Startup Law 101 Series

What Is Restricted Stock?

Restricted stock is the main mechanism by which a founding team will make sure that its members earn their sweat equity. Being fundamental to startups, it is worth understanding. Let’s see what it is.

Restricted stock is stock that is owned but can be forfeited if a founder leaves a company before it has vested.

The startup will typically grant such stock to a founder and retain the right to buy it back at cost if the service relationship between the company and the founder should end. This arrangement can be used whether the founder is an employee or contractor in relation to services performed.

With a typical restricted stock grant, if a founder pays $.001 per share for restricted stock, the company can buy it back at $.001 per share.

But not forever.

The buy-back right lapses progressively over time.

For example, Founder A is granted 1 million shares of restricted stock at $.001 per share, or $1,000 total, with the startup retaining a buy-back right at $.001 per share that lapses as to 1/48th of the shares for every month of Founder A’s service tenure. The buy-back right initially applies to 100% of the shares made in the grant. If Founder A ceased working for the startup the day after getting the grant, the startup could buy all the stock back at $.001 per share, or $1,000 total. After one month of service by Founder A, the buy-back right would lapse as to 1/48th of the shares (i.e., as to 20,833 shares). If Founder A left at that time, the company could buy back all but the 20,833 vested shares. And so on with each month of service tenure until the 1 million shares are fully vested at the end of 48 months of service.

In technical legal terms, this is not strictly the same as “vesting.” Technically, the stock is owned but can be forfeited by what is called a “repurchase option” held by the company.

The repurchase option can be triggered by any event that causes the service relationship between the founder and the company to end. The founder might be fired. Or quit. Or be forced to quit. Or die. Whatever the cause (depending, of course, on the wording of the stock purchase agreement), the startup can normally exercise its option to buy back any shares that are unvested as of the date of termination.

When stock tied to a continuing service relationship can potentially be forfeited in this manner, an 83(b) election normally needs to be filed to avoid adverse tax consequences down the road for the founder.

How Is Restricted Stock Used in a Startup?

We have been using the term “founder” to refer to the recipient of restricted stock. Such stock grants can be made to any person, whether or not a founder. Normally, startups reserve such grants for founders and very key people. Why? Because anyone who gets restricted stock (in contrast to a stock option grant) immediately becomes a shareholder and has all the rights of a shareholder. Startups should not be too loose about giving people this status.

Restricted stock usually makes no sense for a solo founder unless a team will shortly be brought in.

For a team of founders, though, it is the rule as to which there are only occasional exceptions.

Even if founders do not use restricted stock, VCs will impose vesting on them at first funding, perhaps not as to all their stock but as to most. Investors can’t legally force this on founders but will insist on it as a condition to funding. If founders bypass the VCs, this of course is not an issue.

Restricted stock can be used as to some founders and not others. There is no legal rule that says each founder must have the same vesting requirements. One can be granted stock without restrictions of any kind (100% vested), another can be granted stock that is, say, 20% immediately vested with the remaining 80% subject to vesting, and so on. All this is negotiable among founders.

Vesting need not necessarily be over a 4-year period. It can be 2, 3, 5, or any other number that makes sense to the founders.

The rate of vesting can vary as well. It can be monthly, quarterly, annually, or any other increment. Annual vesting for founders is comparatively rare as most founders will not want a one-year delay between vesting points as they build value in the company. In this sense, restricted stock grants differ significantly from stock option grants, which often have longer vesting gaps or initial “cliffs.” But, again, this is all negotiable and arrangements will vary.

Founders can also attempt to negotiate acceleration provisions if termination of their service relationship is without cause or if they resign for good reason. If they do include such clauses in their documentation, “cause” normally should be defined to apply to reasonable cases where a founder is not performing proper duties. Otherwise, it becomes nearly impossible to get rid of a non-performing founder without running the risk of a lawsuit.

All service relationships in a startup context should normally be terminable at will, whether or not a no-cause termination triggers a stock acceleration.

VCs will normally resist acceleration provisions. If they agree to them in any form, it will likely be in a narrower form than founders would prefer, as for example by saying that a founder will get accelerated vesting only if a founder is fired within a stated period after a change of control (“double-trigger” acceleration).

