Today’s featured Indiana startup business is liloQui Digital Publishing, which is developing a social publishing and reading platform for authors.  Started by an author who is tired of the traditional publishing game, liloQui hopes to help authors get their literary works published (to the cloud) and to open up conversations among readers.  Pretty cool idea.  I spoke with Ryan Brock (@ryanbrock), Founder and Publishing Director, about this new publishing platform  - check it out below.

Tell us about your startup…your words…whatever you want to say.

If all the world’s a stage, then authors and readers alike have lost their spotlight to an ensemble cast of agents, publicists, booksellers and businessmen. In today’s literary world, talent and passion often take a backseat to business and the bottom line while many talented independent writers go unpublished. At liloQui Digital Publishing, our vision is simple: give these authors a chance to step away from the rest of the cast by publishing them in the most immersive, viral, accessible way we can. With liloQui, there are no downloads, no new software and no expensive eReaders involved. Stored on the cloud, our works are vibrantly designed and effortlessly sharable. We make reading truly social, promoting conversation right within the world of the story and helping independent writers connect directly to their audiences.

How did you come up with concept for your business, and how/when did the business model for that concept become clear?

The whole idea behind liloQui began with a discussion between an author and a web designer. My partner, Josh Littlejohn, came to me with an idea to help me develop my own web presence as a writer by coming up with a really unique interactive website to showcase my work. The more and more we talked and researched and brainstormed, the more we began to understand just how much missed opportunity there was for authors to take full advantage of the power of the web. We realized that I wouldn’t be the only author interested in seeing what could really be done with a new approach to literature online. With that in mind, we began building a business model around digital publishing that makes use of HTML5 design standards, viral marketing and social reading.

What made you first believe that starting a business is right for you (i.e. as opposed to working for someone else)

For me, it’s all about passion. I think I can speak for myself and my other partners when I say that we decided to found liloQui because needed a place to really let our passion for what we do burn and grow. As an independent author, I recognized an opportunity to do something amazing for others who, like me, have struggled to get their work out there, to find an audience, to get published. I can’t say that I grew up aspiring to be a small business owner someday. I can, however, speak to my love of stories and the people who write them. Someone once wrote that your vocation should be where your greatest passion and the world’s greatest need meet. In my world, there is a great need for what we do at liloQui, and that’s why I started this business.

What challenges have you encountered?

Starting a business isn’t for the faint of heart, especially a publishing company. The entire publishing industry is in transition as everyone is trying to figure out how to enter the digital space. For us, the biggest challenge has been really working to keep our vision unique and relevant while learning how to communicate that vision. There are so many buzzwords flying around when it comes to digital publishing that it’s crucial for companies like ours to stick to our guns and be as true to our original vision as we can.

What sacrifices have you made to start your business?

Our team has been working tirelessly to build a brand, market our vision and develop a good product. When you run your own company, it’s downright impossible to keep your weekly workload down to 40 hours. All of us at liloQui have sacrificed huge portions of our social lives (not to mention many hours of good sleep) in the interest of making our vision come to life. But when you are as passionate as we are, these sacrifices are more like good opportunities. We wouldn’t have it any other way.

In your opinion, what makes Indiana a great place to start your business?

There is just a ton of great stuff going on here for startups and people who run them. All around the state there seems to be this buzzing culture surrounding small businesses, from annual events to monthly networking meet-ups to all sorts of groups and organizations dedicated to supporting and connecting small business owners to each other and potential supporters and clients. We have high hopes for all the connections we’ve been building in the state and I think everyone is just excited to witness and encourage the growth of new companies in Indiana.

If you could give an entrepreneur looking to start a business one piece of advice…what would it be?

This might seem a bit contradictory, but my advice is twofold: Stay focused and remain open. At liloQui, we have a very specific passion driving what we do, and it’s very easy to get sidetracked by any number of distractions. Don’t try to be all things to all people, just be yourself and do what you do best. Don’t sacrifice the vision that makes you unique and you’ll go far. At the same time, however, don’t ignore all the sources of inspiration and support that surround you. Share your vision freely and listen to anyone who wants to talk. Not everyone will have profound insight, but you never know who can push you, challenge you and support you.

