Quick Lesson: Equity and Debt are the two ways that a company can get capital (cash). Debt comes with terms like a set maturity time and interest rates… equity, on the other hand, allows people to simply invest in a company and in return own a portion of profits into the future! In general, debt is cheaper than equity, but carries a higher liability and adds risk to the balance sheet.

Many newswires are reporting stories that would lead you to believe that this move is indicative of an upcoming Initial Public Offering (IPO) — in other words, trading with a ticker symbol on the open stock market where anyone can buy/sell their equity. For some examples, see: “Is Facebook’s IPO coming sooner than expected?“; “Will Facebook Succumb To IPO Pressure?“; and ”The Facebook IPO Is Proof That Everything Is Being Reinvented“. To the contrary, I believe that this move is actually one in which Goldman Sachs is behaving as the white knight… bailing Facebook out of the need to go public with their numbers.

Why An IPO Ain’t Comin’!

For Facebook, the thought of being a publicly-traded company runs contrary to the “cool” factor that has made it such a success. The new age of tech startups is a lot different than the prior era where firms couldn’t wait to get themselves public with free access to capital on the open market. There are several disadvantages to being public nowadays, and Facebook is (supposedly) far from a mature company, so the general consensus is better private than public.

Unfortunately, once Facebook has 500 private shareholders, the SEC regulates that all of their financials must be made transparent. For Mark Zuckerberg, this spells trouble because private equity is one of the company’s most sought after forms of compensation. The beauty behind this deal is that Goldman will invest around $1.5 billion into the company… but won’t add more than one shareholder if all goes according to plan. Here’s how it works: 1) Goldman Sachs goes out to its clients and offers the chance to invest in Facebook; 2) Goldman Sachs pools all of the money that it has received interest for; 3) Goldman Sachs invests the collective sum on its investors behalf… but it is only technically counted as ONE investor! Pretty smooth, eh? It is almost like a syndicated loan — a “special purpose vehicle (SPV)” by definition.

To me, this move by Zuckerberg and Facebook is one that says “hey, we need cash… but we really don’t want to go public.” In no way to me does this say “giddy up, lets go public baby!”

So contrary to public belief, I see Goldman Sachs actually stepping in to save Facebook the need to “sell out” by becoming openly traded. There is already a bit of undeserved outrage from Facebook users in groups like “Keep your dirty hands off my FB“, but hey… we’ll see how it works out for the company. Only problem is: how long can Facebook feasibly wait until investor pressures to execute an IPO get the best of them?

Stay bullish.
-Jimvesting.com

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Jimvesting.com’s Year-Opening Trades

This year, I am betting on a solid market that favors late-cyclical companies… meaning stocks that benefit once a recovery is in place and businesses start outlaying capital with increased confidence. We’re talking certain industrials, materials and energy stocks for the most part.

My biggest bet so far is one of the biggest basic materials companies, specializing in aluminum and other metals. Naturally, I’m talking about the bellwether Alcoa (AA), which I purchased at $15.20 on December 31st, 2010. I love this company going forward as their product is heavily involved in late-cycle industries like construction and automotives, and management has just begun to turn bullish after having big negative numbers throughout the recession. They still trade very cheap at 15 times forward earnings, and I’m up almost 9% on the trade in a matter of two days.

My second trade was into an oil services company called Weatherford International (WFT). I think the oil services space is ready to roar in 2011 after being held back too long from the BHP oil spill many months ago. Weatherford is healthier than a Baker Hughes or a Schlumberger and have seen a lesser stock price appreciation over the past few months. I bought in also on December 31st at a price just north of $22/share… flat on the trade thus far but I am optimistic with oil expected to tear up toward $100 by year end.