Restricted stock is normally used by startups organized as corporations. It can be done via “restricted units” in an LLC membership context but this is more unusual. The LLC is an excellent vehicle for many small company purposes, and also for startups in the right cases, but tends to be a clumsy vehicle for handling the rights of a founding team that wants to put strings on equity grants. It can be done in an LLC but only by injecting into them the very complexity that most people who flock to an LLC seek to avoid. If it is going to be complex anyway, it is normally best to use the corporate format.

Conclusion

All in all, restricted stock is a valuable tool for startups to use in setting up important founder incentives. Founders should use this tool wisely under the guidance of a good business lawyer.

http://www.youtube.com/watch?v=0FRms-swVuQ

The Seven Most Traded Currencies In FOREX.

Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the “margin”. You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD – The US Dollar

EUR – The currency of the European Union “EURO”

GBP – The British Pound

JPN – The Japanese Yen

CHF – The Swiss Franc

AUD – The Australian Dollar

CAD – The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar

“Euro”

USD/JPY US Dollar / Japanese Yen

“Dollar Yen”

GBP/USD British Pound / US Dollar

“Cable”

USD/CAD US Dollar / Canadian Dollar

“Dollar Canada”

AUD/USD Australian Dollar/US Dollar

“Aussie Dollar”

USD/CHF US Dollar / Swiss Franc

“Swissy”

EUR/JPY Euro / Japanese Yen

“Euro Yen”

The listed currency pairs above look like a fraction. The numerator (top of the fraction or “left” of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or “right” of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you’re in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.

So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

[http://www.1-forex.com]

The Four Types Of OSHA Workplace Violations

OSHA stands for Occupational Safety and Health Administration, an organization that is responsible for enforcing health and safety regulations in workplace environments. Employers, employees, and manufacturers are all obligated to follow the OSHA guidelines and support safety in the workplace. These regulations are set in place to maintain safe workplace environments and prevent serious injuries and fatalities. Workplace accidents can range in severity, from minor wounds to serious life-long injuries or even death. People can lose their lives, their loved ones, or their ability to work or perform naturally in everyday tasks. For this reason, it is important to support the OSHA regulations and do your part to protect yourself and other by maintaining proper safety standards at work. Continue reading to learn more about OSHA regulations and the four types of violations companies face if they are not up to code.

OSHA Violations

There are four distinct types of violations a workplace can be assigned by an OSHA inspector: Willful, Serious, Repeated, and Other-Than-Serious. All four of these violations range in severity, but should equally be avoided at all costs. Willful violations are assigned when known OSHA regulations are consciously ignored. Although the discretion was known about, no one took action to remedy the problem. This would call for a Willful OSHA violation.

Serious violations are any workplace hazards that have the potential to cause serious or fatal injuries and accidents. Repeated violations are given when a workplace is guilty of the same violation more than once or on a repetitive timetable. And for all other workplace hazards, OSHA inspectors will assign Other-Than-Serious violations if they are capable of impacting the safety of the workplace, but not likely to cause serious injury or death.

It is common for employers to display OSHA regulation posters throughout the workplace to notify employees of their OSHA obligations and workplace safety rights. These posters will have information regarding workplace safety, OSHA requirements, and instructions for notifying superiors about workplace safety concerns.

Common Workplace Safety Hazards

There is a list of the most frequently violated OSHA requirements that are important to know so that you can prevent them as an employee or employer. The most common hazards that OSHA inspectors have to cite workplaces for the following:

Protection Against Falling

Many workplaces or vocations require working at elevated spaces, like construction workers and painters. For this reason, companies are required by OSHA to provide fall protection for employees working at heights greater than 6 feet. Employees that work above dangerous machinery must always have fall protection, no matter how high or low they are.

Scaffolding

On the subject of heights and fall protection, another common violation construction companies get cited for involves the safety of scaffolding. On top of fall protection, scaffolding must also comply with weight capacity and several other safety features.

Ladders

Continuing our discussion of fall protection and proper weight capacity, ladders are also commonly in violation with OSHA requirements. Not only must workplace ladders be able to support a certain amount of weight, they must also be safely designed in terms of cleats, rungs, and steps.

