ABR Handouts

Business consultants, coaches, facilitators, and mentors

Posted in: ABR Handouts, Blog, Business Planning, Leadership by Mallory Malloy on September 12, 2011 | No Comments

Business Consultants- A consultant is usually an expert or a professional in a specific field and has a wide knowledge of the subject matter. A consultant usually works for a consultancy firm or is self-employed, and engages with multiple and changing clients. Thus, clients have access to deeper levels of expertise than would be feasible for them to retain in-house, and may purchase only as much service from the outside consultant as desired.  A consultant does things for others as well as by giving them advice on how to make their business more successful.

Business Counselors- A counselor is also an expert like the consultant but limits his involvement to giving advice only, that is, he tells the client how and what to do.

Business Coaches- Coaches also help people do things for themselves but not in the same way as counselors. They may have no expertise or knowledge of a specific technical area. They partner with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential. They may challenge the client’s internal beliefs or help to remove internal stumbling blocks that limit the client’s potential. Coaching regards the client as the expert in his/her life and work and believes that every client is creative, resourceful, and ultimately “whole.”

Business Facilitators- The facilitator’s job is to support everyone to do their best thinking and practice. To do this, the facilitator encourages full participation, promotes mutual understanding and cultivates shared responsibility. By supporting everyone to do their best thinking, a facilitator enables group members to search for inclusive solutions and build sustainable agreements.

Business facilitators’ work in business, and other formal organizations but facilitators may also work with a variety of other groups and communities. It is a tenet of facilitation that the facilitator will not lead the group towards the answer that he/she thinks is best even if they possess an opinion on the subject matter. The facilitator’s roles are to make it easier for the group to arrive at its own answer, decision, or deliverable.

Business Mentors- A mentor is someone with more experience and “seasoning” than the protege that they counsel.  A mentor serves as a trusted confidante over an extended period of time, usually free of charge. Why do they do this? First and foremost as a way of giving back to their community and to society at large. They may do it to develop their skills as a teacher, manager, strategist, or consultant. And a true mentoring relationship also works in both directions—they learn about new ideas from their protege just as the protege learns timeless wisdom from them.

But whatever the benefits to the mentor, the benefits to you, the entrepreneur, are even greater:

• Where else are you going to turn? There’s no boss any more to turn to for advice or direction—maybe not even any employees yet. You’re flying solo. But you don’t have to. Everybody needs a good reliable sounding board, second opinion, and sometimes just emotional support.

• They’ve “been there, done that”. Learn from others’ mistakes and successes. They don’t have to have experience in your particular industry. They don’t have to be up on the latest trends or technology—you’ve got other sources for that. Their role is to share with you lessons from their experience in the hopes that you can learn them a bit more quickly and easily.
• It’s (usually) free. If you’re on a tight budget, that’s a major factor. While good coaches and consultants may be able to offer some things that a mentor doesn’t, it comes at a price, usually of several hundred dollars a month. Mentors, though, are readily available free of charge through a number of organizations.
• Expand your social network. Your mentor, being an experienced businessperson, is likely to have an extensive network, and can offer you access to far more senior decision-makers than you currently have. And they will be far more willing to open that network up to you than some casual acquaintance from a networking meeting.
• A trusted, long-term relationship. Your mentor has no ulterior motive—no service or product to sell you. That combined with their experience creates a good foundation for trust. And as the relationship develops over time, that trust can grow even stronger. Also, your time with them becomes more and more efficient as they become more and more familiar with you and your business.

About QR Codes

Posted in: ABR Handouts, Blog, Business Development, Technology by Mallory Malloy on August 29, 2011 | No Comments

A QR code (abbreviation for Quick Response code) is a specific matrix barcode (or two-dimensional code) that is readable by dedicated QR barcode readers and camera telephones. The code consists of black modules arranged in a square pattern on a white background. The information encoded may be text, URL, or other data.

