How to Draft an Operating Agreement for Your Small Business

By on June 18, 2013 in Guest Articles, Starting A Small Business, Your Small Business

Guest Article

How to Draft an Operating Agreement for Your Small Business 300x186 How to Draft an Operating Agreement for Your Small BusinessHave you ever sat down and drafted an operating agreement for your small business? Despite the fact that an operating agreement is considered one of the most important documents an LLC can keep under its belt for structuring a company, many people skip over it. Depending on where you live, it may not even be a written requirement for your business. Clocking in at anywhere from 5 to 20 pages in length with only a vague idea of what the content written should even be about, many businesses choose to omit working on one.

For any business owner, however, it is in their best interest to create a written operating agreement for their LLC, regardless of whether it’s a state requirement or not. According to the U.S. Small Business Administration (SBA), the operating agreement works to protect the business, governs the internal operations of the business to suit the needs of its owners, and helps to prevent any financial, verbal and management disputes along the way. Once signed by its members, the operating agreement serves as an official contract binding them to the items agreed upon.  Before you sign off on an operating agreement, it’s important to know what needs to go into the draft. If you are ready to develop one make sure that your agreement outlines the following areas:

1) Percentage of members’ ownership.

These percentages tend to be in proportion to the investment capital given to the LLC. The more capital a party puts into the LLC, the higher that party’s ownership percentage is in the company. LLCs may also distribute ownership percentages on their own terms such as making a women or minority at 51 percent owner for a strategic reason. You can do whatever you want; you will just need to specify the ownership percentages.

2) Voting rights and responsibilities.

In the event that members of the company disagree over a particular business decision or cannot come to an agreement over a controversy, specifying the voting rights of every member works to help resolve these issues as quickly as possible. Generally, ownership percentages determine voting percentages, but LLCs may allocate equal voting rights to all their members. Additionally within this section of the operating agreement, it’s important to include any tie-breaker mechanism too.

3) Powers and duties of members and managers.

All expectations of the members and managers in which the LLC will be governed must be specified.

4) Distribution of profits and losses.

In addition to specifying the LLC’s mechanism for distributing shares of the company, the operating agreement needs to specify the conditions for distributing the actual profits and losses to its members. Answering the questions upfront on how much and how often these profits and losses will be distributed to the members, could save headaches in the future. There are also tax implications for these decisions.

5) Ownership transitions

This will help specify the procedure for how the ownership of the LLC can be transferred with buyout and buy-sell rules in place. Transitions addressed may include discussion on what happens if a member dies or no longer has the capacity to be a member. You’ll want to spell out if the LLC should have the first opportunity to buy-out a member’s ownership interest, and/or if a member is free to transfer their interest to any other party.

6) Dissolution of the LLC

Finally, the operating agreement needs to specify under what conditions an LLC will be dissolved and liquidated if necessary.

While taking valuable time away from running and growing your business may seem impossible, setting aside time to think through and then draft a detailed operating agreement will prove extremely valuable to business owners and partners.  Drafting an operating agreement for an LLC can be likened to drafting a will.  Many people drag their feet about doing it, but the implications of not doing it are significant.  Once the operating agreement is finalized, it may only take a few hours to get down the primary points. Drafting an operating agreement, will give you piece of mind knowing that there is a solid management plan in order.  Going into business with a clear understanding with your business partners is the best way to start and end a business relationship.

deborah sweeney 199x300 How to Draft an Operating Agreement for Your Small BusinessAuthor Bio:  Deborah Sweeney is the CEO of MyCorporation.com, a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, DBA, and trademark & copyright filing services.

Hand Of Business Man And Document Paper courtesy of khunaspix / www.freedigitalphotos.net

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Top 5 Tasks To Outsource in Your Small Business

By on June 17, 2013 in Grow Your Business, Your Small Business

Top 5 Tasks To Outsource in Your Small Business 300x249 Top 5 Tasks To Outsource in Your Small BusinessWhat is the biggest struggle in any small business? Are you wearing too many hats? Yep, just what I thought. When you are a small business owner you immediately take on 10-14 jobs all at once, so it stands to reason that you might not do them all well. Sometimes, we all feel like “I AM THE BUSINESS!” But it is dangerous for a growing business to operate this way for too long. You will surely fail to maintain the business over time, not to mention you can lose your family and your sanity too, working yourself to death.