Machines

In factories or workplaces that use heavy machinery, OSHA requires that any dangerous moving part in a machine must be guarded with a shield or enclosure. This of course prevents burns, lost appendages, amputation, blindness, and other serious injuries.

Industrial Trucks

Things like forklifts, dozers, tractors, and other industrial trucks powered by an electrical motor or internal combustion engine must always be in compliance with OSHA requirements. These include fire safety and protection, maintenance safety measures, and more.


Startup Financing For Small Businesses

Startup financing for small business is necessary and hard to acquire.  Financing the startup of a business is a particular challenge during tough economic times, as small business startups need money when money for starting up is hard to find.  During these challenging economic times, it is difficult to obtain startup financing from traditional business financing sources; particularly for small businesses, which are considered a high risk for business failure.

However, fueled by a growing unemployment issue (caused by shrinking businesses and lay-offs), individuals are following their dreams and opening a small business.  If their business idea is perceived to be very strong and if they have a unique product or service with a good strategic plan, they might be able to get traditional business start up loans. If there is a perception of risk, those entrepreneurs need to find an alternative method of raising startup funds.

Traditional business financing includes commercial lending organizations, banks and government financial programs. These organizations provide loan products, operating lines of credit, equipment leasing and asset financing, and more. But, due to current global financial market conditions, it can be challenging to qualify for this startup financing ( lending criteria has tightened as most traditional lending institutions want a high level of security and low risk) and it can also be challenging to get cash-strapped lending institutions to disperse business start up loans, asset financing, or operating funds promised.

One alternative to traditional financing is to see if you can interest an Angel investor in providing an investment in your business.  Angel investors typically charge higher interest rates and are in for a short term period; they want an exit strategy within a specified period of time (therefore they will want their money back, with interest, quickly). Angel investors are often interested in the high tech or biotech industries; or other high reward (and also high risk) industries.  To attract Angel investors, your business needs to have strong and fast growth potential, a talented management team, a compelling business plan, and well priced equity. Angel investors usually look for up to 50 percent equity in the business; this is really dependent on the business proposal and the investment amount.  You typically give up some control when you develop a relationship with an angel investor.

Another alternative is to find a strategic partner or to build a strategic alliance that allows your business to reduce its cash and/or startup financing needs. This also means a loss of control over the business; and partnerships can end up like marriages, in divorce.  Yet another alternative startup financing is bootstrapping.  Bootstrapping is financing a business startup or business growth through non-traditional methods. Bootstrapping is about raising funds (for example, to start a new business), without startup capital.  If you plan to startup a business that has a significant investment in capital equipment, consider asset financing.  Asset financing will provide a loan for equipment that you buy to operate your business.

For new business owners, that might mean working several jobs to raise cash.  Or revising your plan to start your business with less money, or fewer products or services.  Consider leasing furniture, computers, sharing office space and administration staff.  Make sure you carefully consider your cash flow needs and do a cash flow projection for at least a two-year period.  Cash flow management is a way of reducing startup financing needs; effectively manage your cash flow by managing receivables, payables, inventory, and short term debt (in other words, increase incoming cash and reduce outgoing cash). 

Some other non-traditional business financing methods might include:

  • use of credit cards;
  • second mortgages on the entrepreneur’s home;
  • equity loans, secured by personal assets; loans from key suppliers;
  • partial pre-payments or progress payments from large customers;
  • and/or loans from family, friends and associates.

For small business owners, obtaining the financing to startup your business or to keep it operating is usually a challenging experience. Before you borrow the money you need for startup, ensure that your business can support that level of debt and can repay on the lender’s debt schedule.  You need to have a strong business plan and be able to present a strong business case to your lenders.  

Financial lenders will assess your knowledge, your capability, and your business proposal. You will likely have to put up personal guarantees for the money you need; this means you have to have assets to back up your guarantees. Unfortunately, not all prospective business owners have the credit rating to qualify with their lending institutions. Business financing and business start up loans are serious endeavors.  You will owe a lot of money and if your business doesn’t succeed, your money and your lenders’ or investors’ money will be gone.