Five Contrarian Market Predictions for 2011

A “contrarian” pick is one that the market isn’t expecting. This means if you happen to bet big, you win big… but if you are wrong, you probably won’t lose that much because nobody thought it’d happen anyway, eh? I like to bet against the market when I think that there is an opportunity to see reversion, and if I had to take a few shots… I’d go with the following:

1. The S&P 500 Index Will Climb More Than 15% on the Year
Businesses are flush with cash and ready to expand. Many of the economic indicators like ISM Manufacturing are headed in the right direction. Investors are (finally) hopping out of the bond market and the global environment is slowly stabilizing. Commodities are moving higher as the dollar stays suppressed which encourages exports. Finally, the Standard and Poor’s Price/Earnings (P/E) ratio is still on the lower end of historical averages and is well below recession-recovery levels we’ve learned to trust in the past. THERE ARE STILL HEADWINDS… but I think the positives are going ignored and investors nowadays love to be bearish. The average expectation right now is around 10% appreciation on the markets, and I love a better than expected result.

2. Chinese Inflation Stays Under Control
Yes, China has a booming economy and has had to raise interest rates two times over the past few months to fight it. Many investors assume that with commodity growth getting out of hand, and a housing oversupply potentially creating a bubble, they are doomed to see hyperinflation. I believe differently, and think that the decentralized command economy may actually be better suited to handle the rush of inflation than a capitalist regime. They are certainly being aggressive so far as they try to control drastic price movements, I think it could be just what the doctor ordered.

3. U.S. Federal Reserve Raises Rates Before Year End
Yep, I said it. I haven’t seen anyone talking about the United States Federal Reserve actually (*gasp*) RAISING the federal funds borrowing rate this year. If we learned anything from the post-IT bubble crash, it is that you simply have to take the punch bowl away when people are clamoring for cheaper borrowing rates. The makeup of the Federal Open Market Committee should change in favor of those more hawkish (a.k.a. aggressive against inflation) in January, and I believe this along with a good stock market will create an environment where we might see a rate hike later on this year.

4. Gold Ends the Year Flat
Gold, gold, gold… everybody wants to buy the stuff. I say the metal is finally at a point where it is fairly valued, and investors will start to shift out of the protective portfolio stance of owning gold once gains begin to be realized in the equity markets on lower volatility. I don’t think gold will close lower, but all the big managers are recommending to stock up on the good stuff and I think it’s gone too far. The GLD has been the best performing ETF for a long time running, but I say you need to own something with intrinsic value. Can gold really go 20% higher without rampant hyperinflation or another depression? There’s not much left in the tank in my mind.

5. Unemployment Breaks Back Above 10%
Sorry to say, but I think the problems in the municipal market will blow up in our faces in 2011. I do not think that this will come in the form of utter bankruptcy, rather… I see a soft landing as states are forced to drastically cut costs and end up surviving. However, you know what happens when we cut costs — layoffs. Government jobs were a big part of the recovery, and I think they lead us in the opposite direction in 2011.

So there we go, five out-of-favor predictions for the market in 2011. We will revisit this at the end of the year to see what hit and what missed. Please remember that nothing in this article should be thought of as investment advice, as I am not a licensed financial advisor. If you are looking to invest on your own and aren’t set up, I use ThinkOrSwim as my stock brokerage.

Stay bullish my friends.
-Jimvesting

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Back in April of 2010, popular MMO blogger John Chow and myself got into a debate over where you should trade Apple (NYSE: AAPL) on the markets. This was the Monday following the initial release of the infamous Apple iPad, which reportedly sold a few hundred thousand units. I bet that the direction of Apple would actually be LOWER on Monday, despite a great headline number — John disagreed, citing a good response to the new product launch. The result? Apple traded higher on Monday, April 5th by 1.07%.

Why John Chow was the winner

As soon as the day closed, John and I got to talking:

Now, while the stock of Apple was up on the day, my verdict was that I was in fact the winner because they underperformed the market. Perhaps John and I come from two different schools of thought, but I really don’t care how awesome my stocks are doing if they are underperforming the market. On the day, Apple underperformed the technology benchmark slightly… so I took this as to say if there was zero news, Apple would have been up more. Why do I put more weight on relative performance versus nominal performance? Any investor can just dump their money in a large index fund and do fine… there is no point in owning Apple and trying to pick stocks if you are underperforming the broader basket of stocks.