As small business owners we cannot do everything, so it’s time to consider what non-core activities you might be able to outsource. This will help you stop doing things you hate doing (and are probably not that good at) and it will free up your time to focus on the things you are really good at like selling and closing more deals.  It is smart to leverage the talents of others rather than trying to do it all by yourself. After all, your time is your most valuable asset in your small business. Here are the top five tasks to outsource in your small business.

Outsource Your Bookkeeping: Bookkeeping is the #1 task in small business that owners routinely neglect and struggle with managing in their operations. Do not let this happen to your small business. By the 15th of the month, you need to know how well your business did last month so you can make any adjustments. By outsourcing your basic accounting services to a seasoned bookkeeper, you will have the ability to use updated financial information to run your small business. A bookkeeper can do your accounting work a lot faster and more accurately than you can, and it is affordable. Ask your tax preparer or another entrepreneur for a referral to the right provider. Stop getting your accounting done for the year at tax time; outsource your bookkeeping services today.

Outsource Your Payroll:  Unless you run an accounting firm, you should not be doing your own payroll. Listen, you can get in trouble faster with the IRS for not paying your payroll taxes properly than not paying personal income taxes. If you hire an outsourcing company to do your payroll, then you can rest assured that you and your staff will have no issue when income tax season rolls around at the beginning of each year. If you do the payroll in-house, then you need to stay on the top of rules for federal, state and local tax laws that often change. The fees to outsource payroll are not very expensive, so do yourself a favor, let a payroll service handle the deductions for withholding, social security, unemployment, and worker’s compensation. You can’t afford to make a mistake.

Outsource Your Social Media Marketing: There are plenty of solopreneur marketing consultants and social media marketing agencies that can handle developing your social media strategy, content development and social promotion for your company. When you perform these tasks in-house, you often fail to retain the consistency of doing them. Leverage the services of a 1099 consultant to handle this for you. I am pretty sure, if you hire the right person or firm, and give them a specific niche focus and strong message about your product or service, your marketing efforts will flourish over time. Just remember that social media is a long term strategy, so be prepared to invest 12-24 months to achieve your goals.

Outsource Your Administrative Support: Do you often feel like you wish you had another pair of hands to help you in your small business? Utilizing virtual assistants is a cost effective way to get routine tasks handled in a  business  You can use a virtual assistant for maintaining your personal schedule, database, preparing mailings, email newsletters, copy editing, blog maintenance, booking travel arrangements, invoicing, collections, voicemail & email management. You can even leverage a niche focused virtual assistant to do bookkeeping and receipt management. I have used Twitter and LinkedIn to search for qualified virtual assistants to support my small business.

Outsource Your Marketing Efforts: Marketing is the fuel of a small business. Your marketing efforts tie directly to your sales results. So if you are too busy working the business you already have to focus on closing the next sale, you need some help. Outsource your marketing efforts to a consultant or public relations specialist for your small business. Some marketing people will help you develop downloadable content for your website, conduct email marketing campaigns, some will focus on reaching out to LinkedIn contacts; they can handle direct inquiries or pitch you for speaking opportunities. They can also develop media pitches and monitor HARO for media opportunities.

Stop making yourself crazy trying to do all this stuff by yourself in your small business. If you outsource two or three of these functions, the consultant will pay for itself in no time. Do your research, check their references and ask for referrals from fellow small business owners before hiring anyone. Once you start outsourcing a few non-critical tasks in your small business, you’ll wonder why it took you so long to do it.

Outsource Key Showing Subcontracting And Freelance courtesy of Stuart Miles / www.freedigitalphotos.net

What tasks do you outsource in your small business?

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How to Become a Successful Woman in Business

By on June 13, 2013 in Q & A Interview, SmallBizChat, Women in Business

SMALL BIZ CHAT LOGO 20121 300x123 How to Become a Successful Woman in BusinessEvery week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Ingrid Vanderveldt (@ontheroadwithiv). Ingrid is an entrepreneur, investor and media personality, and currently serves as Dell’s first Entrepreneur-in-Residence (EIR). As Dell’s EIR, she oversees the program that provides access for Dell’s 10M small business customers and her resources and expertise help entrepreneurs worldwide build and grow their companies. She is the creator and curator of the $100M Dell Innovators Credit Fund (DICF) to power entrepreneurs worldwide and the leader of the Dell Founders Club and the Dell Center for Entrepreneurs www.Dell.com/entrepreneurs

SmallBizLady: Why is networking so important for entrepreneurs and small business owners?

Ingrid Vanderveldt: Networking can be one of the most valuable uses of your time no matter what industry you’re in or what your role at your company is. And for entrepreneurs at any stage it’s a must. Whether you’re just starting out, looking to raise capital or planning to expand into new markets, it’s your network that can help you take your business to the next level.