Principles Of Accounting And Accounting Assumptions

In the modem world no business can afford to remain secretive because various parties such as creditors, employees, taxation authorities, investors, public and government etc., are interested to know about the affairs of the business. Affairs of the business can be studied mainly by consulting final accounts and the balance sheet of the particular business. Final accounts and the balance sheet are end products of book-keeping. Because of the importance of these statements it became necessary for the accountants to develop some principles, concepts and conventions which may be regarded as fundamentals of accounting. Such fundamentals having wide acceptance give reliability and creditability to the financial statements prepared by the accountants. The need for ‘generally accepted accounting principles’ arises for two reasons: First, to be logical and consistent in recording the transactions and second, to conform to, the established practices and procedures.

There is no agreement among the accountants as regards the basic concepts of accounting. There is no uniformity in generally accepted accounting principles (GAPP). The terms-axioms, assumptions, conventions, concepts, generalizations, methods, rules, doctrines, techniques, postulates, standards and canons are used freely and inconsistently in the same sense.

Principles

“A general law or rule, adopted or professed as a guide to action, a settled ground or basis of conduct or practice.” This definition given by dictionaries comes nearest to describing what most accountants mean by the word ‘Principle’. Care should be taken to make it clear that as applied to accounting practice, the world principle, does not connote a rule for which there can be no deviation. An accounting principle is not a principle in the sense that it admits of no conflict with other principles.

Postulates

Mean to assume without proof, to take for granted or positive consent, a position assumed as self- evident. Postulates are assumptions but they are not arbitrary deliberate assumptions but generally recognized assumptions which reflect the judgment of ‘facts’ or trend or events, assumptions which have been borne out in past by facts supposed by legal institutions making them enforceable to some extent.

Doctrines

Mean principles of belief: what the scriptures teach on any subject. It refer to an established principle propagated by a teacher which is followed in strict faith. But in accounting practice, no such doctrine need be adhered to but the word denotes the general principles or policies to be followed.

Axiom

Denotes a statement of truth which cannot be questioned by anyone.

Standards

Refer to the basis expected in accounting practice, under different circumstances. In Indian context, the Institute of Chartered Accountants of India (ICAI) constituted an Accounting Standards Board on 21st April, 1977. The main function of ASB is to formulate accounting standards taking into consideration the applicable laws, customs, usages and business environment.

Accounting Assumptions

The International Accounting Standards Committee (lASC) as well as the Institute of Chartered Accountants of India (ICAI) treat (vide IAS-I & AS-I) the following as the fundamental accounting assumptions:

(1) Going concern

In the ordinary course, accounting assumes that the business will continue to exist and carry on its operations for an indefinite period in the future. The entity is assumed to remain in operation sufficiently long to carry out its objects and plans. The values attached to the assets will be on the basis of its current worth. The assumption is that the fixed assets are not intended for re-sale. Therefore, it may be contended that a balance sheet which is prepared on the basis of record of facts on historical costs cannot show the true or real worth of the concern at a particular date. The underlying principle there is that the earning power and not the cost is the basis for valuing a continuing business. The business is to continue indefinitely and the financial and accounting policies are followed to maintain the continuity of the business unit.

(2) Consistency

There should be uniformity in accounting processes and policies from one period to another. Material changes, if any, should be disclosed even though there is improvement in technique. A change of method from one period to another will affect the result of the trading materially. Only when the accounting procedures are adhered to consistently from year to year the results disclosed in the financial statements will be uniform and comparable.

(3) Accrual

Accounting attempts to recognize non-cash events and circumstances as they occur. Accrual is concerned with expected future cash receipts and payments: it is the accounting process of recognizing assets, liabilities or income for amounts expected to be received or paid in future. Common examples of accruals include purchases and sales of goods or services on credit, interest, rent (not yet paid), wages and salaries, taxes. Thus, we make record of all expenses and incomes relating to the accounting period whether actual cash has been disbursed or received or not. If a fundamental accounting assumption (i.e. Going concern, consistency and accrual) is not followed (in the preparation of financial statements) the fact should be disclosed. [AS-I para 27].

Served A Summons Or Credit Card Debt Lawsuit

I receive e-mails every week from people who have had the misfortune of receiving a summons notice on their doorstep or the joy of having a stranger sidle up to them and say, “You’ve been served.”

