Unfortunately, these criteria aren’t very helpful in the business world. If you are looking to “partner-up” you could take a lesson from those grade school days and write down your own list of criteria before committing to a business partnership with another person.

Forming a partnership is serious business and a partner shouldn’t be taken on lightly. In a recent blog post on Forbes.com, Amanda Neville posited that business partnerships are more difficult than marriage.  Think about the care you took (or plan to take) before entering into that partnership. A business partnership should be approached with the same amount of scrutiny and consideration.

While I send my clients home with a full page of questions before meeting with them about the details of any potential partnership agreements, I think there are three questions you absolutely MUST consider before filing any paperwork.

1. What kind of business do you want to have in the long term? Here you get to think big picture, if everything works out perfectly, what do you and your partner see as being the ideal business? Each partner should develop her own ideas before discussing long term hopes together so you don’t influence each other during this discussion.
2. How will you settle disputes? In the beginning, it is easy to think you will always agree about everything, but as anyone who has ever worked with a partner will tell you, this is never the case for long. You should talk in the beginning about how you will proceed when you don’t agree. Do all the partners need to agree to move forward? Will you see outside counsel when you disagree? From whom?
3. What is each partner bringing to the table? Here it is important to talk about finances, expertise and work availability. The best partners are often people that have different skills and interests, because then your business doesn’t have to spend additional time and funds outsourcing critical tasks. Talk about what you see your role in the company being, how much you can contribute both financially and time-wise.

Discussing these points may seem uncomfortable at first, but they are necessary if you hope to build a partnership that won’t crumble at the first sign of trouble.

1. Will
2. Housing, Land and Cemetery Deeds (and any mortgage information associated with these properties).
3. Proof of Loans made and debts owed
4. Vehicle titles
5. Stock certificates, savings bonds, and brokerage accounts
6. Partnership and corporate operating agreements
7. Tax returns
8. List of Bank accounts and safe deposit boxes
9. List of all user names and passwords (where is/who has information)
10. Durable health-care proxy or a power of attorney
11. Authorization to release health care information
12. Living Will
13. Do-not-resuscitate order
14. Life Insurance Policies
15. Pension, Retirement and 401(k) accounts
16. Marriage license and/or divorce papers

In all four of these posts I discussed various ways to protect yourself and your side business from potential hazards.  If you have considered these factors and decided to move forward with your new venture, there are a few last tasks you should take care of to cover all of your bases.

First, set up a company.  Even if you are contracting, and not creating an entirely new venture, you should separate your contracting business from your full-time job.  You can do this by forming an LLC, a corporation, or establishing your self as a sole proprietor.   There are low-cost ways to do this and taking this step can prevent major headaches in the future.

Either way you want to make sure that the money you receive from your new gig is kept separate from your full-time salary.  This will make life easier for your accountant later and allow you to write off expenditures for your side business.  You can do this easily by opening up a separate bank account for the new venture.  A separate bank account will keep you from mingling the funds until Uncle Sam gets his piece.

Keep in mind that a few simple steps early on can protect you from a host of hassles down the line.  It is always better to be over-protected when it comes to your money and your business.

Yet another thing you want to be aware of is whether or not your current gig could see your side business as competition.

This does not have to be direct competition, like McDonald’s and Burger King.  Your employer could see anything in the same field or line of work (basically any kind of food making or selling from fine dining to packaged granola bars could be seen as competition for McDonald’s).

Once again, if you have an employment contract, you want to pay attention to the clauses on working for competition in it.  Many contracts restrict employees in working for direct competition both during employment and for some time after the employee leaves the company.

If you think your side business could be seen as competition, you should tread carefully.  Consider negotiating with your employer and getting an agreement set in writing about the nature of your business and what your employer is comfortable with you pursuing.

If you don’t feel comfortable approaching your employer or you want to keep the project entirely secret, know that you are taking a risk that down the line your employer may fire you for your behavior or demand some ownership in your side business.

When in doubt, you should get a second opinion before investing significant time or money into a side business to ensure that you won’t have to reimburse your employer for your hard work.

Once you have checked your contract for your employer’s restrictions on outside employment and decided whether or not to tell your employer, you need to consider when you plan on doing the bulk of the work.

When will you work on your side project?

If you currently have a job with chunks of downtime or you are salaried and don’t punch a clock, and you are hoping to freelance or start your own company during this time, you may want to consider your plan more carefully.

If you do the work while salaried or “on the clock” you employer might have an argument that anything you actually produce belongs to him.  This generally only becomes a problem when you least want it to, after your project has become successful.

For example, in the web development world, a developer who works for a fashion company might use her down time to write an amazing program that helps college kids sell their used books online.  This program appears to have nothing to do with fashion but if the program becomes successful the fashion company could want to use an element of the program to help people sell used dresses.  The fashion company could claim the developer created the program while working for them and thus they should be allowed to either a) use the program at no cost or b) be entitled to any profits the developer got from selling the program.  This is last thing you want when you have worked hard to create a successful business.

To avoid these issues entirely, you want to plan to avoid working during business hours and document this in case your employer ever asks.  If you have concerns that the business you want to create might not abide by these rules, you should consider trying to negotiate with your employer so the parameters of what will belong to you and what will belong to the employer is well-defined before you begin your side business.

