If you are starting a new business, everywhere you go you hear people tell you that you must incorporate in Delaware or Nevada. I have some news for you. They are probably wrong.

As a business law attorney, day in and day out, savvy, smart entrepreneurs like yourself actually speak into their shiny new iPhones 4  and proudly proclaim that they registered their business in Delaware. I’m thinking that the lawyer who defended Kato Kaelin’s housemate who now earns his living by hawking do it yourself legal services  just earned another fast buck.

You probably think because all of your favorite big companies are incorporated in Delaware, you should too. But these large corporations have specific reasons why they should incorporate in two states.  The primary reason why you should incorporate is because you can protect your personal assets. Incorporating in Delaware will not afford you any additional layer of protection. You may also incorrectly believe that you can save money in taxes.

Here are some more reasons why you shouldn’t incorporate in Delaware or Nevada:

• It’s Less Expensive Fallacy. True, it is less expensive to initially incorporate in Delaware. Nevertheless you have to register to do business in New York.
• Failure to Register Your Business in New York Could be Deadly. If you fail to register do business in New York and your business becomes subject to a lawsuit, your personal assets may become exposed.
• You Still Have to Pay Taxes. Simply  because Delaware and Nevada do not have personal or corporate taxes doesn’t alleviate your duty to pay taxes in New York.
• The Less Litigation Fallacy. Some attorneys would argue that since most Delaware corporations do not end up litigating disputes because their professional advisers examine volumes published opinions and construct deals to avoid lawsuits.  In New York the caselaw on corporations is voluminous.
• The No Jury Fallacy. In Delaware, your case would be tried by a judge, not a jury. But the simple fact is that 99 percent of the cases settle before trial.  In my experience, it is very rare to hear of a runaway jury in New York County.
• Privacy. In the past, many people decided to incorporate their business in Delaware because they do not require director or officer names to be listed in the incorporation documents. However, the IRS have become aware of this and the rules governing privacy or much more strict. Since you need to register your business in New York, you are going to have to disclose your CEO anyway.

The Law Office of Frederic R. Abramson practices Business Law and Civil Litigation in New York. If you have any questions regarding Incorporation, feel free to contact me at 212-233-0666

NYEBN Startup Series #2 features Peter Shankman, the founder of Help A Reporter Out (HARO). Here is your chance to interact with one of the world-class PR, marketing gurus. Food & drinks will be available.
This event will be co-hosted by Select Office Suites as part of theirwww.Network-Preneur.com Power Concepts Series. Ray Lindenberg, Director of Marketing & Branding of Select Office Suites will be making the opening remarks.
Pre-pay online for $15. You can also pay at the door for $25. Space limited. Order your tickets now. 10% of ticket sales will go to the charity, and it’s 100% refundable if you’re not satisfied with the event due to some reasons.

Schedule:
6:00 PM – 6:25 PM – Registration (Food & Drinks Ready)
6:25 PM – 6:30 PM – Opening Remarks by Ray Lindenberg
6:30 PM – 7:15 PM – Peter’s talk
7:15 PM – 7:45 PM – Q & A
7:45 PM – 8:30 PM – Networking
Check out Peter’s new book here – “Customer Service: New Rules for a Social Media World (Que Biz-Tech)”
How to use social and viral technologies to supercharge customer service – and avoid disasters along the way

~ The breakthrough guide to leveraging social and viral media – by Peter Shankman, the legendary founder of HARO, one of today’s hottest Internet growth companies
~ Actionable insights based on what’s really happening right now – not yesterday’s news or academic theory
~ How to build customer loyalty, trust, and credibility online – and rebuild it after a customer service catastrophe
[read more...]