Not fun. Oftentimes, these same people tell me that the first thing they did was to pick up the phone, call the collection agent or collection attorney in many cases and try to work out a payment plan or settlement agreement. This is WRONG, WRONG, WRONG.

Once you have been served a summons, this means that the collection agency is SUING YOU. You are being sued and the collection agency is now the Plaintiff and you are the Defendant. Any and ALL communication with the Plaintiff should be done via written correspondence only.

It’s too late for “I’ll send you $50 buck a month, I promise.” Way too late. Now is the time to take responsibility for your financial future and face your fears (debt) head on. Even if the collector was to agree to a payment plan, they cannot be trusted. While you are “working it out” they could be in the process of putting a lien on your property and searching for your bank account information in order to seize your assets.

Here’s what you need to do. First of all, DO NOT BE INTIMIDATED. This is difficult, after all I’m sure you feel badly about the debt in the first place and it’s probably been haunting you for years. The sad truth is that many of these debt lawsuits are brought about on out-of-statute debt and the collection agencies and debt attorneys are notorious for re-aging the DOLA or Date of Last Activity on your credit report. It’s in your best interest to dig up any old credit reports and bank statements to prove the the date of the last payment you made on the defaulted account. If that date is past your state’s statute of limitations on open credit card debt, they have the right to try and collect, but they cannot sue you and must drop the lawsuit.

Additionally, very rarely is a debtor sued for the actual amount they owe…penalties, interest, and other assorted fees are generally tacked on to the balance. Make them prove their case!

There are many other defenses that can be raised against one of these collectors. The key is that you need to communicate with them through the court system. They don’t expect you to fight back, over 96% of debt lawsuits end in default judgment. The chances of them backing off and dropping the lawsuit are HUGE if you take the time to properly format what is called a Notice of Appearance, Answer, and Certificate of Service.

It takes some time and research to properly file these documents, but it’s your financial future at stake. A default judgment can not only freeze your bank account or garnish your wages but it will also ruin your credit for a minimum of 7 years. A few states offer basic templates for the forms you will need to file with the court, a simple Google search should offer up some resources. You can purchase Word templates (w/ affirmative defenses for third-party debt collectors) for the “Answer to Complaint” document and more at www.IHaveBeenServed.Info and alternatively there are very helpful people on several internet “debt” message boards who can offer up advice when drafting your own documents.

Additionally, you should fax and mail (certified, return receipt) a Cease & Desist Letter to the creditor informing them that they must communicate you with via written correspondence only and now that they know how to communicate with you they must refrain from contacting any of your neighbors, friends, relatives or employees in an attempt to collect their debt. If they violate your request, you can threaten to sue them for an infraction of the FDCPA (Fair Debt Collection Practices Act) which allows $1,000 for each violation.

Now is the time to action. If you do nothing, the creditors will find your assets and take them. Bottom line. File your Answer and other supporting documents and wait and see. The best that can happen? They won’t want to fight you in court and drop the lawsuit (they rarely have the supporting documentation to back up their claims) or you’ll receive a courtdate and you’ll be given the chance to work out a settlement agreement at that time. Either way you will have avoided a default judgement which is looked upon as poorly as bankruptcy in many cases.

Fight back! You have nothing to lose and everything to gain.


Office Space For Lease

Buying office space for any business is really expensive. As we all know, business requires investment. Depending on the kind of business you are planning to do, the investment will vary. For a large business you definitely need to pay a lot. But, still you can do something to cut your business or infrastructure related costs. For example, leasing an office space can be a much better decision than to buy one.

As an owner of the business you will need to spend most of your working hours in your office. You will have to attend important meetings with your clients or finalize deals with your business partners or do any other professional duties in your office. Therefore, importance should be given to the design, infrastructure, location or even decoration of your office.

Finding an office is not too difficult a task. Internet has made the task easier to find a suitable space for lease. There are lots of websites to provide you with the kind of information you need regarding your office. To select an office for lease you should know the needs of your business. You should consider the location, size, parking, lease term and length and so on. While thinking about the location, first think about its security. You need to collect the crime statistics of the location and judge them. Your office must be located in a place that is transportation friendly. It should also be made sure that there is room for parking cars or any other vehicles. Reception area is one of the pivotal parts of an office space. Therefore, the reception area should be decorated nicely. It must have a professional look. If you find that something additional needs to be done in order to make the look of the office space better you may consult with the landlord so that necessary changes can be made.