Networking is all about making connections and building lasting, mutually beneficial relationships. It’s a known fact that people want to do business with those they know and trust, so it’s important for entrepreneurs to take the time to attend in-person networking events and engage with relevant organizations. You never know who you might meet, and these interactions can lead to future opportunities for both parties, be it anything from advice to an introduction to a new business contact to an actual business deal.

SmallBizLady: How did you build your network?

Ingrid Vanderveldt: When I was first starting out, I gradually built up my network through non-stop putting myself out there in places where I could meet people that I could collaborate with.  Networks don’t naturally pop up.  The people who are doing the big things in the world (and who we all love learning from and want to work with) have a LOT going on. They have already built their networks. So if you want to meet them or connect with them, it requires a lot of hard work and it takes time. You have to roll up your sleeves and just go do it.

SmallBizLady: What are some of your personal networking tips?

Ingrid Vanderveldt: My number one tip is to always be networking as you never know who you’ll meet and what they’ll have to offer. Every person you talk to has the potential to introduce you to others in his or her network.

Additionally, it’s important not to treat networking as prospecting – it’s important to develop some degree of a relationship with each person you meet, rather than focusing on just transactional deals.

Another tip is to have clear cut objectives of what you want to get out of networking and who you’d like to meet. If you don’t know what you want, you can’t ask others for help, and if you don’t know who you want to meet, the members of your networks and other people you meet can’t help you reach them.

Finally, focus on giving not taking. Serve as a resource to your business networks, and in return the members of your network are likely to do the same for you.

SmallBizLady: How can conferences be used as a networking tool?

Ingrid Vanderveldt: I often talk to people coming back from conferences and it doesn’t sound like they took advantage of the opportunity to move the ball forward – they traveled, they had fun, but they didn’t focus on making meaningful professional connections. I like to set objectives for myself before any trip so I have a general sense ahead of time on who I’d like to meet and potential goals I’d like to accomplish. While there, I make sure to focus on takeaways and action items that will happen following the conference. I make sure to build in time to network and build relationships, and also try to remind myself that sometimes business relationships and deals will happen at unexpected times in unexpected places.

SmallBizLady: How can entrepreneurs and small business owners use social media to build their networks?

Ingrid Vanderveldt: Social media is a great way to magnify your message, connect with an audience of like-minded thinkers and build your network. The key to building your own network through social networks is to think about how you can add value to the experience. Again, people are busy and already have full plates.  As you think about your social media strategy, really consider how you, as an “unknown” person to them, can provide value in your messaging in a way that your audience will be willing invite you into the few moments they have each day to look at social media.

I like to think of social media and my audience as a “gift” to my brand and businesses, so I always look at what I can give back that adds value.

SmallBizLady: How do women network differently than men?

Ingrid Vanderveldt: Experts say that men tend to network less frequently and in a transactional, direct manner, reaching out to who they need at the time of need – whether that need be advice, a job, a connection, etc. Women are natural networkers and tend to personalize professional networking by forging powerful bonds and nurturing long-term relationships, often thinking about how they can help their peer first in order to get what they need in return. This style of relational vs. direct networking puts the emphasis on connecting as an end in and of itself, rather than a means to an end goal.

SmallBizLady: What can women learn from men about networking and vice versa?

Ingrid Vanderveldt: In my opinion, women can benefit from the broader networking approach that men seem to take on. The Global Entrepreneurship Monitor study on “The Role of Networks in Women’s Entrepreneurship and Business Ownership” shows that women entrepreneurs tend to have smaller networks than men, and that they are less diverse, often comprised of close friends and family members, while men are more likely to seek advice from other network sources. On the other hand, men can benefit from adopting a more personalized and relational approach that women excel at; this would make it easier for them to find what they need through their entire extended network, rather than seeking out the correct person to provide it directly.

SmallBizLady: What is the Dell Women’s Entrepreneur Network and why is Dell targeting female entrepreneurs specifically?

Ingrid Vanderveldt: As female entrepreneurs we’ve traditionally been under-represented in business and tech fields, but there’s more and more evidence that when given the opportunity, women shine as leaders. Dell launched the Dell Women’s Entrepreneur Network (DWEN) four years ago to create and foster a community of like-minded female founders looking for ways to grow – primarily by expanding into fast-growth, emerging countries like China, India, Brazil, Turkey – and who need a venue to exchange ideas, learn and do business with one another. Through the network, Dell supports and nurtures these women by providing access to the knowledge, networks, and capital they need to succeed.