As you start your side business, remember to pay attention to when you are working on your project and when you are working on your employer’s project.  If any entrepreneurs have a great time keeping system, I would love to hear about it!

Over the next four weeks I will talk about the various things you need to consider before launching a start-up side business or taking on a second job.

First: To Share or Not to Share

One of the first things you will need to decide is whether or not you are going to tell your employer about what you are doing.  If you decide to go the stealth route keep in mind that you probably want to keep it mum from the entire office.  Co-workers tend to talk and word will probably get back to your boss at some point unless you tell absolutely no one.

Remember to Check your Contract!

Before deciding to ‘fess up, you should also take a look at your employment contract (if you have one).  Many employment contracts limit an employee’s ability to get a second job.  Sometimes contracts require employees to jump through hoops like such as getting the employer’s written permission before taking on any other employment.  If you don’t follow the rules you expose yourself to being fired for cause.

If your contract seems limiting but you are still interested in working at a second gig and your contract discourages this you can always approach your employer and negotiate with him or her.

Once you know where you stand and how up front you are going to be, you are ready to consider the type of work you will be doing and how that work product may affect your employer.  Stay tuned for next week’s post on this issue and how to navigate it.

I don’t know who this person is that is spreading these rumors, but I wish he or she would stop.

The truth is that for most businesses filing in Delaware does not save any money. Instead, you should form your business (and file the appropriate papers) in the state where you will actually be running  your business.  Before you buy in to the Delaware hype, consider where your offices will be, where you will be opening your shop or where the majority of your clients will be based.

 Why? 

Your home state (you know, the one where you will actually be operating your business from) will want to see documentation that you are registered to do business THERE .  If you are doing business in New York (for example), meaning opening a bank account, interacting with customers, signing a lease or seeking a license, the State of New York wants you to be registered there (and other states feel similarly).

Only now that you have formed your business in Delaware (and paid Delaware all the filing fees) you now have to register as a “foreign corporation” in order to operate in your home state.  To register as a foreign corporation you will often have to pay the EXACT same amount of money as if you had just formed the company in your home state.  So essentially your business ends up paying the State of Delaware AND your home state.

So how can start-ups save money?

Believe it or not, the most cost-effective choice for most small start-ups is to register their company where they will be doing business.

The idea that you can save money by registering in Delaware is a MYTH! In short, get all the facts before you jump on the Delaware bandwagon.

I hope you find this useful and that it saves you money. I know a lot of people who wish they would have known about this before registering (and paying in Delaware AND then again in their home state).

The law offers various types of businesses, from sole proprietorships to LLCs to S Corporations to Not-for-profit corporations.  People starting a business may know what they want to do or sell, but they have trouble determining which legal structure is right for them.

When clients ask me this question I always start by telling them”it depends.”  I then pepper my client with a handful of questions to see how she feels about the following key factors:

- Control.  How much control do you want to have over the business you are starting?  If you want exclusive control then your business is going to take a different form from someone who is looking to share decision-making power.

-Liability.  Some legal structures do not protect your personal assets.  If you are concerned that the money you own personally (as opposed to the business funds) remains separate, you need to choose a legal form that provides for this.

-Raising capital. More basic entities (like sole proprietorships) are restricted in how they can raise capital.  If you are planning to raise funds through means like selling shares, you should consider a legal structure that allows you to do this.

-Taxes.  Each legal form is taxed differently.  You should get advice from an accountant and make sure that the form you choose will be the right financial fit for you.

If you are thinking of starting a business these are some great topics to consider before choosing a legal structure.  Do any business owners have other tips or factors they considered when deciding the legal structure their business would take?

I am never one to argue that you should stay somewhere you are unhappy, BUT before you walk away from a regular paycheck you should take some time to assess where you currently stand.

You can start by asking these 3 questions:

1)   Do you have an employment contract? – If so, this may explain the terms of how you may permissibly leave and what you might be entitled to if your boss decides to let you go.  If you don’t have a contract, what you are entitled to is more fluid, but you can still leave with something if you negotiate properly.

2)   Does your employer want you out? – If the unhappiness works both ways, it is usually in the employee’s best interest to get laid off (as opposed to quitting).  Getting laid off can often entitle a person to unemployment benefits or severance.  There are often ways to negotiate an exit if both parties are unhappy.

3)   Can you navigate leaving on good (or at least neutral) terms?  A bad employment reference can be a problem in this economy and if you can stay on neutral terms with your employer you will be in a better position to be hired for your next, even better job.

Answering these questions is a great way to start thinking about how to exit an unsatisfying work environment and start to protect your own interests.  Once you determine where you stand you will be in a better place to assess your options, negotiate carefully and exit gracefully.

The article describes people around the city who are running all kinds of businesses out of their homes, from personal trainers to bakers to retailers of children’s clothes.  As the article suggests, not all of these businesses are done above board and on the books.  But there are a surprising number of ways to compromise with your neighbors. Working out of your home is a great way to save money as you start the business and can be convenient too. If you are already running a business out of your home, or thinking about starting one, I would love to hear about how it is going and what challenges and successes you are encountering.  Do you find a way to hide it from the neighbors or get them involved?  Either way it is important to recognize and acknowledge the challenges early on rather than wait for them to grow into something more serious. I really enjoyed the article and was heartened and inspired by the the incredible entrepreneurial spirit that so many New Yorkers have.