Stat Sheet:  liloQui Digital Publishing

• Website:  http://www.liloqui.com
• Facebook Fan Page: http://www.facebook.com/liloQuiDP
• Twitter: @liloQuiDP
• Blog: http://blog.liloqui.com
• Your title at the business: Publishing Director, Founder
• When was the business founded: August 2010
• Business Description in 140 Characters or less:  liloQui is revolutionizing the publishing industry with a passion for authors and innovative ideas for immersive social reading experiences

A couple of months back I blogged on here about a bill that at the time was making its way through the Indiana state senate – The “Young Entrepreneur Auction” Bill.  The bill has excellent potential to help keep some of Indiana’s entrepreneurial college grads in this state.  There is not really much to dislike about a program that can be implemented with almost zero fiscal impact, although with even a small budget behind it, the program could have been opened up to more than just entrepreneurs that are 3 years or less years removed from a state entrepreneurial studies curriculum.  Still, it is a step in the right direction.

What puzzles me, though, is that nobody seems to know anything about it, despite having been signed into law by Governor Daniels in March.  Small communities I have spoken with that are ACTIVELY offering incentive packages to startups know nothing about this bill.  Representatives I spoke with from DevelopIndy had never heard of it. Tech incubators and accelerators had never heard of it either.  In the social media age, how can this happen?  I realize the bill is still relatively hot off the press, but maybe this speaks to a fundamental problem we have in this State.  State government sticks to itself.  Local governments stick to themselves.  And for the most part, state and local governments are saving up incentive packages for the easy hit out of the park – the startups that are no longer startups – that give them the most press at the time they give an incentive package. Lets hope this bill gains some momentum and changes that.

Cities like Shelbyville get this, with their Intelliplex facility that is providing lease deals and actual capital to promising early stage tech startups that can meet certain workforce growth requirements over a span of time. How smart will Shelbyville look if TheTyros.com ends up being this area’s next Angie’s List?  How smart would Indianapolis have looked had they jumped on white hot Slingshot SEO’s bandwagon 2 years ago?  I am all for offering incentives to the Slingshots and ExactTargets of this state (they deserve it for sticking around) – but how many promising Indy metro area startups never make it because they don’t have enough funding / support?

Maybe larger cities like Indy feel they have way less to gain by supporting early stage startups.  And maybe that is where private companies like Developer Town come into play.  Who knows?

What do you think? If you can articulate a thought and not ramble like I just did – please leave a comment.

For the past two years, the Venture Club of Indiana has hosted an event called the Innovation Showcase.  The event in the past has drawn 40 startups and 350 investor-types to the Purdue Research Park in Indy.  A great idea, and great way for businesses looking for funding to find local people looking to invest.  I am a fan of anything that helps the entrepreneurial community in Indiana grow  - but I have never had the desire to go (probably because I have never been invited). I won’t be missing it this year though.  3 reasons:

• Verge
• Developer Town
• Developer Town’s GIGANTIC new digs
• (and a 4th, it is open to the public so even lame blogging attorneys like me can get in the door).

If you don’t already know, Verge is the ridiculously awesome monthly event that brings together the Indy tech startup community (200+ at each event) for pizza, beer (shout out to @thr3ewisemen, an @brewhouse production), 5 minute pitches, and most importantly, great networking with some of the brightest tech and startup talent around.  This year Verge is throwing its hat in the ring as a co-host for the Innovation Showcase, and I imagine that means this event will take on a whole new look and vibe.  Consider also that Developer Town, the Indy venture development shop that is changing how non-technical people get early stage tech ventures off the ground (one little house at a time), is not only a sponsor, but will be physically hosting the event in its ambitious and groundbreaking new MONSTER facility just south of Broad Ripple, and I sense this could be the start of something big for Indy/Indiana.  Don’t get me wrong – Venture Club is great and it has ties to lots of big players in central Indiana – but The Innovation Showcase was never going to become a destination event like it may now with Verge and Developer Town involved.  Those organizations are young, hungry, hip…and right now they are white hot.  They are run by some of Indy’s most passionate entrepreneurs (@hunckler, @mecloran, @nathanjaltman, @YawA, @jcorwin6…the list goes on and on) – and they are the kind of people that will claw and scratch if need be to make this event something special.  They also have lots of Twitter followers and Facebook friends/fans – so that helps.