SmallBizLady: Can you share some examples of networking leading to real business deals?

Ingrid Vanderveldt: The Dell Women’s Entrepreneur Network (DWEN) is a perfect example of the power of networking. In fact, it was through attending the inaugural DWEN event in Shanghai in 2010 that I first became engaged with Dell, and it was a result of the relationships I made at the event that I was able to find a buyer for my alternative energy company. Then, fast-forward two years and I’m working as Dell’s first entrepreneur in residence!

Some other success stories that came out of engagement in the DWEN network are as follows:

  • Venture catalyst Springboard Enterprises officially launched in Australia as a result of connections made at DWEN 2010 in Shanghai.
  • DWEN 2011 in Rio inspired UK entrepreneur Alex Butler to start KindredHQ, a community for business owners.
  • Maria-Helena Pettersson, Partner at Ernst & Young Brazil, established a Winning Women program in Brazil after making significant alliances at DWEN 2011 in Rio.
  • Jacqueline Arias, Founder of Republica, is now importing organic baby food to India as a result of her experiences attending the 2012 DWEN event in New Delhi.

SmallBizLady: There are a lot of single mothers and divorced women who are starting businesses to reinvent themselves. What bootstrapping advice do you have for them?

Ingrid Vanderveldt: Every small business has unique needs in terms of the amount and type of capital they need to stay in business and to grow. It’s important to carefully assess what you need and what type of funding is right for you, be it equity, debt financing, or looking to friends, family and personal savings to get started. You often hear of people struggling to try to get bank loans, but they forget it’s not the only game in town.  The Small Business Administration has a number of resources for businesses of all stages.  Springboard Enterprises, a “venture-catalyst” that has helped companies raise over $5.5 billion, has a great support program for women. Crowdfunding with popular sites like Indiegogo and Kickstarter has also been a good option for bootstrapping entrepreneurs.

SmallBizLady: What do you think holds back women entrepreneurs in business?

Ingrid Vanderveldt: Historically, women around the world have been under-represented in business leadership, and while women are now successfully starting and growing businesses, they are underserved by the financial community and the technology industry. In established and emerging markets alike, women founders struggle to access the capital, networks and knowledge they need to start or take their businesses to the next level.

Despite owning 30 percent of businesses in the US, less than 5 percent of venture capital funding goes to female CEOs. According to the Department of Commerce, women are substantially less likely to tap outside funding including loans, angel investments or venture capital over their lifetime – and less startup or growth capital means slower growth. Men tend to be quicker to ask for what they want, while women are slower to ask, feeling they need to earn the ability to ask. Women need to get past their inhibitions and can benefit by identifying and engaging in the networks that are critical to their businesses.

SmallBizLady: What does it mean to “Pay It Forward” for female entrepreneurs like yourself?

Ingrid Vanderveldt: My personal mission is to “Empower a Billion Women by 2020.” I am passionate about helping women become stewards of their own lives, through empowering them with the right tools, resources and knowledge to help drive their businesses, careers and ultimately, financial stability and wealth.

During DWEN earlier this month, Dell launched an initiative called “Pay It Forward” to support one million female entrepreneurs by 2015. Pay it Forward is a movement to harnesses the power of our collective networks to positively impact the future of women’s entrepreneurship around the world. We believe if one woman helps another woman, who in turn helps another 10 women, businesses, communities and ultimately economies, will prosper.

Mentoring a young entrepreneur, making a donation of money or time to a dedicated organization or investing in a budding startup are just a few ways to provide your support and create a positive impact. You can visit www.Dell.com/payitforward for suggestions on ways to pay it forward through a network of non-profit organizations focused on advancing women and girls.

SmallBizLady: Where can entrepreneurs and small business owners go to find resources from Dell?

Ingrid Vanderveldt: The Dell Center for Entrepreneurs is a community by and for entrepreneurs and serves as a one-stop shop for the resources founders need to start, run and grow a business. Visit Dell.com/entrepreneurs to learn more.

If you found this interview helpful, join us on Wednesdays 8-9 pm ET; follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat: http://bit.ly/S797e

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

Melinda F. Emerson, known to many as SmallBizLady is America’s #1 small business expert. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing to fulfill her mission to end small business failure. She writes a weekly column on social media for The New York Times. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog http://www.succeedasyourownboss.com Melinda is also the bestselling author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works and the ebook: How To Become A Social Media Ninja; 101 Ways to Dominate Your Competition Online.

 

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