I read with great interest this recent article entitled, 100 Ways to Become a Better Entrepreneur.  In general the article gives pretty solid advice.  But it always concerns me when articles automatically assume the entrepreneur is unable to afford paying a lawyer to draft a business contract. (See No. 74).

I understand that many entrepreneurs must watch their dollars very closely.  Hiring a lawyer to write a business contract may seem like a luxury the struggling entrepreneur cannot afford.  The problem is that I have seen business contracts written by the entrepreneur come back to haunt them many times.  Trust me, litigation is a whole lot more expensive than having a lawyer review or write a contract.  At least go talk with a business lawyer to find out how much it will cost.  Don’t automatically assume it is something you cannot afford.

If you are thinking about starting a corporation in Iowa, here is a checklist of steps you might consider before starting your business:

1. Find out the availability of your corporate name. You can do a quick search on the Iowa Secretary of State’s Web site to see whether your name is available. If the name is available you may want to reserve the name through the Secretary of State but you are not required to do so before incorporating. You may also want to consider whether any company outside Iowa has your corporate name. You can conduct a free search on the U.S. Patent and Trademark Web site. It is also a good idea to check whether someone has your proposed Internet domain name. In Iowa, your corporate name must have "incorporated", "corporation", "limited", or some abbreviation of such term.

2. Pick a Place to Incorporate. I am sometimes asked whether an Iowa company should incorporate in another state such as Delaware or Nevada. In general, an Iowa small business is probably better off incorporating here in Iowa. The filing fees are low and the ongoing fees for registering the business in Iowa are among the lowest in the country. (Only $30.00 every two years if you file your biennial report online).

3. Choose the Shareholders and Directors. Who will be the shareholders in the company? These are the owners of the company. Most of the businesses I represent have only a handful of owners. Determine how much capital you will need. Do you have enough capital or access to capital in order to start the business on your own? If not you may need to consider other investors.

In most cases the shareholders of the small business are also the directors. Do you want outside directors? There may be good reasons to have outside directors but think this over carefully before you elect to do so.

3. Create your Articles of Incorporation. The articles of incorporation act as a charter to start your new business in Iowa. The filing fee with the Secretary of State is currently $50.00. It may be a good idea to have an Iowa business attorney prepare your Articles of Incorporation and other corporate documents.

4. Prepare corporate bylaws. The bylaws set out the operating standards and procedures the business corporation will follow.

5.Create meeting minutes, resolutions and agreements. It is a good idea to document the initial meeting minutes of the company including the meetings of the shareholders and directors. At this time, you will elect the officers of the company including the president, vice-president, secretary and treasurer. You will also issue stock certificates at this stage. If you have multiple shareholders you will also likely need a shareholder agreement.

6. Obtain your employer identification number (EIN). Your corporation will need to obtain an employer identification number from the IRS. This can be done through a convenient online application process.

7. Elect "S" corporation status. (This is optional). You should speak with your accountant to determine whether it is appropriate to treat your corporation as an "S" corporation or a "C" corporation. Most small business corporations choose to be "S" corporations. An S corporation lets you enjoy the limited liability of a corporate shareholder but pay income taxes on the same basis as a sole proprietor or a partner. The "S" corporation is a pass through entity where the owners report the profits on their personal tax returns. In a "C" corporation the company itself is taxed on business profits and the owners are taxed on the money they draw out of the business. This could lead to double taxation. However, an experienced accountant can help you minimize your tax and in certain situations a "C" corporation may be more advantageous. So the key is to follow the advice of your accountant.

If you elect "S" corporation status you must file a special form with the IRS (Form 2553) upon starting your corporation.

8. Open a bank account. You will typically need the EIN and a banking resolution in order to do this.

9. Obtain any licenses and permits. You will need to check the federal, state and local regulations to determine whether you need and licenses or permits to operate your business.

10. Follow the corporate formalties of running a business. In Iowa, this includes registering your business every two years with the Secretary of State’s office. You also need to do corporate minutes at least on an annual basis including the election of officers and directors. Sign all documentation using your title as a corporate officer. You will also want to minimize or avoid situations where limited liability is not an absolute.

For more information on forming an Iowa corporation please visit the Sullivan & Ward, P.C. Web site for my small business formation package.

How did I miss this at the end of last year?  Des Moines accountant Joe Kristan was featured in an Entrepreneur Magazine article on trimming your taxes at the end of the year.

Joe’s blog provides helpful information on a variety of tax subjects.  Check out his collection of 2007 tax season filing tips.

The owner of the North Grand Mall in Ames, GK Development, Inc., is holding a franchise expo this Friday and Saturday.  A number of franchising and business experts will give presentations including successful franchisees from Central Iowa.  The expo is designed to allow franchises and potential entrepreneurs the opportunity to connect with one another and to provide useful information for you to start your business.

I am scheduled to speak on Iowa franchising law issues at 1:00 p.m. on Saturday.  If you are interested in learning more about franchising we would love to see you there.   

