Asatte Press, Inc. is Setup

Asatte Press, Inc. Logo

Asatte Press, Inc. is up and running!  Tomoko and I filed all the paperwork and opened the bank account for our new company last week.  Asatte Press will be producing books, e-books, software and a variety of small promotional products. Martinis will be an area of special focus.  It will be a few more weeks before our website is running, but all of the other formalities are basically complete.

Tomoko has already designed a nice logo for us.

So, what exactly does it take to get going? In the ongoing “Step off the Cliff” spirit, allow me to provide some feedback on what we have actually done so far.

First the Fundamental Assumptions

There are thousands of variations in how one could go about setting up a company.  In our case, some key assumptions simplify the picture considerably:

  1. This will be a high-tech company. This assumption is more about the business style, atmosphere, employee relations and approach to solving problems. Asatte Press is going to be a software development company that happens to produce books, not a traditional book company that feels that it somehow has to produce some software.
  2. We are planning for success. While we don’t need or even want to be the next Facebook, we do want to grow into a company of at least a few hundred employees and tens or even hundreds of millions of dollars of revenue.  That is, we need an organizational form that will scale to a larger size and eventually allow for additional investors, employee financial incentives and so on.
  3. We are not doing squirrelly weird stuff.  Transparency and honesty is a key point. No Bermuda offshore, upside-down, cheat-on-taxes, contorted lawyer fantasies. We intend to build our business and make money the old-fashioned way: by providing attractive products and services. We will not be trying to make money by playing games by less-than-transparent financial arrangements and organizational structures.
  4. We are going to pay our taxes. We are not Leona Helmsley.  Asatte Press will not be engaging in oddball maneuvers or accounting slight-of-hand to avoid paying its fair share of taxes.
  5. We are the investors.  We will not be using Secret-Handshake-Society private equity funds. No venture capital. No ethically challenged Wall Street financiers. (We don’t anticipate working with Goldman Sachs any time soon)

Working through the assumptions above, it becomes clear that what we want is a normal corporation.

  1. What about a Delaware Corporation? The primary advantage of the Delaware Corporations apparently lies in laws that are very convenient for proxy takeover fights and other pleasant pass times of the Secret-Handshake-Society crowd.  Such laws will not benefit us. Furthermore, since we actually operate in Texas, we would have to file for foreign corporation status and business permits locally, in effect doubling our paperwork overhead and fees.
  2. What about a LLC?  LLCs have certain legitimate purposes for operations such as law firms that primarily do professional services.  Given that most legislators are lawyers, there is a certain tendency for them to write laws tat are advantageous for law firms. About ten years ago, such laws conferred some big tax advantages on LLCs. There was a big scramble as many enormous companies that really had no legitimate reason to be a LLC restructured to make themselves a LLC holding company with a large subsidiary containing the actual business. We are not interested in playing this sort of game.
  3. What about a S-Corp? This is a better question and we may elect S-Corp status at some point. However, S-Corp is actually just a status for the tax purposes.  There isn’t any difference in how one goes about setting up the business entity at the state level. Furthermore, the excellent books from Nolo Press mentioned below point out that S-Corp status is actually only an advantage if you have significant other income and you want to pass through business losses from your corporation to offset that separate income stream. We don’t have any such separate income stream at this point.

Thus, the best form for us turns out to be the plain old, ordinary Texas corporation and that is what we have set Asatte Press, Inc. up to be.

Here is an overview diagram of our experience with the early steps of setting up Asatte Press, Inc. as a Texas corporation:

The Bank Account is Key

Overview of Setting Up a Texas Corporation

 

Get Ready – the Early Phases Step-by-Step

The first thing one needs is a good guidebook. I highly recommend “Incorporate Your Business, A Legal Guide to Forming a Corporation in Your State” from Nolo Press.

This book is excellent and covers most of the different possible variations and also the differences from state to state.

Background Study

Background investigation is important. You need to have a clear concept for your business and there is a large variety of diverse detail that has to be mastered. For the mid-career guy who is stepping off the cliff, the change is dramatic. The difference is best described by defining the difference between a specialist and a generalist.

  • The Specialist – is a person who starts off knowing a lot about a little and continues to narrow and enhance his knowledge until he knows absolutely everything about nothing.
  • The Generalist – is a person who starts off knowing a lot about a little and continues to expand and broaden his knowledge until he knows absolutely nothing about everything.

Up there on the top of the cliff in large company land, you were almost certainly a specialist. Large companies love specialists; they are so easy to sort into nice little pigeonholes. Once you step off the cliff and are plummeting towards the rocks below, you will discover that you need to rapidly metamorphose from Specialist into Generalist.

We have spent about $900 to date on books. By the way, we order books from Amazon (even though we think their stance on sales tax is undermining local government and not a good idea) because Amazon Marketplace provides a very efficient way to obtain used copies of almost anything. We don’t care if the dog chewed on the book for a few days – as long as we can still read it, the book is good enough for us.

If you don’t like reading or can’t deal with a fire hose of information, don’t step off the cliff. That is, there are any number of new private clinics that will provide lobotomies at cut-rate prices. Sign up. Get the lobotomy. Learn to love Big Brother. Stay with the big company.

Pick a Name

This step is the hardest step in the process. It is complicated. However, one step can simply the process immensely: Marry an intelligent Japanese woman and let her pick the name

Our name “Asatte” is a Japanese word that means “The Day After Tomorrow” and is written in Japanese as 明後日。Needless to say, this name did not come from my brain. (I have a congenital defect that makes it difficult for me to think of things like this that are polite)

After you have some candidate names, the next step is fairly obvious: use Google to see if anyone is using the name yet. If someone else is obviously using the name, think of another name.

