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Building a Company: Partnerships, Incorporation, and Employee Stock Plans
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Hide Text TranscriptMARIA GIUDICE: Prior to having this corporation, Hot Studio, I had a partnership for four years. But my experience was challenging, because I had a partnership where my partner was equal in my skill set. And when you have a partnership of two, who breaks the tie? And so what I’ve found in a partnership that it can actually get in the way of progress, especially when you are partnered with somebody with exact same skill sets. And therefore when the partnership ended, I vowed that I would never be in a partnership again, for that reason. That said, I have many colleagues who are in partnerships, and I think the best way a partnership can work is if the partners are very, very clear on the skill sets they can do and that take ownership. But at the end of the day there still has to be one person who is the decision maker, and that’s really worth it, to make sure that there’s progress in the business. And so when people come to me for advice, especially when they are thinking about partnerships, I give them that kind of advice.
AVOID LIABILITY: INCORPORATEMARIA GIUDICE: Hot Studio incorporated in 1999. Hot Studio was founded in 1997, so I started out as sole proprietor, because it was just me. And I have two great advisors that I treasure to this day: my accountant and my lawyer. And my accountant, who used to do my personal taxes, looked at what I was making every year and said, “Maria, you have outgrown me. You need incorporate, and you need to go to this accountant.” So I went to the accountant that he recommended and the accountant, “Yes, based on the amount of money that you are bringing in, you need to incorporate . . . to protect. . . not only from a tax benefit, but also for a liability benefit. So that’s why I incorporated, I just took the advice of my accountant, and to this day they are my trusted advisors.
SET UP AN EMPLOYEE STOCK PLANRAJAN DEV: So, the employee stock option plan was one of our tools for aligning everybody’s incentives as employees, as we are a service business, with our net results, and our goals for our company.
(voiceover continues) Creating an ESOP -Understanding underlying reasons -Establish Clear Goals -Consult with Outside ExpertsFor people that are thinking about an ESOP plan, is one, why are you doing it; two, are you clear on your goals; and then three, do you have folks outside of the business to make sure that you’ve covered all of your bases and that this is something that’s going to have a long-term life. What we did was consulted with a number of our ongoing advisors, but what they did was really provide a balanced external point of view around the goals of the plan. Then the next step after we did that was to actually write the plan, which was done within the legal framework our attorney helped us with. Once we completed that, then the last step was really then a step of finalization, everybody looking at it, and then rolling out to employees.