Pre-order the book

Peter’s bio
PR Week Magazine has described Peter as “redefining the art of networking”, and Investor’s Business Daily has called him “crazy, but effective”. Peter Shankman is a spectacular example of what happens when you merge the power of Attention Deficit Hyperactivity Disorder (ADHD) with pure creativity and a dose of adventure, and make it work to your advantage.
An entrepreneur, author, speaker, and worldwide connector, Peter is recognized worldwide for radically new ways of thinking about Social Media, PR, marketing, advertising, creativity, and customer service.
Peter is perhaps best known for founding Help A Reporter Out, (HARO) which in under a year has become the de-facto standard for thousands of journalists looking for sources on deadline, offering them more than 125,000 sources around the world looking to be quoted in the media. HARO is currently the largest free source repository in the world, sending out over 1,200 queries from worldwide media each week. HARO’s tagline, “Everyone is an Expert at Something”, proves over and over again to be true, as thousands of new members join at helpareporter.com each week.
In addition to HARO, Peter is the founder and CEO of The Geek Factory, Inc., a boutique Marketing and PR Strategy firm located in New York City, with clients worldwide. His blog, which he launched as a website in 1995 at http://shankman.com…, both comments on and generates news and conversation.

With the unemployment rate a hair under 10 percent, the job outlook for many college students is not bright. With the mountain of debt that awaits upon graduation, many are starting their own businesses.

The road to creating a successful business is not easy. The stats show that most businesses fail within the first five years.

In an effort to help young entrepreneurs, Scott Gerber has started the Young  Entrepreneur Counsel. Mr. Gerber and the Counsel were featured in the New York Times. The Counsel’s mission “is to teach young people how to build successful businesses and fight the devastating epidemics of youth underemployment and unemployment.”  After perusing the website, the group looks like a great resource.

The group has hooked up with a who’s who of all the big players of the Entrepreneurial media scene, including Mashable and Business Insider (my two favorite business blogs).

Mr. Gerber has also started the Gen-Y fund , which helps entrepreneurs obtain funding.

The Law Office of Frederic R.Abramson represents entrepreneurs in New York.

The always excellent blog Business Insider lists New York’s Coolest Tech People in 2010. The end of the list was a bit weak. What’s up with listing Glen Beck has a NY tech powerhouse?

What do you think of the list? I’m working on a top secret start-up right now. Perhaps I will be on it next year.

Image via Wikipedia

Why do so many startups fail? You may be really smart, execute well and have the funding.  However, the bigger problem may that the problem is too big to handle. The blog Business Insider lists ten startup ideas that never work.  They are:

1. Semantic Search/Any search company that’s not Google. When was the last time that you asked Jeeves anything?
2. Social recommendations as a standalone don’t work.
3. Local News Sites. Perhaps the Patch network of sites may work, but probably not because of lack of advertising dollars.
4. Micropayments don’t work. The site with the best content, The New York Times failed charging by the article.
5. Stop trying to kill email. Look what happened to Google wave.
6. You can’t try to make a better car company. Tesla has sold only 2,000 cars.  How about the DeLorean? I vividly remember John DeLorean busted on tape selling cocaine in a ludicrous attempt to save his company.
7. Music startups can’t get enough paying customers. I am a music geek and have  purchased music online occasionally on iTunes and rarely on Amazon. (I still purchase CD’s at J&R Music, so I may be a bit of a dinosaur).
8. Marrying the web and the TV hasn’t worked out.  Even though all the cool kids in New York love Boxee, do you know of anyone who uses it? It remains to be seen what happens with Apple and Google’s latest offerings, but history is not on  their side.
9. RSS Readers are not a business. Whatever…. Google does the job reasonably well.
10. A startup focused on kids or making life easier for parents. I’m not sure I agree with this overboard generalization. Certainly my hometown of Port Washington,NY needs more daycare centers. However, if you are planning a startup to take on the big boys, ie Target, Wal-Mart et. al, you are looking for trouble.

What do you think? What is on your list for startup ideas that never work?

The Law Office of Frederic R. Abramson represents startups and small businesses in New York. If you have any questions, feel free to call me at 212-233-0666.

The New York Times reports that the Senate advanced legislation to aid small businesses on Tuesday after months of Republican resistance.