The Innovation Showcase 2012 =  Midwest SXSW (would that be MXMW?)  Maybe…

An Indiana LLC offers all of the advantages that most people would point to when assessing whether to form an Indiana LLC as opposed to operating a business as a sole proprietorship.  Those would include:

• Limited liability and protecting personal assets.
• Creates credibility with business customers and clients.
• The risk of audit can be reduced in some cases.
• It becomes easier to deduct certain valid expenses.

An Indiana LLC offers all of the advantages that most people would point to when assessing whether to form an Indiana LLC as opposed to a corporation.  Those would include:

• An Indiana LLC provides a great deal of flexibility and organizational freedom.
• An Indiana LLC can be member managed, manager managed, can have any number or type of officers.
• An Indiana LLC has less requirements, restrictions and formalities under Indiana law.
• An Indiana LLC can allocate profits, losses, and distrubutions among members in whatever manner the members agree to – not so for a corporation and its shareholders.
• An Indiana LLC has far fewer restrictions than an S corp and can have as many members as it needs.
• An Indiana LLC can enjoy pass though taxation.  Any business profit or loss is passed through to the members, so that they pay the taxes individually on their personal income tax returns.  Paying tax at the business level is avoided for an LLC.

Finally, forming an Indiana LLC does have a few advantages over forming an LLC in a different state:

• Forming an Indiana LLC is fast!  The process of filing articles of organization with the Indiana Secretary of State can be done electronically – and in most cases – your Indiana LLC can be up and running within 24 hours.  Some states require documents to be mailed to the state, while other require that certain notifications be published in the newspaper – all of which can take weeks!
• Forming an Indiana LLC is can be a private and confidential process.  Most other states require that the name and address of members, managers and/or officers of the LLC be filed as a matter of public record.  Indiana only requires that the name and address of the registered agent of an Indiana LLC be filed (which can be anyone located in the state of Indiana – typically an attorney or registered agent service provider).
• Forming an Indiana LLC only requires a $87.00 filing fee with the state (which is included in in all of our LLC formation packages).  Some other states charge double, triple, and even quadruple that amount.

If you are looking to raise capital for your business, a private offering of securities might be one way for you to consider. Selling securities, whether it be to friends and family or angel investors, is an excellent means of raising capital if you are prepared and do it the navigate the maze of state and federal laws and regulations involved.  The following is intended to provide a basic understanding of raising capital via the private placement process. You should retain the services of a private placement attorney to advise you through the entire private placement process.

The SEC created Regulation D, which creates certain rules for private offerings. By following these rules, an issuer (i.e. a company selling stock, LLC units, partnership interest, notes, or other forms of a security to raise capital) generally may raise capital without a public offering.

Generally, a private offering may have no more than 35 investors. On the federal level, though, certain high-net-worth investors defined as “accredited investors” may be excluded when calculating the number of investors. There must also be NO general solicitation of investors by the issuer – no advertising. Just this weekend I came across someone soliciting the “private” sale of securities on Twitter – definitely not a good idea if you are trying to comply with the registration exemptions under Regulation D.

The federal securities laws for both public and private offerings are based on the premise that investors in securities are best protected by the disclosure of all relevant information regarding the securities and the issuer. The underlying guideline in this respect is Rule 10b-5, which requires the issuer to disclose to investors anything material that a reasonable investor would want to know prior to making a decision to invest. This is why PPMs are stocked to the brim full of material facts, disclaimers, and lots and lots of risk factors. Failure to properly include these and other items may subject the issuer to serious liability, including being forced to buy back the securities from the investor, as well as damages. If you want to avoid liability, overdisclose, do not hide anything, and do not mislead (among other things of course).

Keep in mind that there are also state “blue sky” laws to comply with – and they will need to be complied with in every state that a security is offered and/or sold.

There are lots and lots of land-mines to avoid when raising money in a private offering – so make sure to consult a private placement attorney / securities law attorney before you raise capital for your business. Also, I may be a lawyer, but the above is not legal advice!

From the title of this post, you are probably assuming it refers to the chunk of your company you will be giving up in exchange for an infusion of capital.  You would be right – mostly.  In addition to giving up equity, start-up founders also give up some measure of control when they raise venture capital.  Therefore, the first part of this post will deal with equity; the second part will deal with control / governance.  Keep in mind that what i say below is not necessarily applicable to seed capital or early angel rounds – which I will discuss in a later blog post.