Regardless, I read what I said… and because I didn’t mention relative performance I am writing this review as payment for a lost bet. As it happens, John was absolutely correct about Apple’s stock! Looking over the past few months, Apple has actually outperformed the S&P 500 Index by roughly 15% and has been one of the best performing companies in the markets. Was this due to strong iPad sales? That is too much for me to extrapolate — but the news now is that Apple valued higher than Microsoft!

Is Apple Overvalued Here? Was John Chow Just “Lucky?”

It remains my contention that John was the fortunate benefactor of random upward momentum in Apple’s stock. The reason that he expected the stock to trade up was that the iPad sold a lot of units. Despite how many units they sold (which was actually in-line with expectations), it is important to look at how the stock market actually works. Naturally, everyone and their grandmother knows that Apple is “sexy” and that people like their products. The problem here is that investors aren’t dumb — positive sentiment is already factored in.

Apple is a great growth company, but I absolutely hate putting cash to work in stocks that are positively viewed by the market. Why? Think about upside and downside. Assuming that market movements are relatively unpredictable, which I think most of us would agree to, stocks that are “good” will not move up on positive news (they are already assumed to be good) but will get slaughtered on bad news (nobody expects a company like Apple to issue a product recall). On the other hand, stocks that are frowned upon now will do awesome on any piece of good news, while bad news is largely ignored because the company is already seen as being of lower quality so they won’t do too bad.

Looking at the performance of Apple, it is common for stocks to trade up on the expectation and sell on the news — in fact, so popular it is an axiom. This is why Apple always gets killed the day after they release good earnings: they might have been good but everyone saw it coming. The market sees forward 6 months, so trying to profit off of news like the iPad is insane difficult. Did John Chow get lucky? I don’t think so — he knows a lot more about the tech space than me and probably has additional insight into Apple’s products. However, I would think that over the short term my track record would be better. John won this round.

A Smarter Investment Strategy That Makes Sense:
At the very least, I think that it is psychotic that Apple is valued higher than Microsoft… and would embark on a long-term “short Apple, long Microsoft” strategy for investing. This will capture any outperformance of Microsoft in a market-neutral way. My prediction is that growth in Apple will inevitably slow down, no matter how good you think they are. People are currently willing to pay more than 22 times the amount of Apple’s current earnings to own shares (what we call a “P/E ratio”), whereas Microsoft is getting less than 14 times. However, Microsoft generates cash like nobody’s business ($21B last year), and Apple isn’t even close to that good ($12B last year). Stock value is all about cash flow that the business is experiencing. Despite the fact that Apple might gain more cash flow per year over time, they would have to surpass Microsoft’s $21B number in around 6-7 years in order to end up more profitable into perpetuity. To this, I say “fat chance.” In fact, if both companies held their current cash generation rates, Microsoft is worth twice as much as Apple.

My Gift to John Chow

For John’s birthday, and for winning our little bet, I compiled a completely customized portfolio strategy report for him and sent him it in the mail, along with a copy of one of the best investing books out there — “One Up On Wall Street” by Peter Lynch, one of the greatest investors in history. I put some effort into developing this report, and it recommended a portfolio allocation to John based on two things: 1) his personal investment profile (as a technology lover); 2) the market conditions. I recommended weighting his stock portfolio in a certain manner that I feel will outperform the markets, and recommended stocks that I felt are underpriced and worth investing in. I don’t want to reveal the actual report, which was around 5 pages and professionally printed, but here is a screenshot:

The Proof Is In The Pudding

I issue an unofficial email newsletter to friends and family that want stock picks and pans when I see the opportunity. I run what I call “Jim’s Value-Growth Portfolio” privately through ThinkOrSwim.com (my broker). My portfolio to date is actually up a considerable amount — despite the fact that the market is down. I do not short stocks in it, so anyone can get invested and feel comfortable.