The process of leasing an office space is not exceptionally difficult. You can go for a leased one according to your requirements. You may have to pay some money in advance. The services provided in a leased office space are usually prepaid.

If you are planning to start a new business, it will be better for you to take an office for lease. This is because you may need to change your office space for different reasons. One significant benefit of leasing is that you need not spend a lot of money to have an office. The amount of money saved with a leased office space can be used for other purposes. A landlord has to undertake many responsibilities. By leasing an office you can avoid the responsibilities of ownership. This will help you save your valuable time. It is always a good idea to review the terms and conditions before signing for a leased office space.

To conclude, leasing an office space is more beneficial than buying it. But you should be careful while selecting an office for lease because the success of your business depends much on the appropriateness of the office.

Social Entrepreneurs Vs Business Entrepreneurs (The Similarities And Differences)

Business Entrepreneurs

Business entrepreneurs focus more on the profit and wealth side. Their main goal is to satisfy customer needs, provide growth for shareholders, expand the influence of their business, and to expose their business to the greatest number of individuals as they are able to. Commonly, some might neglect the ecological outcomes of their habits. The most important priority for the business entrepreneur is to earn revenue. They have to obtain revenue to enable them to essentially keep on delivering assistance or products to the clientele, care for themselves and their households, and provide for their business’ progress.

In the operation of beginning their enterprise, they search for holes in the market to fill. They try to find things that people need or want, and then they make a system or product that will satisfy that need or desire. The final outcome is to bring in returns by means of material items.

Social Entrepreneurs

The social entrepreneur’s chief emphasis is the communal and/or ecological health and well being. Once they realize an obstacle in the local community, surroundings, or methods of the people, they seize actions toward helping resolve that drawback. The central end goal for the social entrepreneur is not fortune or profit. Instead, they prioritize way more on serving the wants and needs of the local community in a much more versatile method. Often times, they will involve themselves in their jobs with very little financial resources, whilst furthermore making a significant difference on society.

Social entrepreneurs help to make the planet an improved place to live in. They concentrate a lot more on the greater good. Their jobs might not produce richness and income. At times, they will invest a considerable amount of their time and focus in transforming society with little in return. Social entrepreneurs fixate on several different topics, such as the economy, social disorganization, and inequality.

The Entrepreneurs In-Between

And then there are the entrepreneurs that look closely at both the business aspect of things and the social aspect of things. Whilst making a change in modern society, they will also look closely at creating earnings. This is a critical technique and it may be even preferable to carry out this approach than an extreme form of either business or social entrepreneurship. It is due to the fact that if you concentrate a large amount on the social and environmental side of things, you could wind up having insufficient money to do anything else. In contrast, if you aim so much on the business and material side of things, you could find yourself losing concentration and priority over the greater good.

Another thing appealing with regards to social entrepreneurship and the greater good is that it certainly is great for marketing. In the event that the mass media finds a company moving in the direction of favorable environmental and societal impact, the company is going to acquire more favorable compliments and awareness. Customers will much more likely spend money on this company. It is a very good strategy for developing long-term sustainability and also long-term important relationships with customers and investors.

And yet, you will discover those businesses that concentrate on the greater-good part of things just for the favorable mass media attention. Their motives may not at all be for the greater-good but merely for the primary goal of acquiring a lot more money and awareness. These kinds of business owners and organizations will not proceed exceedingly far. Ultimately, the media, the customers, and the people will catch up with the organization. In the event that the company is not authentic in supplying social value to the community as well as the environment, they are going to be caught in the act. Sooner or later, consumers will begin discovering the company’s true behavior. You can’t cover something forever. In the event that the whole thing is an act, and the organization really wants to keep receiving that favorable mass media attention, then that organization will need to maintain “acting” to obtain that beneficial popularity. Also it becomes demanding to always keep acting continuously.