How Much Equity Should You Give Up?

Don't expect a free lunch.

Unfortunately, the answer is not something you will typically have control over.  Generally, an investor will give a value to the business based on the net present value of future cash flows, then setting its desired ownership percentage based on its target internal rate of return.  A big component to this determination will be the level of risk associated with the investment.  So if you want to give up less, you’ll need a good valuation…and you’ll need to minimize risk.

How Much Control Should You Give Up?

Unfortunately, this is someting you will also not have much control over.  A venture capiltalist will want board seats.  They probably will not require control of the board, but they will likely require supermajority voting provisions on certain issues such as spending capital, raising capital, and selling the business.  The venture capital board members will also likely require directors fee and reimburesement for travel expenses.   Make sure that the number of seats the investor is entitled to adjusts based on percentage ownership; so as that percentage goes down, so do the number of board seats they are entitled to.  Also keep in mind that venture capitalists typically bring very valuable wisdom and exprience to the table – so having them on your board is not necessarily a bad thing.

Today’s featured Indiana startup business is PocketTales.com – and it is one that hits pretty close to home for me.  PocketTales is a tool that essentially adds a social game layer to books that kids read – which is a cool/fancy way of saying motivating/tricking them in to reading more.  I have two young girls, and I can attest to 2 things: 1) Anything that will motivate them to read more is awesome, and 2) Anything that involves a digital display is something my kids will use (my iPad was confiscated by my 4 year old 2 weeks after I bought it and I haven’t seen it since).  I am eagerly waiting for PocketTales to open its doors (for my kids, not for me)!  For the profile, I talked to Yaw Aning, the co-founder and CEO of PocketTales. He gives some great insight below, particularly with his advice about finding the right co-founder.   I have seen lots of good ideas and businesses go up in smoke because co-founders turned out to be incompatible for whatever reason.  You can also hear more about Yaw and PocketTales.com on the most recent 8ify.com podcast (by local technology rockstar Brandon Corbin).  Also be sure to check out the slideshare presentation by PocketTales.com at the 2010 SXSW at the bottom of the page.

Tell us about your startup…your words…whatever you want to say.

Reading is one of the most critical skills a child must develop. It lays the foundation for obtaining an education. When you ask any teacher or parent what the biggest challenge is when helping kids acquire reading skills, most will likely say its motivating them to read books in the first place. Pocket Tales has created a game layer on top of the books kids are reading to motivate them read and engage with any and every book they read. To play, kids create a profile. They add friends to their social network and compete with them to win points, and unlock prizes and virtual goods by answering trivia questions that leverage content from their favorite books. Passing these challenges also unlock other activities for kids to complete and earn points.

How did you come up with concept for your business, and how/when did the business model for that concept become clear?

We started our business by focusing first on a market we really enjoyed. We thought education, children’s publishing and digital reading were going to radically transform (we started the company before game-changing devices like the Amazon Kindle were even announced) and we were right on that hunch. Before we built anything, we talked with a lot of people (teachers, educators, publishers, parents, kids, investors, etc) and worked on a few different ideas before we landed on the concept for what Pocket Tales is today. It was a lot more about testing and iterating on ideas and seeing what the market responded to. Our business model still isn’t clear, but we’re taking the same approach to finding it as we did with the idea: testing a few concepts and seeing what the market responds to.

What made you first believe that starting a business is right for you (i.e. as opposed to working for someone else)

I’ve always loved taking ideas and concepts and watching them transform into tangible things. When starting a business, I found I had the opportunity to take part in the entire process of taking an idea and making it a reality. Very few jobs let you do that to the extent entrepreneurship does.

What challenges have you encountered?

I think JLM said it best on “The Herd Instinct”: “Entrepreneurship exists in the tiny space between madness and genius; and, its journey requires a few cross border violations across both madness and genius to get to the final destination.” When you work on a startup, you ride a very fine line between being in complete control and going insane, and its emotionally taxing. Managing those emotions while maintaining a clear head and resolved focus has been the biggest challenge thus far.

What sacrifices have you made to start your business?