The last date I updated my performance was May 2th: My portfolio is up 9.31% and the S&P500 is down 2.64%, an outperformance of about 12%. Here is a chart of my investments versus the market:

To me, it’s all about timing the market and investing in the right industries when it is most prudent — this is why John Chow’s strategy of investing in companies that have a new product that he thinks is cool, is basically heresy to me. And hey, when John wrote “ Oh crap! That was wild market ride! I hoped you picked up some nice stock bargains! I did!” on May 6th, I recommended staying on the sidelines and the broad market is down over 6% since then.

Bottom Line: John Chow won this round of stock picking in the tech space, but I’d still give myself the edge on the broad market. At any rate, I figured this would be a chance to get a few good jabs in on the man. Congratulations John, you’ve proven your mettle in IT stocks.

-Jimvesting Dot Com

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But was my excitement premature!?

One of my readers, Rob from myTTOOS.com, pointed out the following:

Rob: “Really cool, but i bet it will be overseen a lot = bad conversion. Let us know if i am right.”

Jim: “Could be true… but then again I am not trying to spam people like typical marketers, haha”

Rob: “at least put the focus on the chalk board, put a few blinking stars around it or something lol”

Though it sounded silly at first, I started thinking about just how right he was! While I was all concerned with making the new opt-in newsletter box look at good as possible… I made it flow TOO WELL! Therefore, I needed a little something to get people to notice it (though I won’t be putting blinking stars on my header anytime soon, haha). So what did I do? I added a big ol’ floating arrow!

Why Are Floating Objects A Smart Idea?

Just as Rob pointed out, you can have the best idea in the world… but if nobody notices it, than it’s worthless. Adding something to the top of your website that is a bit “out there” can really help to emphasize a particular region of your website, while not detracting from your overall “look” or crowding the rest of your text. When it comes to attention-grabbers, I’d much rather have something that just sits on top so I don’t waste any valuable real-estate.

This is very much like building a house: if you are trying to expand and you run out of acreage on your property… you can still make a bigger house by adding another floor!

How To Add Floating Objects to Your Website or Blog

So how do you actually do it yourself? Let’s walk through the steps that it takes to add a flashy layered/floating image to your website or blog.

1. Get a Transparent Image to Use
I made an image located here, that is just a basic arrow with a ton of photoshop effects laid on top to make it stand out. Remember that you CANNOT have your image be a .jpg, .bmp or any other non-transparent image (unless you want it to look “el horible“). Therefore, I would recommend that you use .png (better quality) or .gif (more of a “standard” format) for your image.

2. Put the Correct Coding Into Your Header (or wherever you want)
The coding works by building a reference off of a certain “div” table in your header. It will float the image relative to the div that you select, so be sure that you put a “div” table somewhere near where you want your image to be floating around.

<div id=”floating_region”>
<a href=”#”><img src=”image.jpg” id=”top_image” /></a>
</div>

As you can see by the code, there are 2 areas that we will also need CSS coding. Let’s first talk through the code! You need to first make a div table (as mentioned earlier) in the region of the website where you would like to add a floating image. Don’t worry, you can move the image around from there… but it always references the div as a “starting point” when you tell it to move “50 pixels to the right” (or whatever you choose). I have called that div table “floating_region.” Next, you need to style the image so that it knows it is floating (I called it id=”top_image”), and put it inside of a linking reference so that it works properly.

3. Update Your Theme’s CSS Styling (in wordpress, it’s “style.css”)
Your CSS should look like this:

#floating_region {
position:relative;
width:___px;  }

#top_image {
position:absolute;
top:50px;
right:20px; }

For “floating region,” you simply need to change width to match the width of the div. In my case, the div was a part of the header, and it was the div that contained a cutout splice of my header “hdr_03.jpg” which is 87 pixels wide. Therefore, mine was “width: 87px;“! The “top image” layer is your graphic, and position should be set as “absolute.” Then, you can simply position it around (using top,right,left,bottom) and messing around with the number values to push/pull your image in different directions.