Although initially used for tracking parts in vehicle manufacturing, QR codes now are used in a much broader context, including both commercial tracking applications and convenience-oriented applications aimed at mobile phone users (termed mobile tagging). QR codes may be used to display text to the user, to add a vCard contact to the user’s device, to open a Uniform Resource Identifier (URI), or to compose an e-mail or text message. Users can generate and print their own QR codes for others to scan and use by visiting one of several free QR code generating sites.

QR codes storing addresses and Uniform Resource Locators (URLs) may appear in magazines, on signs, buses, business cards, or almost any object about which users might need information. Users with a camera phone equipped with the correct reader application can scan the image of the QR code to display text, contact information, connect to a wireless network, or open a web page in the telephone’s browser. This act of linking from physical world objects is termed hardlinking or object hyperlinking.

The use of QR codes is free of any license. The QR code is clearly defined and published as an ISO standard. Denso Wave owns the patent rights on QR codes, but has chosen not to exercise them.

Recently, QR codes have become more prevalent in marketing circles and have been integrated into both traditional and interactive campaigns. Media where QR codes have been deployed include: billboard ads, guerrilla marketing campaigns, in-store displays, event ticketing and tracking, trade-show management, business cards, print ads, contests, direct mail campaigns, websites, email marketing, and couponing just to name a few. QR codes are of particular interest to marketers, giving them the “ability to measure response rates with a high degree of precision” on marketing budgets. QR codes also have been used at trade shows and in conferences.

In July 2009, QR codes were created for character design and promotional materials in the Shane Acker film 9. The use of QR codes was part of the characters in the movie and culminated into a promotional campaign with unique QR code cards, posters, and street advertisements on billboards or public transportation for major popular art events. These advertisements were largely focused upon the attendees of the 2009 San Diego Comic Con and 2009 Academy Awards. QR codes were integrated into the artwork and symbolized individual characters in the movie. Instructional pamphlets and videos were released to explain how the codes could be retrieved and deciphered. QR-coded artwork could be read with QR-capable cellphones for prizes and access to exclusive online content. This was one of the first major integrations of QR codes with Hollywood studios and urban environments.

Sponsoring

Posted in: ABR Handouts, Blog by Mallory Malloy on August 22, 2011 | No Comments

Sponsorship

Sponsorship provides a great means of broadening your competitive edge by improving your company’s image, prestige and credibility by supporting events that your target market finds attractive.  In recent years, corporate sponsorship has become the fastest growing type of marketing in the United States.

Part of this growth can be attributed to the increasing numbers of small and medium-sized businesses involved.  Previously, only large businesses could afford to sponsor, now it has become a tool for boosting profits as well as establishing goodwill.  However, now smaller companies are sponsoring everything from local volleyball and softball teams to fairs, festivals and clean-ups of parks as an effective method of boosting their visibility in their community. Most of these sponsorships help these companies to enhance their public profile relatively cheaply.

Irrespective of the size of the company, however, experts in the field tout a broad spectrum of benefits that can be gained by sponsorship aside from enhancing visibility and image, such as differentiating the company from competitors, helping to develop closer and better relationships with customers, both existing and potential ones, showcasing services and products, and even getting rid of outdated inventory. These experts go on to say that when sponsorships are strategic and well-conceived, they can boost both short-term and long-term sales.

Event Sponsorship Benefits

Sponsorship of events in particular can be especially effective as a marketing tool because it can be a means of accessing a wide range of audiences such as decision makers in business, government entities, and of course customers. It can be particularly beneficial for companies that take part in international trade, because sponsorship transcends cultural and language barriers.

A growing number of marketers think that corporate sponsorship is better than other methods as it provides opportunities to gauge customer response to products immediately.  Events allow business owners or executives relate directly with their customers, while they give customers the opportunity to try out the products of a company firsthand. In comparison, marketing research methods such as focus groups are usually costly and may not focus on the right kind of people, while market surveys or questionnaires usually do not allow prospective customers the opportunity to try out products.