The President supports the bill, which would provide loans and tax breaks to small businesses, and it is likely to be passed quickly.

The bill would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms.

It would also exclude from taxes all capital gains on sales of small business stock and ease tax rules for expensing and depreciation of equipment. Tax breaks in the bill total $12 billion.

What do you think of the new bill? Do you think it will create more jobs?

Two-thirds of net new jobs are created by small businesses.  However, the National Bureau of Economic Research found that once the age of a business is taken into consideration, there is no systematic relationship between firm size and growth.

According to the New York Times, nearly all job growth occurs when businesses are starting up. When businesses mature,  job expansion essentially stops.

Our unemployment rate is at 9.6%. Any serious solutions for creating new must focus on how to create new start-ups and nurture new firms that are in their infancy.

Some argue that raising long-term capital gains, like the Obama administration is proposing, can hurt the prospects of start-ups.  Since angel investors calculate taxes when deciding how much to invest, they may decide to fund less start-ups.

On the other hand, most new businesses make  little or no income. Entrepreneurs focus on making it big, not on taxes. The  New York Times notes that when Microsoft started up, the top income tax rate was at 70%.

One cheap way of fostering start-ups is by granting more residence visas to skilled immigrants, especially those who attend American universities. On February 24, 2010 Senators Kerry and Luger proposed the Startup Act of 2010, which would permit immigrant entrepreneurs to stay or immigrate into the  United States if they have secured “significant” funds to start a new company. Since immigration is a sensitive issue and the mid-term elections are upon us, this bill seems unlikely to pass soon.

Start-ups are always in need of capital. Unfortunately, banks have tightened their lending to start-ups.  Since the private sector is unwilling to lend, the government may have to step in and start lending to start-ups.

Another possible solution is to provide funding for incubators. Currently, there is an excess capacity of commercial real estate. The government should provide tax breaks to landlords to provide below market leases to incubators. Incubators would be required to house no less than three different businesses and be in business for less than 3 years.

What to you think? Is funding incubators a good idea? What are your solutions for job growth?

Frederic R. Abramson is the principal of the Law Office of Frederic R. Abramson, which represents start-ups.

You probably spend much of your time at work in front of a computer. When you are on the run, you use your Blackberry or iPhone for both work and pleasure. But who owns the data that is created, viewed and stored while working?

If you work in New York for a private company, you have a reasonable expectation of privacy for your electronic devices, work computers and cellphones. This is especially the case when the company that you work for does not have a policy regarding internet usage. As a result, I have been advising companies to cover their bases by clearly and specifically drafting internet usage policies that explains their employees expectation of privacy.

Restrictive internet usage policies usually include the following:

1. All the data that is stored on work computers is company property;
2. Employee’s have no expectation of privacy;
3. The Employer may monitor its employees computer usage without their knowledge.

The law regarding restrictive internet usage policies have been looked at with increasing scrutiny by the courts.  For example, a recent court ruling did not allow an employer to access the Hotmail account of its employee.

Despite a written internet usage policy, employers are not immune from potential lawsuits from employees. Listed below are restrictions that employers should be aware of:

• PRIVILEGED DISCUSSIONS. Discussions regarding attorney-client communications may continue to be privileged.  If an employee is using the internet for legally permitted employee, like union organizing her communications may be privileged.
• DISCRIMINATION. Be aware that you cannot treat your employees differently while monitoring their computer usage.
• ACCESSING PRIVATE ACCOUNTS. You cannot access your employee’s Twitter account simply because they accessed their account at work.
• NEW YORK STATE LAW. Believe it or not, New York State does not have an invasion of privacy law.  Be aware that you cannot fire an employee simply because she tweets.

Be aware that case law is changing on this subject.  As a word of caution, use your common sense and think about the golden rule.

For more reading:  Who Owns all the data in the Workplace

If you have any questions about who owns your data at work, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

Crain’s New York Business reports that members of the group of New York Tech Meetup are working to repeal the law that requires companies to pay a publication fee to form a New York Limited Liability Company (LLC).