BOTTOM LINE: Thanks to Rob for recommending I don’t “settle” with what I had… because I believe that it is indeed even better now, and people will actually notice the area of my website when there is a giant red arrow with the word “FREE!” in it. Let me know if you are thinking of doing something similar, and if you  are having problems I’ll try to help!

-Jimvesting

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We’ve got a special today, a sale of one of the websites I am part-owner of!

BullishBankers.com is an established and popular financial research community with a strong subscriber base and pull in the industry. Recently, we had ceased to operate the site as of May 2009… so there has been a period of about 6 months where there has been nothing done to the site. HOWEVER, we believe that despite the recent activity, it will be very easy to revitalize the website and should make for an attractive buying point for any interested buyer.

There are many reasons to consider the website, including (but not limited to):

• Fully customized website, based on WordPress, that has integrated features and custom coding for a financial audience
• vBulletin-based forum, including license, that is custom-skinned to match
• Twitter account (@bullishbankers) with almost 4,000 followers
• Average 37,500 uniques/month (during normal operations, July ’08-May ’09)
• Averaged $700/month, with a peak monthly earnings close to $1,200/month
• Quality partnerships, including theStreet.com, Seeking Alpha and Morningstar
• RSS feed with over 1,750 daily readers
• Aweber newsletter with almost 1,500 subscribers

In addition, we have maintained great Google keyword rankings!

Here are some examples:

• “investing ideas” – #2
• “bullish” – #6
• “stock market ideas” – #8
• “bullish bankers” – #1
• “top stock trends” – #1 (BING)
• “top stock trends” – #9
• “investing ideas” – #4 (BING)
• “top stock market trends 2009″ – #1
• “stock market analysis 2009″ – #1
• “top ten stock” – #8
• “investing in ideas” – #2
• “top stock market” – #3
  *All rankings are from Google (unless otherwise mentioned)

This website is being listed for sale on Flippa.com, which is the merged version of SitePoint.com’s old marketplace. Feel free to check out the listing, and see how we are doing in the first site that I’ve ever sold through an auction service like this one.

Bullish Bankers For Sale on Flippa.com

Stay Bullish on the Net!
-Jimvesting

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With that in mind… I have a little “break in the action” planned for today!

I’ve long been a proponent of traditional pen-and-paper communication, but seeing as how technology has been evolving to the point where I can watch live television on my cellphone… the old school postal service (aka “snail mail”) just seems to be behind the times. Despite numerous attempts to improve one of the oldest American means of transportation, many companies have crashed and burned at the hands of traditionalists like myself. Just recently, however, I’ve discovered a fantastic service that I think can really be a game changer.

Imagine The Possibilities…

Have you ever gotten home from work, or even a vacation, and had a pile of mail dumped at your doorstep? What if you could avoid the stack entirely… and have every one of your mail items digitally scanned for your convenience? Pretty cool! But what if you could also receive a free business mailing address, the ability to recycle your letters or shred your letters, the convenience of forwarding your snail mail to anyone in a 100% secure environment… and get it for just $9.95 a month? That’s living like a king!

What service am I talking about? Mailbox Forwarding, Inc!

Mailbox Forwarding provides a new, innovative service that should be of significant interest to anyone who considers themselves to be an online entrepreneur: the ability to get a professional business address for as low as $9.95/mo and manage all of the paper mail sent to that address the same way you manage your email, from anywhere. The scenario above was picture perfect… but realizing that this can be built into a perfect package for any entrepreneur makes things even sweeter!

MailboxForwarding.com provides remote management of paper mail via an online mail management interface. Users can have their mail sent to a unique box number at the Mailbox Forwarding address, where scanned images of the envelopes will be uploaded to their account and they can choose whether to have the mail opened and scanned, forwarded to them physically, or shredded and destroyed.

Worth The Cost?

Accounts at Mailbox Forwarding start at $9.95/month, but they also offer a few expandable options at comparable rates (all the way to $39.95/month for the top plan). There is no other provider that has the core competency that Mailbox Forwarding, Inc has accomplished, so it wouldn’t have shocked me if they made the service overly expensive. All things considered, however, I feel that having my mail opened for $100-200 a year with the convenience of online access is well worth the cost.