Heightened visibility due to positive publicity through the media is another reason corporate sponsorship of events – especially those that attract large numbers of people like popular sports events – can be the most effective marketing tool. Every corporate sponsor seeks the widest exposure possible in both print and electronic media. This publicity increases the visibility of the company’s products and services. The various kinds of media that cover the event usually include the names, and even pictures, of the sponsors. This kind of mass coverage by the media that the sponsor gets is usually unaffordable, if the company were to purchase it. Therefore, in order to maximize the impact, the company sponsoring the event should augment the media coverage the organizers arrange. In fact, sponsorship often can generate media coverage which may not have been otherwise available.

Telemarketing

Posted in: ABR Handouts, Blog by Mallory Malloy on August 15, 2011 | No Comments

Click here to see previous Anderson Business Roundtable topics.

How Telemarketing Works:

Call Center Base

• Telemarketing is a form of out-bound sales that takes place in either a call center or from a home office.  Most telemarketers work out of a call center.  Each telemarketer is given a cubicle and a phone. When a telemarketer calls you, you can often hear the other telemarketers in the background. Because of the noise some companies opt to have their employees make calls out of their home office. This creates jobs for moms who want to stay at home, or for disabled individuals who have trouble leaving home to go to work.

Phone Numbers

• Telemarketers are given phone numbers of prospects to call. These phone numbers are either received in response to some type of survey, bought from another company, or found in your every day phone book. The telemarketers must make a certain number of calls per day to stay above their quota. Telemarketers are also now using automated voice messages to pre-screen prospects since most individuals hang up on telemarketers. If the individual wants to hear more and speak to a representative they can just press one. Then the telemarketer would get on the phone and proceed with their sales pitch.

Sales

• The main reason for telemarketing is to sell some type of product or service. Sometimes it is to get more information about your buying habits. Many telemarketers work on commission so they are pushy when you answer the phone. They don’t take no for an answer because they know they can sway some individuals in to buying their product. Telemarketers are not left to call the individuals without a sales pitch. It is all pre-written for them. They might have some training as to how to handle any questions that may come up, but primarily they stick to their script

Surveys (passive selling)

• By giving well written surveys telemarketers are introducing your company, product, or service for the first time to consumers and businesses.  This can generate and qualify leads for follow-up.  Surveys are also a good tool to measure current customer satisfaction through reaching out to current customers for feedback about products and services.  Surveys are also a way to poll the general public about their perceptions of the company and products versus the competition.  This also gives the consumers the opportunity to give their input on what products should be offered in the future and what products, if any, should be brought back to the market.

Why Telemarketing Works?

• Personal Contact…prospects tend to discard mailouts.
• You can’t wait for clients to come to you…in today’s competitive market, you must seek them out.
• More cost-effective and flexible than printed advertising.
• Multiple products can be offered.
• Target specific groups by any criteria, such as age, economics, or geographical, just to name a few.

Subcategories in telemarketing:

• Lead Generation, the gathering of information
• Sales, using persuasion to sell a product or service
• Outbound, proactive marketing in which prospective and preexisting customers are contacted directly
• Inbound, reception of incoming orders and requests for information. Demand is generally created by advertising, publicity, or the efforts of outside salespeople.

Telemarketing is a good opportunity for a small business to generate appointments for potential clientele. It is the first step in the sales cycle to gaining revenue for your company.

Do Not Call List:

The Federal Communications Commission (FCC) and the Federal Trade Commission have implemented a national “do not call” registry, making it illegal for telemarketers to contact you if you register your telephone number.

Frequently asked questions about the Do Not Call List:

How does the national do not call registry work?

By law, telemarketers must search the registry every 90 days and delete from their call lists any telephone numbers on the registry. If you continue to receive telemarketing calls even after you have registered your number, you will be able to file a complaint with the FCC or FTC. A telemarketer who disregards the do not call registry could be fined up to $11,000 for each call.