In getting Pocket Tales off the ground, I’ve devoted all of the resources I have at my disposal. Starting this business has definitely put strain on my finances, personal relationships, my emotional state, and personal time. You have to live and breathe your product everyday, but I believe passionately in what Pocket Tales stands for so its made it easier to put all of those things on the line for the opportunity that it will succeed and have large social impact as well.

In your opinion, what makes Indiana a great place to start your business?

Access. The seasoned and successful entrepreneurs in Indiana are devoted to helping develop our community, and they’ve made themselves extremely accessible. It’s great knowing that I can send an email to someone like Mark Hill, Kristian Anderson or Brad Wisler and get coffee on their schedules days later. They support budding entrepreneurs and that makes it leaps and bounds easier to build a business with such a supportive community.

If you could give an entrepreneur looking to start a business one piece of advice…what would it be?

Find a cofounder. Find one that complements, not supplements, your skills. There’s no way you have all of the skills necessary to make a business a success. And choose carefully, you will spend some serious time with this person. You’ll experience a lot of fantastic and terrible things with each other as you build your product, and you’ll definitely see the spectrum of their true colors in these settings. I like to think of finding a cofounder and starting a company as being the same as getting married and giving birth to a child. Besides helping you build your product, they are your support group, the one who helps vet your crazy ideas, and someone who can pick up the slack when you’ve hit a wall. And trust me, you’ll hit a lot of walls. More than anything though, they keep you sane when everything around you feels insane

Stat Sheet:  PocketTales.com

• Website:  www.pockettales.com
• Facebook Fan Page: facebook.com/pockettales
• When was the business founded: February 2009
• Twitter: @pockettales
• Business Description in 140 Characters or less:  Pocket Tales is a social reading game that motivates kids to read more often and share what they’re reading with their friends

Our mission here at IndianaStartup.com is to not only help entrepreneurs and startups by providing useful information from all of our guest bloggers – we want to get the word out about why Indiana is a great place to start a business (see tag line at top of screen).  One of the questions I have been asking each of our featured startups is “In your opinion, what makes Indiana a great place to start a business?”  Lots of people around this state have opinions on this topic – but really – who knows better than the people that are in the trenches.  I have included a summary post below of all the responses we have received to date.  Have something to add?  Leave a comment!

“In your opinion, what makes Indiana a great place to start a business.”

The people in Indiana—especially central Indiana—are wonderful. They are intelligent, hard-working, and proud of their state. They want to turn central Indiana into a hot spot of entrepreneurial activity, and they’re passionate about that goal. These people are the reason why the entrepreneurial community here is growing so rapidly. Another thing that makes Indiana a great place to start a business is the limited amount of government interference. Bigger governments in other areas can make starting and growing a business more difficult than it has to be.    - Matthew Barloh, Sales and Marketing Manager, Giggil.com

Indiana’s startup culture is beginning to gain national recognition. We have a history of creating some great online marketing and software companies. There is a lot of talent, and because the startup scene is still relatively small, the competition for that talent is not as great as it is in other areas.  - James Paden, Founder, Emailium.com

Indiana has a very active tech community. We’ve seen it with groups like the newly rechristened “Verge” and with Indianapolis Startup Weekends. Additionally, there are communities in Indiana that are interested in bringing in new businesses and are willing to help. We’ve been fortunate enough to partner with the city of Shelbyville, who wants to bring more tech jobs to their area and have funds budgeted for economic development. Communities like Shelbyville are becoming more proactive in bringing in jobs and it makes this a great place to start a business. – Andrew Morin, Cofounder, LifeShare Technologies

I love Indiana. I have started several companies here (from lawn care to .com’s to a real estate company) and enjoy the people, low cost of doing business, and opportunities. – David Hosei, Founder, eFamily.com

Indiana is a wonderful state, full of interesting people and strong demographics. As a marketer, Indianapolis serves the purpose of “concept” testing very well and is ideal for an endeavor such as launching your own online business. More specifically, the city of Indianapolis, has provided a great opportunity for profitability and growth for Snappening.com for a number of reasons, the first and foremost being its pending spotlight associated with the 2012 Super Bowl. While investment has slowed or stopped elsewhere in the country, the Indianapolis region continues to flourish to meet the demands of its industries. The ten-county region surrounding Indianapolis is literally “raising the game” with its high-profile event preparations. The most noteworthy of these preparations being the multi-billion dollar investments in new event facilities such as the Indiana Convention Center’s expansion (moving Indy from the 32nd to 16th largest meeting facility option in the nation) and the construction of the new JW Marriott.  Indianapolis has nowhere to go but up in our nation’s meeting and event industry profile, and we certainly want to be part of a collective effort to make this process the best it can be. Being a Hoosier native myself, I couldn’t think of any other place I’d rather start that right here at home. – Crystal Grave, Founder, Snappening.com