The real deal-breaker here for me is the fact that you get your own unique mailbox at Mailbox Forwarding to have clients sending your mail to. You can do away with being forced to give a personal email address… and get a dirt-cheap mailbox with this awesome scanning/disposal service included for practically no cost. I did some digging through the United States Postal Service (USPS) website, and found that one of the smallest boxes cost $140/year just to rent! Plus, I would have to drive by there anytime I wanted to pick up my mail. Not only is Mailbox Forwarding, Inc. actually cheaper, but they will scan in my mail, take care of my mail in a secure environment, let me view it all online and even shred it when I am done!

Bottom Line: For a business mailbox that is actually cheaper than one from the nation’s mail provider, along with a top-notch scanning/reading/disposing service that would dramatically enhance my offerings as a business owner, Mailbox Forwarding is a service that I personally endorse and would implore you to check out.

-Jimvesting

P.S.: Use coupon code “freemonth” during checkout to get your first month for free!

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Now that we have our corporate strategy set up and organized, we need to talk about the real “nitty gritty” details of how exactly to form your business. Everybody talks about it, but it seems like something that is so difficult to do that many people don’t even try! Not the case. Starting a business on the internet, an eBusiness if you will, is one of the more simple processes out there. All we really need is some legal protection under an LLC or an S-Corporation to start off; then, we should set up some financial agreements to lock in our business security. Let’s get to it!

Limited Liability Corporations (LLC.) and S-Corporations (Inc.)

One of the most daunting tasks in operating an eBusiness online is choosing between the two types of corporate structure: Limited Liability Corporation (LLC.) or S-Corporation (Inc.). There are many similarities and differences between the two… but in the long run, the choice is really based on a business-specific case. In the terms of online businesses, you probably won’t want to try out anything but an LLC or an S-Corp for practical reasons… so let’s stick with the two.

There are many examples of both businesses on the internet, and the differences can sometimes be blurred. When you think about a Limited Liability Corporation or S-Corporation, both function as “pass-through” entities for your business. What this basically means is that any taxation for the business can be “passed-through” to their owner’s income statements for legal purposes. This avoids the problem of double-taxation that you would run into with anything else. For Bullish Bankers, we took the LLC. for flexibility and practicality, and became Bullish Bankers LLC. My friend Tyler Cruz (whom many of you know) chose to get an S-Corp for Merendi Networks because of savings on employment taxes among other things.

The Bottom Line Decision:
I recommend Limited Liability Corporations because they are a lot easier to operate. They do not have to be operated by a board of directors like an S-Corp, and also offer flexibility in profit-sharing and a more lax ownership structure. If you would prefer the rigid and set-in-stone rules that come along with massive employment… go with the S-Corp. If you would rather feel your way through it all with a more allowing structure… go with the LLC. You can read more details in this article if you need more information.

Registering Your Corporation

Now that you have selected between an LLC and an S-Corporation… it’s time to go ahead and actually register your business. How much will this cost? Actually, it is only around $100 to do it yourself. The price will vary by state, but in Maryland (where I registered both of my small businesses) it was just $100 for registration filing for life. Not a bad deal for thousands in potential tax savings, eh?

So here are the two routes:

• Hire a Professional: If you are just too lazy to dig around on your State Department website and do the filing yourself (which is ultra-simple), you can always hire someone and pay them fees to do it for you. Sure, this will run you around $200 (double) for the filing costs and the service charge… but it is also a lot easier. I’d recommend using LegalZoom.com to handle this. I have never used them myself, but have heard only positive remarks toward their service.
• Find the Forms and File: This is really very simple to do, and is just a one-form contract. The best way to do anything nowadays is to search through Google. So search for your “State filing an LLC.” or “State filing an S-Corp” and you should find the documents available no problem. Not a lot is required on these forms, just your name, business name, address and a check for the amount required. They will be called the “Articles of Organization” or “Articles of Incorporation”. For an example, see how easy the form for Maryland is!