Tomorrow I am the luncheon speaker for the Des Moines Sertoma Club.  The topic is my Iowa business law practice and how this blog fits into that practice.  When I started Rush on Business one year ago I never could have imagined all the great things that would happen to me in just one year from a business perspective.

I have gone from the first blog post of small business incorporation in Iowa to posts that have been included in Forbes.com and the Des Moines Register (sorry I don’t think the article appears online anymore).

I received press from The Business Record on multiple occasions and mention from great law bloggers like Kevin O’Keefe, Robert Ambrogi and Dennis Kennedy.

I have been able to strengthen great relationships with people like Iowa patent lawyer Brett Trout (who along the way picked up an award for the sixth best law blog in the world).  Thanks Brett for all your help!

I also have met and worked with talented people like Mike Sansone and Sandy Renshaw and developed strong supporters like New York small business lawyer Imke Ratschko (the very first person I noticed other than Brett Trout that actually put my blog on a blogroll).

I even started podcasting with the opportunity to interview experts like Trout, Matt Ashburn, Adam Steen and Joe Cooney.

Along the way I had the good fortune to work with many quality business clients I may never have worked with had I not been blogging.  And while I am blessed other lawyers are finding similar success including lawyers that get two to three clients a week from their blog.   

So needless to say I am a strong supporter of blogs and the impact blogging can have on a law practice or any business.  As Kevin O’Keefe has said to me and quoted on Lexblog,

"Act as if you have a magic wand when creating a blog. What type of work do you want to do? Who do you want to work with? What type of clients do you want to serve? And be careful what you wish for. Blogging can make it happen."

Thanks to the Sertoma Club and Joe Kristan for the kind invitation to speak and allowing me to reflect upon my first year of blogging.  I can’t wait for the second.

Problem:  You need to train your existing employees on new manufacturing techniques but you don’t have the necessary funds to complete it.

Solution:  Consider a grant under the Iowa Jobs Training Program (260F) through the Des Moines Area Community College Business Resources.  A client recently obtained this grant to train his employees.  He was able to obtain $50,000 to train workers over a three-year period.  To qualify for this program, your business must be engaged in interstate or intrastate commerce for the purposes of manufacturing, processing, assembling products, or conducting research and development.  Businesses that provide services in interstate commerce are also eligible.  Businesses under the 260F program are required to provide 25% of the training program cost as a cash match.

I recommend checking out DMACC’s Business Resources site.  Another funding option for expanding companies includes the Iowa New Jobs Training Program (260E).  The 260E program is free to participating businesses.

Sullivan & Ward, P.C. seeks a lawyer with 15+ years experience and an established practice to join our business law firm.  Sullivan & Ward is an AV-rated law firm located in West Des Moines, Iowa with 14 lawyers.  The firm’s practice includes representation of many rural electric cooperatives and generating cooperatives throughout the state of Iowa.  The firm’s lawyers also serve as counsel to many businesses throughout Iowa, including technology and manufacturing companies, retailers, medical professionals and real estate entities.  In addition, lawyers in the firm handle litigation, employment law, estate planning and family law.

Sullivan & Ward encourages a work-life balance.     

If you are interested in learning more about this opportunity, please contact Mark Landa from our office.  Mark’s email is mlanda@sullivan-ward.com.  All inquiries will be kept confidential.   

I had a fun meeting this morning with Mike Colwell, the Executive Director of Business Innovation Zone (BIZ).  BIZ is a new regional business accelerator program through the Greater Des Moines Partnership.

What is BIZ and what will it do for Central Iowa businesses?

To find out stay tuned for a Rush on Business podcast highlighting BIZ in a couple of weeks.  Mike has graciously agreed to allow me to interview him.  He is an interesting guy with a tremendous business background.  If you are starting a business, working on your business model or perhaps seeking capital, you won’t want to miss it!

Mike confirmed what Adam Steen told me in a recent podcast – there is more money out chasing good business opportunities in Central Iowa than there are good business opportunities.  If you have the right business model and plan, Des Moines, Iowa is the right place to be for your business.  Of course, 10 minute commutes and good schools are not for everyone, right?   

Thanks to a post by Kevin O’Keefe I discovered a terrific business law blog written by New York business lawyer Nina Kauffman.  Nina had a recent post on how the game of kickball applies to strategic alliances.  Her point is that the world of business is not too far removed from our playground games.  It is always better to know the rules when we enter into business relationships.  Nina says,

When collaborating with another company, business owners want to know what will happen to the clients, intellectual property, and flow of money that the strategic alliance creates, for however long the collaboration lasts.  Deciding those issues only when they arise is like catching the kickball in mid-air and only then deciding whether the kicker should be "out."

While the kickball rules of the playground are not in writing it is a good idea to reduce your understandings with a strategic business partner to writing.  This is particularly true if you have trade secrets or intellectual property you must protect.  Unfortunately you won’t have all those screaming kids on the playground to help you in the event your strategic alliance falls apart.  Follow the old adage, if you think you have an agreement, get it in writing.