If I have learned anything in this process, it is that Indiana is just wide open for so many opportunities. There are many businesses that are absolutely booming in bigger cities that have not come to Indy, and I have also found that people are just so supportive of local business. Indy has a lot of great resources and a population that wants to see our city on the cutting edge. Tiffany Schutt, Cofounder, PrettyIndy.com

I’ve never seen anywhere as open to networking as Indiana and specifically Indianapolis. Also, once you’ve found a great networking group that meets the necessary requirements (same target audience, sales cycles, etc) they actually begin to work FOR you and with you to help you grow your business faster than you’d ever be able to alone. John Cannon, Founder, MyCarDoc

Indiana…like any place in the United States is a great place to start a business. That’s what I love about this country. We don’t live in a caste system. There are no limits to what you can do if you are willing to work for it. The United States is fertile ground for entrepreneurs. – Mike Reed, Cofounder, Guardian Tracking

Indiana is a great place to start a business for the simple fact of the incredible amount of support and network opportunities available to entrepreneurs throughout the state. I firmly believe that once a startup begins networking they will find that we have a small town “everyone knows everyone” environment. – Josh Koch, Cofounder, TheTyros.com

Today’s featured startup is Giggil.com, a startup with a simple yet brilliant business model – they take your used stuff and sell it online for you (right now just books, CDs, DVDs and video games – but I am guessing they won’t stop there).  Despite how prevalent selling used goods online has become, there are lots of people and organizations out there that either don’t have the time, the inclination, or the know-how to sell their stuff online.  Others just are no good at (me for one).  Plus there is more to selling books online than posting an ad on craigslist – at least if you want to be successful doing it.  The price needs to be right, the proper online marketplace needs to be identified, the books needs to be properly described…etc.  Giggil does this and more – streamlining the whole process.  Giggil is yet another example of innovative central Indiana entrepreneurs identifying a niche (a HUGE niche, right in plain site, that everyone else seems to have missed), and figuring out a way to commercialize it. I can’t wait to see where they take it next.

Tell us about your startup…your words…whatever you want to say.

Selling used goods online is broken. It is complex and convoluted, and it has left many people feeling confused and discouraged. Giggil decided we were going to do more than just simplify the process, we were going to improve it. In May 2009, Giggil took our first strides towards improvement by creating an easy, environmentally conscious alternative to selling online. Right now, Giggil is an online consignment shop for books, CDs, DVDs, and video games. We help individuals and organizations make more money with almost no effort by marketing and selling their books and media online for them

How did you come up with concept for your business, and how/when did the business model for that concept become clear?

The founders of Giggil wanted a business that could be profitable, and ultimately become national or global in scope. The founders also wanted to start small and without a lot of fundraising. Most importantly, the founders wanted a business that could change the world in a positive way. The trick was finding a big idea on which the business could grow once it had become cash flow positive. To determine which business met all those requirements, the founders debated hundreds of ideas, and the idea for Giggil came out on top

What made you first believe that starting a business is right for you (i.e. as opposed to working for someone else)

Giggil’s CEO likes to joke that brain damage in his childhood made him want to start businesses, but really I think it’s his ability to recognize opportunities for change in the world, and develop businesses that take advantage of those opportunities. When someone has the ability to recognize opportunities like that, the decision to start and grow a business probably comes naturally.

What challenges have you encountered?

We wanted to begin by selling all types of used goods online, but we had to sacrifice that desire in order to perfect our model and build a foundation for rapid future growth. So, we decided to start by selling just books and media. We’re glad we decided to start that way, but we’re excited to ultimately move into all types of used goods.

We’ve also had to sacrifice time and energy. Building a business is thrilling, especially for a great company like Giggil, but it requires a lot of dedication. Most of us work 60-80 hours a week, if not more than that, just to grow the business as quickly as possible.