Therefore the objective of this post is to establish the main difference between social entrepreneurs and business entrepreneurs. The differences are in their actions and their motives. Social entrepreneurs concentrate more on transforming the approaches of modern society for the good of the community and the environment, whilst business entrepreneurs concentrate a lot more on the income and wealth-building aspect of things.

The most significant and effective kind of entrepreneur is the one that practices the two styles. The most influencing type of entrepreneur is one who is able to naturally get other people to like them. Click here to find out how to get people to like you.

Stocks VS Bonds

In the world of investments, you’ll often hear about stocks and bonds. They are both feasible forms of investment. They allow you the opportunity to invest your money with a specific company or corporation with the possibility of future profits. But how exactly do they work? And what are the differences between the two?

Bonds

Let’s start with bonds. The easiest way to define a bond is through the concept of a loan. When you invest in bonds, you are essentially loaning your money to a company, corporation, or government of your choosing. That institution, in turn, will give you a receipt for your loan, along with a promise of interest, in the form of a bond.

Bonds are bought and sold in the open market. Fluctuation in their values occurs depending on the interest rate of the general economy. Basically, the interest rate directly affects the worth of your investment. For instance, if you have a thousand dollar bond which pays the interest of 5% yearly, you can sell it at a higher face value provided the general interest rate is below 5%. And if the rate of interest rises above 5%, the bond, though it can still be sold, is usually sold at less than its face value.

The logic behind this system is that the investors deal with a higher rate of interest then the actual bond pays. Thus, the bond is sold at lower value in order to offset the gap. The OTC market, which is comprised of banks and security firms, is the favourite trading place for bonds, because corporate bonds can be listed on the stock exchange, and can be purchased through stock brokers.

With bonds, unlike stocks, you, as the investor, will not directly benefit from the success of the company or the amount of its profits. Instead, you will receive a fixed rate of return on your bond. Basically, this means that whether the company is wildly successful OR has an abysmal year of business, it will not affect your investment. Your bond return rate will be the same. Your return rate is the percentage of the original offer of the bond. This percentage is called the coupon rate.

It is also important to remember that bonds have maturity dates. Once a bond hits its maturity date, the principal amount paid for that bond is returned to the investor. Different bonds are issued different maturity dates. Some bonds can have up to 30 years of maturity period.

When dealing in bonds, the greatest investment risk that you face is the possibility of the principal investment amount NOT being paid back to you. Obviously, this risk can be somewhat controlled through the careful assessment of the companies or institutions that you choose to invest in.

Those companies that possess more credit worthiness are generally safer investments when it comes to bonds. The best example of a “safe” bond is the government bond. Another is the blue chip company bond. Blue chip companies are well-established companies that have proven and successful track records over a long span of time. Of course, such companies will have lower coupon rates.

If you’re willing to take a greater risk for better coupon rates, then you would probably end up choosing the companies with low credit ratings, companies that are unproven or unstable. Keep in mind, there is a great risk of default on the bonds from smaller corporations; however, the other side of the coin is that bond holders of such companies are preferential creditors. They get compensated before the stock holders in the event of a business going bankrupt.

So, for less risk, choose to invest in bonds from established companies. You will be likely to cash in on your returns, but they will probably not be very large. Or, you can choose to invest in smaller, unproven companies. The risk is greater, but if it pays off, your bank account will be greater, too. As in any investment venture, there is a trade-off between the risks and the possible rewards of bonds.

Stocks

Stocks represent shares of a company. These shares give part of the ownership of the company to you, the share-holder. Your stake in that company is defined by the amount of shares that you, the investor, own. Stock comes in mid-caps, small caps, and large caps.

As with bonds, you can decrease the risk of stock trading by choosing your stocks carefully, assessing your investments and weighing the risk of different companies. Obviously, an entrenched and well-known corporation is much more likely to be stable then a new and unproven one. And the stock will reflect the stability of the companies.

Stocks, unlike bonds, fluctuate in value and are traded in the stock market. Their worth is based directly on the performance of the company. If the company is doing well, growing, and attaining profits, then so does the value of the stock. If the company is weakening or failing, the stock of that company decreases in value.

There are various ways in which stocks are traded. In addition to being traded as shares of a company, stock can also be traded in the form of options, which is a type of Futures trading. Stock can also be sold and brought in the stock market on a daily basis. The value of a certain stock can increase and decrease according to the rise and fall in the stock market. Because of this, investing in stocks is much riskier than investing in bonds.