Filing with the Internal Revenue Service (IRS)

To save some time, we are going to go ahead and file for an Employee Identification Number (EIN) from the IRS. The reasoning behind this is essentially the same reason why individuals carry Social Security Numbers. This is a number that you will need time and time again, so it is better to get it now and get it over with.

Getting an EIN from the IRS is one of the quickest and easiest steps you will make, despite how daunting it seems. It is completely free, and you can apply for an EIN online and get your EIN number almost instantly via email. Then, just print out the forms to have a physical copy or two. You’ll need the EIN if you sign on as an affiliate for any company or if you need to open a bank account, among other things.

Setting Up a Banking Account

Many banks nowadays emphasize small businesses. Because banks function off of deposits and loans… they actually do want your money. Check out your local banks or nationalized chains and ask them about their banking plans for small businesses. You are going to want a bank with checking… and if you are planning on running a lot of transactions you might want to pay a little extra for the flexibility. I use PNC Bank for my operations through both LLCs that I own.

Once you set up a bank, you will have something to link a PayPal account to if you choose to do this. As an online eBusiness, I trust PayPal to handle most of my transactions. Plus, since this is legally separate from your banking account, you will get as many free transactions as you want! This PayPal-Bank combination is pretty standard nowadays, and it is how a lot of us operate. At the very least, you need that bank account to have checking capabilities so you can pay the bills under your company name.

Protecting your Business with Legality

We’re almost done! We’ve got everything from the company registration (takes a month or two to clear) to a bank account to our Employee ID Number from the IRS. All we need at this point, is a few second checks against any potential liability issues that might arise. I would recommend getting together a Privacy Policy and a Terms of Service for every website that you administer under your eBusiness. We need a way to ensure that nothing goes wrong… and if something does, you are protected against it. Writing a Privacy Policy and Terms of Service can be a time-drawn process, but it is well worth it in the long run. You can take a look at the Privacy Policy and Terms of Service from Bullish Bankers LLC. if you need an example of how to correctly write one of these to cover your bases.

Second to the online forms to secure your liability downside, if you are working with partners you should draw up a charter. This is just a simple document that you can write yourself delegating tasks and the corporate structure. We’ll call this a Manager’s Agreement. One thing about the law that many don’t understand, is that you can effectively write anything yourself and have people sign it to be legally bound… so long as they are fully aware of what they are signing and consent to the terms. Get in Microsoft Word and write up a clause… perhaps delegating who is the CEO and who is the HR Representative… perhaps talking about ownership, who owns what % of the business… or even talking about your voting process. You should always draft something like this and have it signed early if you are running a corporation to have everything set before you hit the ground running.

Bottom Line:
Whew! That’s a lot of paperwork, eh? Hopefully, after reading through this two-parter… you realize that starting your own business really isn’t too much work when it all comes down to it. After all, once you get past the initial set up, your business will carry a considerable amount of added weight, and people will downright trust you more. An added bonus to all of this is that you no longer have full liability for loss because of your filing with the government. I’d say it’s a good idea overall.

Hope you enjoyed this lesson on forming your first eBusiness. Feel free to contact me with any questions, or just drop a comment. Oh, and stay bullish on the net!
-Jimvesting

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1. Forming Your Own eBusiness – Part One: The Basics of Starting an Online Business
2. How to Make Your Own GPT Website: Getting The Wheels in Motion
3. Make Your Own Incentive Website: Building a GPT Website & Growing Your Business

There are many ways to start thinking about running your own business… and being a business owner is something that will become increasingly popular as the years go by. As the owner of two small businesses, I have been through the process myself, and I would like to help YOU do the same! Don’t let anyone tell you that running a business is difficult, you just need to know where to go and how to organize yourself. Let’s start in with the basics, and then in part two we will cover more specific goals and structure.