In your opinion, what makes Indiana a great place to start your business?

The people in Indiana—especially central Indiana—are wonderful. They are intelligent, hard-working, and proud of their state. They want to turn central Indiana into a hot spot of entrepreneurial activity, and they’re passionate about that goal. These people are the reason why the entrepreneurial community here is growing so rapidly. Another thing that makes Indiana a great place to start a business is the limited amount of government interference. Bigger governments in other areas can make starting and growing a business more difficult than it has to be.

If you could give an entrepreneur looking to start a business one piece of advice…what would it be?

Value each and every customer very deeply. Your customers will be the lifeblood of your business; without them, your business will wither and die. So, it’s not enough to simply act like you care about your customers; you must really care about them and their success, because when they succeed, you will too. At the same time, monitor your customer acquisition costs and try to keep them as low as possible.

Stat Sheet:  Giggil.com

• Website:  www.giggil.com
• Facebook Fan Page: facebook.com/giggil
• When was the business founded: May 2009
• Twitter: @Giggil
• Business Description in 140 Characters or less:  Giggil markets used books and media for you online. No matter who you are, you can use Giggil to generate more cash easier than ever before.

A corporation is an entity created under statute that is separate and distinct from its owners. In other words, a corporation can be created only by following the requirements of the relevant statute (in Indiana, it is the Indiana Business Corporation Law) and will not automatically be created (as can be the case with some partnerships). Once formed, the corporation is recognized as being independent from you, the owner/shareholder. The corporation is managed by directors and officers; sometimes, the directors and officers are also the shareholders. From a liability standpoint, the corporation affords you complete protection; creditors must rely on the assets of the corporation and you are notpersonally liable for anything beyond your investment and financial commitment to the corporation.

That said, lenders frequently require shareholders of smaller corporations to personally guarantee the debt of the corporation. Corporations are the most complex entities, both in terms of creation and operation. In addition to filing articles of incorporation, corporations need to adopt by-laws, elect directors and officers, and in many states, have regular meetings. There may also be annual reporting requirements with the Secretary of State in addition to annual fees.

The shares of a corporation are freely transferable and unlike a partnership or limited liability company, the transferee of yourshares will succeed to all of your rights in those shares. In other words, the person to whom you transfer your shares will be just as much an owner of the corporation as you were. This ease of transferability can have significant impact later on as you begin to implement exit strategies (that is, you are ready to retire from
the enterprise).

From a tax perspective, corporations can also be more complex than their partnership and limited liability company counterparts. Usually, a corporation is a separate taxable entity. It pays tax on its income and later, when it distributes accumulated income to the shareholders, the shareholders will pay a second layer of income tax on those dividends. This “double taxation” is a significant drawback for most corporations. There is a special type of corporation (commonly referred to as an “S” corporation) that generally is not subject to double taxation. An “S” corporation allocates income and losses on a pro-rata basis to its shareholders, although the use of losses by a shareholder is limited to that shareholder’s basis in the corporation. You must strictly adhere to rigid equirements imposed on “S” corporations, and shareholders sometimes are surprised by how easy it is to terminate an existing “S” election inadvertently.

Occasionally, a business owner might intentionally choose the double taxation of a regular corporation to take advantage of certain corporate tax benefits. For instance, while partners in a partnership cannot be employees of that partnership, shareholders in a corporation can be employees; as a result, these shareholders can participate in certain fringe benefits extended to “employees” under the federal tax law, such as flexible spending accounts. Other examples include (i) the ability of a corporation to participate in tax-advantaged reorganizations unavailable to partnerships and limited liability companies and (ii) the potential for up to $50,000 ($100,000 on a Married Filing Joint Return) of losses from the sale, exchange, or worthlessness of certain small business corporation stock to qualify for ordinary loss treatment (as opposed to capital loss treatment).

As you can see from this post and my prior business entity selection and formation posts, a good deal of thought and care must go into your decision of what type of legal form your new business should take. Quite often, the advantages of one form will be offset by disadvantages not present in another. As mentioned, within similar types of legal forms, nuances exist that make the decision all the more difficult. By identifying the right combination of advantages and disadvantages and with the assistance of competent advisors, the right choice of entity selection can help ensure your business success.

Check back soon for a post regarding limited liability companies.