Once you have a name that seems to be available, the hard part starts. You will need to systematically check to see if it is a good candidate for trademark protection. At this point, you should order the book Trademark, Legal Care for Your Business & Product Name from Nolo Press.

The challenge and difficulty of deciding whether the name you have chosen is going to work from a trademark point of view seems to arise from some sort international treaty ratified by all major countries in the 19th century guaranteeing full employment for intellectual property lawyers worldwide.  That is, we seem to have broad international agreement that trademark infringement or ownership should not be determined by whether a competing mark is identical, but rather whether the competing mark is “Similar” or “Reminds you off” or “Could cause confusion in the public’s mind”. This lawyer-friendly arrangement means that it is basically impossible to ever get a clear answer as to whether any given proposed trademark is actually safe and acceptable or not.

In our case, we algorithmically generated 64 permutations of the word “Asatte”, checked all these on Google, checked them all against the United States Patent and Trademark Office’s database and checked them for registered internet domains using the WHOIS database.

Finally, we paid $300 to do a search on Thomson Reuter’s SAEGIS database as recommended in the Nolo Press book.

Register – Sign Up the Corporation

The next three steps should be done in rapid succession, ideally on the same day or even during the same hour. The reason for speed is that as soon as you start entering anything into the state databases, the entire world can see it.

In our case, we reserved the name “Asatte Press, Inc” with the Texas Secretary of State on a Thursday with the thought that it was better to put a hold on it while we worked out the details. In retrospect, I don’t recommend this approach because on Monday we received our first piece of advertising mail addressed to Asatte Press, Inc. – even though we had not finished setting it up yet.  Needless to say, we scrambled to finish the rest of the steps that afternoon. We were lucky and did not have any actual problems.  However, there was nothing that would have prevented an internet troll from grabbing our domain name in the interim.

The corporate registration in Texas was remarkably simple and we were able to do it entirely online with the Texas SOSDirect web site of the Texas Secretary of State.

We filled out a simple online form, paid the $300 fee using our credit card and had our certificate of formation in a ZIP file attached to an e-mail by the end of the next business day.

Reserve Domain

As soon as you click submit to register the corporation, you should move immediately to reserving your domain name. If you have already decided to use a certain hosting service for your web site, that hosting service will probably register your domain name for free.

In our case, I wanted the domain name registration to be ours, free, clear and independent of the hosting service.  The main registrar for the United States seems to be Network Solutions.

As shown in the diagram above, we ended up spending $250. The web site is showing $19.99 domain registration. Why did it cost so much?

  1. The $19.99 price is for a “*.co” domain, not a “*.com” domain.
  2. As soon as you ask it to register XYZ.com, the website points out that you really should register XYZ.net, XYZ.org, and XYZ.us  as well. There is a certain logic to this argument.  I signed up for a total of five domains.
  3. Next the website asks if you really want your personal home address and telephone number listed in the international WHOIS database where every Russian Mafia programmer, Nigerian scam artist, and Goldman Sachs telemarketing rep can look see it. For a mere $9.99 per domain, they will serve as a proxy for you in terms of WHOIS registration. I signed up for this.
  4. Great! Now I will just sign up for the first year… at which point the website points out that search engines will spot such short-timer registration and downgrade the search engine ranking. I signed up for 5 years for our main domain and 3 years for the alternates.

Funny how $19.99 became $250 by the time the smoke had cleared.

Employer ID Number

Actually, this step is not as sensitive as the previous two. However, you are going to need your employer identification number from the Internal Revenue Service before you can do anything else. You might as well sign up for it right away. Again, this application can be submitted on line in a few minutes at the IRS EIN Online website.

Before you register for an EIN, you will need to decide on your fiscal year. Asatte Press, Inc. will have a fiscal year that starts in July and ends in June the following year.  Why did I sign up for a non-calendar fiscal year?

Well, one answer is that it fits nicely with the month we happen to be setting up the company. However, that is not actually the real answer. I had already picked this fiscal year months ago.  The reason I picked this fiscal year is to strategically place the “end of the year panic” at a time that does not crush employee family holidays. Over the years I have watched too many needless and stupid “March of Death” projects get scheduled in December – when everyone really wants to be working less and spending more time with their families and children – merely because it was the end of the year and this, that or the other executive wanted to have a few extra brownie points for his or her annual performance review. At Asatte Press we intend to be a bit more thoughtful about setting up structurally to avoid these sorts of problems.

Setup the Money

Bank Account

With your certificate of formation and your EIN you are ready to setup a business checking account for your company.  Since we do our personal banking with Bank of America, we decided to use them for the Asatte Press checking account as well.  By looking carefully at their web site offerings, I was able to identify a “Business Economy” checking account that is free as long as you stay within some reasonable usage guidelines.

We went down to our local bank branch where a very nice business-banking specialist set everything up for us in about 45 minutes.

The creation of your corporate checking account is an important milestone. All the expenses up to this point come out of your personal account. These expenses are really your hobby expenses and irrelevant from the point of view of the accounting and taxes of your new corporation. Only after you have a proper checking account for your corporation can you start spending “on the record” money.

Credit Card

In principle, once you have the checking account you are ready to go. In practice, you will want to have a credit card attached to that account for most realistic expenses. Writing checks is an expensive and cumbersome way of doing things these days.

Again, after looking carefully at Bank of America’s credit card offerings, one was a very basic VISA card with no fees or charges as long as you pay off the bill every month. The business-banking specialist set up two such VISA cards for us during the same 45 minutes.

Finish Up the Details / Everything Else

Now you are ready to really get going on setting up your business. There are dozens of other little details that will need to be handled before you are really up and running. Some of these details are problems or ordering things such as letterhead, web site hosting, a corporate binder, and so on. Others are procedural such as having the initial director’s meeting, adopting bylaws and so on. We will be working on these activities during the next few weeks.

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