How do I register my telephone number?

You can register free of charge at www.donotcall.gov or by calling toll-free (888) 382-1222. If you register by telephone, you must call from the telephone number you wish to register.

Do I have to re-register my number every 5 years?

No. Originally, customers were required to re-register their number after 5 years on the registry, but the FCC recently changed this. Today, telemarketers are required to honor all registrations indefinitely, so the registrations will not automatically expire. Customers no longer need to re-register their numbers to continue their preference not to receive telemarketing calls.

Will this stop all telemarketing calls into my home?

Businesses with which you have an established business relationship are not required to follow the do not call rules. They can call you for up to 18 months from your last purchase, payment or delivery, even if your number is on the national registry. Companies with which you have made an inquiry or submitted an application can call you for three months, but if you ask a company not to call you, it must honor your request.

Callers soliciting charitable contributions do not have to search the national registry. Calls regarding political and religious speech are also not subject to the do not call requirements.

To avoid such calls, read all fine print before filling out sweepstakes or other contest forms. You may be establishing a business relationship, giving the company permission to call you. You can also ask companies and organizations to place you on their internal do not call lists.

What about my wireless phone?

Telemarketing to wireless phone numbers has always been illegal in most cases and will continue to be so. FCC regulations prohibit telemarketers from using automated dialers to call wireless phone numbers. Automated dialers are in standard use in the telemarketing industry, so most telemarketers are barred from calling consumers on their wireless phones without their consent.

Personal wireless phone users can add their numbers to the national registry. The government does not maintain a separate national wireless phone registry.

What is Ohio doing?

If you continue to receive unwanted telemarketing calls, you can file a complaint with the Ohio Attorney General in addition to the FCC and FTC.

Are there other protections against unwanted telemarketing calls?

• The telemarketing rules prohibit deceptive and abusive telemarketing practices and protect you from late-night calls.
• Calling times are restricted to 8 a.m. – 9 p.m.
• Telemarketers must promptly tell you who they are calling for and if the call is a sales call or charitable solicitation.
• Telemarketers must disclose all material information about the goods or services they are offering and terms of the sale. They are prohibited from lying about any terms of the offer.
• Telemarketers must transmit caller ID information and are prohibited from blocking caller ID information.
• Express permission must now be obtained in writing before advertisements may be sent to a customer.
• Fines for violations are $500 per each call and are payable to the victim.

Fax Blasting:

Fax Blasting (junk faxing), is a form of telemarketing where unsolicited advertisements are sent via fax transmission.  Junk faxing came into widespread use in the late 1980s as a result of the development and proliferation of relatively inexpensive desktop fax machines which resulted in rapid growth in the number of fax machines in the U.S.  The invention of the computer-based fax board in 1985, provided an efficient platform for reaching those fax machines with minimal cost and effort.

The fax machines of this period typically used expensive thermal paper and a common complaint about junk faxes was that they consumed that expensive paper without permission, thus shifting the cost of printing the advertisement to the recipient.

In the U.S., the passage of the Telephone Consumer Protection Act in 1991 along with action by individual states reduced the use of junk faxes at that time. However, by the late 1990s junk faxing had once again become a widespread problem in the U.S., with the entry of a number of large-scale fax broadcasters such as fax.com who boasted of the capacity to send millions of fax advertisements per day. Because the legal restrictions of fax advertising are more widely known today, junk faxes are now predominately used in connection with disreputable or fly-by-night marketers. Fines for violations are $500 per each fax and are payable to the victim.

Fraud:

According to the FTC, at least several hundred telemarketing firms exist specifically to defraud people in North America including the United States and Canada. Fraudulent schemes range from charity schemes and credit card fraud to credit repair and loan schemes.  When speaking to a telemarketer, be sure you have all of the information about what they are selling and be cautious of telemarketing fraud. 

