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Q & A (Archive)

Week of June 22th

This weeks question is another great one :)

Question :

My collaborator and I both have our own corporations and we are starting this small business together as equal partners, how should we handle this? We will be jointly establishing more than one internet business project together and each project will be distinct yet share some software programming (similar to product divisions I imagine). Should we use one corporation or both or form a new entity or a sub-entity? Thanks so much Shannon!


In response to your question . . . be extremely careful with using only one of your existing (individually owned) business to “own” the projects.  This could make things really complicated/messy if you had to “break-up.”  I would keep those as individually owned for right now while you are in the “dating phase”.  That way, if you had to end the relationship, your individually owned companies would stay in tact.

The structure that will give you the most “protection” is also the most expensive because it involves setting up multiple companies.  Go figure!  That would be setting up a holding company (which could be owned by your company and her company 50/50).  Then that holding company would set up subsidiaries (additional companies) to own/house each project.  The shared software that you mention could be owned by the holding company and the subsidiaries would pay the holding companies a licensing fee for the use of this software.  Attached is a graphic depiction of this structure.

Another route (less protection) you could set up one company (owned by your company and her company) and have all of the projects housed there.  The problem with this structure is that one project’s debts/liabilities could be used to bring down another profitable/successful project.  Of course, you could start with this structure and as you started getting revenues you could then form the subsidiaries.  This would give you legal protection for all new issues, but not for those that arose while all the projects were housed under one company (roof).

Finally, you could form a joint venture between your company and her company.  This is the cheapest route because you don’t have to file anything with the state to start the business.  You would set up a joint venture agreement internally between the two companies.  But, you have even less protection with this route because now the debt/liabilities of one project can not only be used against another profitable/successful project, but they can also be used against the assets in your individually owned companies.

So you have some choices/decisions to make.  I hope this is helpful.

Week of June 15th

This weeks series of questions comes from my recent Health and Finance Presentation at the Power To End Stroke Gala and Breakout Sessions June 13th 2009. (


Is there special insurance for strokes and other illnesses like there is for cancer? Also, is a “cancer policy” a smart choice? Finally, if one of my parents should have a stroke, how can I make sure their rehabilitation or possible stay in a nursing home is covered?


Yes, these policies typically cover several critical illnesses, including stokes. These policies can be a great choice to help with living expenses while you are unable to work.  They also can be used to cover costs related to rehabilitation and nursing home costs.


Is it possible to shelter an elders’ assets to prevent liquidation for nursing home.  Is this legal?


Yes, it is possible to transfer assets to a relative in a perfectly legal manner, subject to several restrictions.  For example, there is a 5 yr look-back rule that may include these assets in the elder’s total assets for purposes of calculating Medicaid eligibility.


What are the tax & financial impact/ implications of taking a 401k hardship withdrawal after someone has a stroke?


You can take a 401k Hardship Withdrawal for your medical expenses.  Typically, the 10% penalty for early withdrawals will be waived but you will still have to pay income taxes.  But once you take this money out, you can’t put it back in and thus you lose for life the tax advantage on these funds.


After my mother suffered a major illness, she was disabled and unable work.  Also social security did not provide her with enough money to pay her regular everyday bills. My question is how does someone like my mother afford to be able to pay her normal everyday bills?


You should first help your mother do a spending plan (a budget) with her current monthly income and expenses.  This will help to set priorities and make the needed changes to reduce her expenses (such as cutting prescription, medical, food, and housing costs). This will also highlight creditors that you may contact about making new/smaller payment plans.

Week of June 8th

Do you have a question to ask me? Well what are you waiting for? Post a comment or email me at

This weeks question is from Portia . . .


I am starting a small internet business and I want to involve a few people initially to contribute their talents with the thought of (possible) future success paying off their efforts eventually by way of sharing a percentage of ad revenues. I am contemplating different possible ways of doing this and wondered if there are any examples of this kind of arrangement/agreement that have worked in the past? I want to have a very clear and well thought out agreement, but I am not actually employing them in the sense of paying wages for services – it’s more like a barter. Would it be legal to give them a percentage of advertising revenue in exchange for services and if I did this could I create an ‘out’ after a period of time in case the agreement wasn’t working out? Are there any precedents for this kind of arrangement? I’d be very appreciative to hear your thoughts and ideas about this. Thanks! -Portia


Hi Portia,
Great question.  First, I want to wish you much success in starting your Internet business.  Given the state of this economy, it’s great to see people taking control of their own destiny!  I know you will do well.

Yes, it is absolutely legal to do what you suggest and you are extremely smart and savvy to know that this MUST be documented BEFORE you actually start using their services.  As a starting point this arrangement/agreement would be a mix of an Advertising Sharing Agreement (or Ad Revenue Sharing Agreement) and Services Agreement.  But I wouldn’t get caught up in the “name” of the contract.

Instead, you need a contract that spells out in plain English all the terms that you have described.  Clauses and language that you will particularly need to focus on include:

Independent Contractor Clause
– Spell out that you aren’t employing them.  That they will be considered as independent contractors/service providers.  This means they will be responsible for all of their own taxes, insurance, benefits, etc.

–  How long do you want the agreement to last? 1 yr? 2 yrs? Make sure this is very clear.  Also, devise an “out” that lets you terminate the agreement for “cause” (i.e., they aren’t performing well, haven’t provided services to you in 60 days, etc) and for “without cause” (meaning just because you feel like it) by you giving them the proper written notice (10 business days, 30 business days, etc) that you are ending the contract.  Finally, if you owe them money at the time you are ending the contract, make sure to provide that they will be paid these amounts within a reasonable time frame (30 days) after ending the contract.

Ad Sharing Revenue
Detail how much they will share in the advertising revenue.  Include the timing of when you will make this calculation of their share of the revenue (i.e., weekly, monthly, quarterly) and how soon after that you will actually pay them (i.e., immediately, 7 business days, etc).  It’s key here that you come up with a system that gives you the time to do the proper accounting/bookkeeping.  Finally, you might want to consider adding in a minimum payout requirement – basically you won’t pay them money until this share reaches an aggregate amount of $50 or $100.  This will help you to avoid having to cut checks for $2.50 each week!

–  Make it clear that you are the owner of all of the content of the Intenet business/website.

Services –  A real clear description of what they are providing in exchange for a share of the advertisement revenue.

Standard Clause – Include the standard clause such as: Confidentiality, Indemnity, Arbitration.


I also highly recommend that you set up an LLC (limited liability company) for your internet business and that you then have the agreement be between your LLC and the service provider (or his/her company)

Of course, we would love to help you and we offer very reasonable flat rate packages to help set up your business and draft/review your agreements!
Good luck!


From Portia

Hi Shannon-

Wow, thanks so much for this extremely helpful and well-researched answer! This was really useful information for us and included several important things we had not considered. I have one more question which is this: my collaborator and I both have our own corporations and we are starting this small business together as equal partners, how should we handle this? We will be jointly establishing more than one internet business project together and each project will be distinct yet share some software programming (similar to product divisions I imagine). Should we use one corporation or both or form a new entity or a sub-entity? Since I am asking you so many questions – please send me your package deal quote! Thanks so much Shannon! -Portia

From Don

After getting licensing ,IRS tax I.D.,and setting up product info,ect. What is the best way to approach opening a small business with little to no funds.Basically, how do I go about getting a grant or free government monies for the small business owner.What would also being better approaches to pulling in the business without spending tons of money on advertisement since I am small?

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