The Wrap-Up

Both stocks and bonds can become profitable investments. But it is important to remember that both options also carry a certain amount of risk. Being aware of that risk and taking steps to minimize it and control it, not the other way around, will help you to make the right choices when it comes to your financial decisions. The key to wise investing is always good research, a solid strategy, and guidance you can trust.


Only Financial Advisor?

When you accept professional advice on how to invest, save, and grow your hard-earned money, you have certain expectations from your financial advisor: expertise, professionalism, ethics, and independent, sound financial advice. If you’re not working with a Fee-Only Financial Advisor, you may not be getting what you bargained for. Why?

According to the Bureau of Labor Statistics, in 2008 there were over 208,000 financial advisors in the United States, with that number expected to rise to 300,000 by 2018. However, of those, only 2,000 are Fee-Only and members of the National Association of Personal Financial Advisors (NAPFA). Unlike transaction-based financial consultants who make their money on commissions earned from selling financial products, Fee-Only financial advisors do not sell any products, nor do they work on commissions. Instead, they are paid a flat fee by the client for independent financial advisory services they provide, rather than from the investments recommended. Let’s break it down:

No Sales / No Commissions Many financial advisors are “Commission-based” which means their income is directly linked to the financial products and investments they sell you. Make no mistake, they are selling; these individuals may call themselves financial advisors, but they are really just financial salespeople. Here’s why: It is more lucrative to recommend certain investment products over others because of the commissions they earn. Therefore, it is very difficult for you, the client, to evaluate whether the “advisor’s” particular investment recommendation is most appropriate for your portfolio, or if it’s most financially lucrative for the consultant himself. By contrast, Fee-Only financial advisors do not sell any products nor earn commissions; their only source of income is from their clients. Therefore, clients understand that Fee-Only Advisor works only for their clients’ best interest, and are not wed to any investment company, product, or even insurance company. As a result, advice is unbiased and independent, with no conflicts of interest – they are free to recommend investments and products that are in the best interest of the client rather than the company’s bottom line. It’s important to determine whom your financial advisor is really working for: you or the company whose products are being recommended?

Fee-Based In recent years, the term Fee-Based was introduced by the large investment firms in response to the growing demand for Fee-Only. Buyer beware: Fee-Based is not the same as Fee-Only. Fee-Based financial advisors can collect both fees and commissions, and they may also be incentivized to recommend certain products endorsed by their sponsoring firms.

Fiduciary Standard A fiduciary is a financial professional who is held out in trust, and is legally obligated to put their clients’ interests above their own. Fee-Only financial advisors are the only financial consultants who operate under a fiduciary standard; transaction based financial consultants operate under what is known as a suitability standard, which is a much looser standard. In addition, Fee-Only financial advisors are highly regulated by either State or Federal regulators. If your financial advisor is unwilling to sign a fiduciary oath committing to put your interests above his/her own, then it’s time to work with someone who is Fee-Only.

Solutions Based vs. Product Based A product-based approach is whereby a specific product is recommended or sold to the client, sometimes irrespective of the client’s particular financial circumstances and goals. Transaction, Commission, and Fee-Based advisors are typically trained on only the products they sell and/or recommend, thereby taking a product-based approach to their clients’ portfolios. The problem with the product-based approach is that providing comprehensive financial advice should be a process with multiple steps, integrating the client’s holistic financial and non- financial reality. Fee-Only Financial Advisors always take a holistic approach with each client, and offer more objective advice on a plethora of investment options. As part of the holistic approach, Fee-Only financial advisors recognize that they can not work in financial silos, but rather in coordination with the client’s other professional consultants such as CPAs, attorneys, and estate planners. In this way, clients can rest assured that all actions taken related to their finances are commensurate with their overall needs and circumstances.

Moral of the Story Always do research and ask a lot of questions before you enter into a professional relationship with a financial advisor. Whether you have $10,000 or $10 million to invest, your financial consultant should be paid only by you, commit to a fiduciary standard, and be free from any conflicts of interest. Fee-Only financial advisors fulfill all of these requirements.

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