Forming an Idea that Works

If you are looking to start a business, what’s the first thing you will need. That’s right… a business idea! It sounds a bit funny, or even a bit obvious, but solidifying your idea will probably be the biggest step you will have to take. As an example, I am going to use Bullish Bankers… which is an online financial research community that I formed with some friends from Penn State University.

It’s one thing to say “okay, I am going to start a financial business online“… but it is entirely different to lay out exactly what you will be doing. Obviously, the point of owning a company is to make money (assuming you are for-profit). Therefore, you will need to first consider your competitive advantage. What do you have to bring to the table? If you are planning on going in direct competition (i.e. doing the exact same thing as another business), you better be more experienced and able than your peer to be able to win. I would prefer to be in a niche like financial services, but have some kind of spin that makes my business unique. That is what we did with Bullish Bankers LLC., and it has worked thus far!

When you are brainstorming your business idea, don’t think solely about what you are doing… make sure that you can be profitable in your space, and that you have some kind of edge over your competition (whether that be uniqueness or execution skills).

What Kind of Business is It?

When thinking about eBusiness, one has to understand that being an “online business” isn’t a classification. In fact, now that so many companies are moving to internet-based revenue streams… it is essential that you understand where you are on the map. Additionally, if you are a business owner… you will need to be able to quickly identify to potential partners, employees and clients exactly what business you are in. For example, if you walk into a bank for a new account and tell them you are an “internet” business… they are going to want more information.

Furthermore, it is important to have a classification for what you do for your own sake. Too many people come up with business plans and think that they can do everything at once. If you are going to focus on selling cars, don’t also try to offer marketing services. Not only will your business industry give your clients a better idea of what exactly you do, but it will help you to keep from over-extending yourself. Staying with your niche industry is always the best way to form and operate a profitable business… don’t try to do too much at once.

Naming Your Business

Coming up with a name for your business is a very important part of your new online venture… but it shouldn’t be a deal breaker if somebody has already chosen the name that you wanted. That being said, I would have to say that the name your company carries will be important in lending authority to your name. I would suggest sitting down with a pen and a notebook to jot down ideas as they come to you. Go ahead and take an hour to come up with some interesting ideas, then pick your favorites. I would suggest using some “trigger” word that would immediately attach the name of your business to what you do. For example, when we selected “Bullish Bankers”… that is a name that immediately brings up the thought of Finance to people in the industry, so it is much easier to get your foot in the door.

Checking to see if your name is available can be a bit tricky. The problem here is the you register your corporation with the State department where you reside… so you will need to check with the State to see if your business name is available. This can be solved relatively easily with a search through Google for something like “California business name availability search.” Try out some combinations, or simply call your State department to figure out if you are in the clear or not.

Recruiting Partners and Stakeholders

Alright, so by now we have the idea, the name and the general business strategy set in stone. All we need right now is a helping hand. Sure, you can opt for what is known as a “sole proprietorship” and go it alone. In this case, ignore this section entirely. However, I would actually recommend that you enter into some kind of partnership among people you know, and people that are interested in the business. We will discuss the actual contractual part in the next part to get things legalized… but for now you should consider recruiting a few partners or private investors that are interested in the success of your idea. Nothing jump-starts a business like a little buying interest to keep you motivated to succeed!

Okay, so we’ve covered the thought-process behind launching your own eBusiness. Now that we have everything in place and ready to go… let’s turn to the second half of this report and start considering how to actually file and register all of your ideas legally. It is important to have everything ready to go before you start… which is a big reason behind why I laid out this “idea machine” technique before actually talking about registering your business.

Do you have that million dollar idea? If so… let’s figure out exactly how to get up and running. Check out part two of this series on forming your own eBusiness, and we’ll continue this lesson to the point where you can legally operate as a business!

-Jimvesting

Related posts:

1. Forming Your Own eBusiness – Part Two: How to Register and Set Up Your Business
2. Why Keeping an Idea List is the Best Move You'll Ever Make as a Blogger
3. FOR SALE: BullishBankers.com (Finance, Stocks) – $9k/yr Profit, 38k/mo. Uniques