Publication fees range from $1000 to over $2000 and are a burden on many start-ups. The rates depend on the county where the business is located.

The New York LLC publication law is as follows:

1.  Within 120 days of formation of a New York LLC, the LLC must publish a notice in two (2) newspapers, once a week, for a period of six (6) consecutive weeks, as follows:

(a)  The notice must include the name of the LLC, the date of filing, the county in which the office is located, the full street address of the LLC, the purpose of the LLC, and a statement regarding service of process on the secretary of state. The information must be precise… there’s no room for errors.

(b)  The notice must be published “as though the copy or notice were a notice or advertisement of judicial proceedings.”

(c)  The two (2) newspapers must consist of one (1) weekly paper and one (1) daily paper of general circulation in the county where your LLC was formed. The newspapers must be designated by the county clerk for such publication.

2.  After the LLC publishing is complete, you must obtain affidavits of publication from the newspapers in which the legal publishing was completed.

3. The affidavits of publication must be filed with the state, along with other information contained in a Certificate of Publication. There are fees for this filing.

4. If you fail to comply with the LLC publishing law within 120 days of formation, the authority of your limited liability company to carry on, conduct or transact any business in NY state shall be suspended, effective as of the expiration of such 120 day period.

5. The suspension will be annulled upon the filing of the Certificate of Publication, even if filed late.

The main beneficiary of the publication law is print publications like the New York Law Journal and Crains New York Business.  Hat tip to Crains for disclosing the conflict. With advertising fees in traditional media in a free fall, expect newspapers to fight for this important source of revenue.

The purpose of the publication requirement is to notify members of the public to know who they are doing business with.  I have never heard of anyone who reads the legal notices of any newspaper.  Moreover LLC information can easily be searched for free on the New York State Department of State Corporation and Entity Database.

The time has come to abolish the New York LLC publication requirement is law from an era whose time has passed. What do you think?

The Law Office of Frederic R. Abramson represents businesses in New York.  If you have a question regarding LLC formation contact me at 212-233-0666.

On July 4, we celebrate the entrepreneurs who were our founding fathers who made a difference by bringing social change to America. Unlike July 4, there is nothing particularly unique about the date of March 4.  On that date back in 2006 final contact was attempted with Pioneer 10 by the Deep Space Network. Unfortunately, no response was received.

NYConvergance recently noted that the New York Tech scene has matured. One sign of its maturity is the bevy of tech events in the New York City area.

What could be better than making March 4, 2010 special by spending the evening celebrating the power of entrepreneurs to change the world.  According to the press release:

The event will feature a panel that brings together the nation’s most prominent advocates for both early stage investment and social enterprise.  Fred Wilson, founder of Union Square Ventures, is an advocate for early stage investment and the single most read blogger in the venture capital community.  Jacqueline Novogratz is the founder of the Acumen Fund, a global nonprofit venture philanthropy fund that hat uses entrepreneurial approaches to solve the problems of global poverty.  They are joined by Roger Ehrenberg, founder of IA Venture Strategies and one of the most active angel investors in New York and Jacob Gray, partner at Murex Investments. The panel will be moderated by Scott Edward Anderson, founder of the greenskeptic.com and a frequent commentator on the FOx Business Netowrk. This rare combination of finance and philanthropy leadership reflects GoodCompany Ventures’ unique mission to help social entrepreneurs develop scalable, for-profit businesses to address unmet social needs.

Here are the details:

Date:   March 4, 2010

Time:  6-8 PM

Location:

Green Spaces NY
394 Broadway
5th Floor
New York, NY 10013

Cost: $35

For more information: GoodCompany Ventures

Drop me a line and let me know if you are planning to attend.  I would love to meet up with you!

The Law Office of Frederic R. Abramson is not affiliated with the above event.  If you have any questions regarding legal issues concerning entrepreneurship, contact the Law Office of Frederic R. Abramson at 212-233-0666.