of how many on the network will be targeted.&#160; Very nice.</p>
<p><a href="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_430.png" target="_blank"><img style="border-right-width: 0px; margin: 0px 0px 0px 10px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="FaceBook ad options" border="0" alt="FaceBook ad options" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_430_thumb.png" width="264" height="263" /></a>Then set up how much you wish to spend.&#160; Here are the defaults.&#160; Click for larger. Set a daily budget you can afford for your campaign and choose CPM (cost per 1,000 impressions) or CPC (cost per click).&#160; I decided to go CPC for my initial test, then created another ad afterwards on CPM basis.</p>
<p>I placed my order and my ads were pending approval until today (just overnight).&#160; An hour or so after going live, here’s how my ads were doing:</p>
<p><img style="border-right-width: 0px; margin: 0px auto 5px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="facebook ads 1" border="0" alt="facebook ads 1" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_435.png" width="327" height="137" />Not too shabby… I made sure to add a little something extra to the URLs to track how many clicks I’m getting in real time (as an audit tool).&#160; The ads stats they show are about an hour delay.&#160; Two hours later:</p>
<p><img style="border-right-width: 0px; display: block; float: none; border-top-width: 0px; border-bottom-width: 0px; margin-left: auto; border-left-width: 0px; margin-right: auto" title="facebook ads 2" border="0" alt="facebook ads 2" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_439.png" width="329" height="141" /> </p>
<p>Easy to set up and nice results.&#160; Facebook, with its extensive market targeting, is going to drink Google’s milkshake.</p>
<h3><a href="http://www.adready.com/">AdReady</a></h3>
<p><img style="border-right-width: 0px; margin: 0px 0px 0px 5px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="AdReady logo" border="0" alt="AdReady logo" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/adready.png" width="202" height="91" /> AdReady is a self-serve display ad server.&#160; Normally you would need to contact someone and get a display ad on a publisher’s site.&#160; This is one of very few services that allows you to place ads without a lengthy setup process and phone calls.</p>
<p>AdReady doesn’t have a sophisticated targeting system.&#160; You choose from a category dropdown.&#160; You can choose multiple.&#160; For some niches this is always a shotgun approach.&#160; You get lumped in with a larger category is your impressions get watered down.&#160; One way to combat that is with CPC, but terrible for CPM.</p>
<p>For starters, the monthly minimum spend on AdReady is $300.&#160; So it’s not a cheap bet.&#160; They stretch ads across the Google Content Network (where AdSense ads show up), Yahoo Publisher Network, and RightMedia.&#160; You can add in YPN and RightMedia, but each has their own minimum, and you can’t spread that $300 across multiple.</p>
<p>The ads are flash-based and not good. They were typical of the worst flash ads you’ve seen.&#160; I switched to different categories, looked at most used and newest, all still pretty boring, or just awful.&#160; They are all editable for adding you own logo, so you’ll need a bit of creativity to get a good outcome.</p>
<p>You can upload your own ads instead, but they must be either flash or gif, and small enough size for the ad networks.</p>
<p>To be honest, I didn’t finish all the way to the end on this one.&#160; I wasn’t interested in committing $300 to a service I was unimpressed with.</p>
<h3><a href="http://adroll.com">AdRoll</a></h3>
<p><img style="border-right-width: 0px; margin: 0px 0px 0px 5px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px" title="AdRoll logo" border="0" alt="AdRoll logo" align="right" src="http://www.startupnextdoor.com/wp-content/uploads/2010/05/cap_432.png" width="179" height="48" /> From the beginning, AdRoll made a good impression on me, and along the way it delivered.&#160; You start by targeting.&#160; You’ll enter a subject (airplanes, toasters, etc) and it will come up with sites that match that subject.&#160; If you are in a niche there may be few or none. It only supports sites that have registered as a publisher with one of their partners.</p>
<p>Next, upload your ads (one of size 300&#215;250 and the other at 468&#215;60) or use their simple ad maker.&#160; They also offer a service to create professional ads starting at $100.</p>
<p>After the ads are in, you’ll target by geography: global, US, or specific geographic locations.</p>
<p>Next you’ll decide how much you want to spend per week.&#160; AdRoll runs on a CPM basis, so they’ll deduct $0.002 to $0.005 per impression, or you can set a maximum CPM.</p>
<p>AdRoll offers two ways to advertise.&#160; If your goal is eyeballs, they have an option that will optimize placement to maximize brand exposure.&#160; If you just want the traffic to your site, they’ll optimize for clicks instead.</p>
<p>I created a campaign on AdRoll with a $10 weekly budget to try it out.&#160; I’ll tell you how it goes in a later update.</p>
<p>One important way that AdRoll goes beyond is by offering retargeting.&#160; Retargeting is a new concept in advertising that attempts to guide people who have visited your site (without buying) back to your site with the hopes you’ll get a conversion when they come back.&#160; They accomplish this by adding a bit of code to your site in order to set a cookie.&#160;&#160; For $1 per retarget success, it’s not bad at all.</p>
<h3>PennyWeb / AdDynamix</h3>
<p>This was so bad I didn’t even want to link to it.&#160; The service and site are straight out of 1997, when it was founded.&#160; The service is a self-serve (for budgets less than $500/month), and you pay for CPM on a single ad format.&#160; They offer pop-ups and pop-unders, which when I saw it made me feel like I’ve turned into a dark alley and want to turn around.&#160; They have programs as low as $99 for a straight campaign.</p>
<p>What really made me sick was seeing the text on the bottom of their FAQ page.&#160; It was a long list of linked keywords, each going to a landing page.&#160; And after them links to 5 pages of link exchange ads.&#160; Honestly, you need this old fashioned SEO trickery?&#160; Is business that bad?&#160; But this is what I should expect from pop-under people.&#160; It’s always shady business. </p>
<div xmlns:cc="http://creativecommons.org/ns#" about="http://www.flickr.com/photos/michaelhays/2631782483/"><a href="http://www.flickr.com/photos/michaelhays/" rel="cc:attributionURL">photo courtesy michaelhays</a> (<a href="http://creativecommons.org/licenses/by/2.0/" rel="license">CC BY 2.0</a>)</div>
<p><strong>Next post:</strong> <a href="http://www.startupnextdoor.com/2010/05/why-arent-you-the-leader/">why aren’t you the leader?</a></p>
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