Food for Thought:

What are your opinions on telemarketing?

Would you use it to market your business?

Do you talk to telemarketers and listen to what they are selling?

What would a telemarketer have to tell you to keep you on the phone?

Games of Chance in Business

Posted in: ABR Handouts, Blog by Whitney Recker on July 10, 2011 | No Comments

For previous Anderson Buisness Roundtable topics click here.

“Games of chance” refers to all practices involving “luck” or uncertain outcome.  This would include business card drawings where nothing of value is at risk all the way to gambling.  In gambling there is some sort of wager on the line and there are many laws and regulations for gambling.   Because you are not wagering anything in a game of chance it is not really true gambling but there are still rules and regulations that apply to games of chance.

Gaming law can be described as the set of rules and regulations that apply to the gaming (including gambling) industry.  Gaming law is not exactly a branch of law in the traditional sense but rather a transversal gathering of a range of legal topics related to gaming which encompasses matters normally included in various branches of law, including constitutional law, administrative law, tax law, company law, contract law and criminal law.

Gaming Law in Ohio:

Ohio permits charitable gaming (bingo and schemes and games of chance), horse racing, and the State of Ohio operates a lottery.

Forms of charitable gaming permitted in Ohio:

Charitable Bingo

Charitable organizations wishing to conduct bingo, including traditional bingo and instant bingo, must be licensed by the Attorney General of Ohio. To qualify for a license the organization must generally satisfy the following requirements:

• the organization must have received a tax-exempt determination letter from the Internal Revenue Service stating that it is exempt from federal income taxation under Section 501(c)(3), 501(c)(4) (civic league), 501(c)(8) (fraternal society), 501(c)(10) (domestic fraternal society), or 501(c)(19) (veteran’s post) of the Internal Revenue Code;
• The organization must qualify as a “charitable organization” as defined in the Ohio Revised Code; and, with the exception of a volunteer rescue service or firefighter’s organizations, the organization must have been in continuous existence for a period of not less than two years.

Raffles

A “raffle” is a form of bingo.

Organizations wishing to conduct a raffle must satisfy the following requirements:

• Revenue Service stating that it is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code; the organization must have received a tax-exempt determination letter from the Internal
• The organization must qualify as a “charitable organization” as defined in the Ohio Revised Code; and, with the exception of a volunteer rescue service or firefighter’s organization, the organizations must have been in continuous existence for a period of not less than two years.

Unlike other forms of charitable bingo, which requires a license issued by the Ohio Attorney General’s office, no license is required for a qualified charitable organization to conduct a raffle.

Games of Chance

A “game of chance” is a one sided form of gambling.  You do not wager anything.  An example of a game of chance would be a business card drawing.  A lot of times businesses do not even know they are partaking in a game of chance when they have business card drawings.  It is important to know the rules and regulations of gambling when you are hosting any game of chance.

Case Study – Monopoly Scam:

A popular game of chance was conducted by McDonalds.  It was the Monopoly game where customers must purchase certain menu items to obtain property cards much like the actual board game.  If they collect a matching set of properties they win a prize. 

In 2000, the US promotion was halted after fraud was uncovered. A subcontracting company called Simon Marketing, which had been hired by McDonald’s to organize and promote the game, failed to recognize a flaw in its procedures, and the chief of security, Jerome P. Jacobson, was able to remove the “most expensive” game pieces, which he then passed to associates who would redeem them and share the proceeds.  The associates “won” almost all of the top prizes between 1995 and 2000, including McDonald’s giveaways that did not have the Monopoly theme.  The associates “netted” over $24 million.  The scheme was uncovered when one of the participants informed the FBI on its ringleaders.  Even though the fraud was perpetrated without McDonald’s knowledge, the McDonald’s Corporation voluntarily attempted to rectify the situation by issuing payouts to new (legitimate) winners, awarding five $1 million annuity prizes, and fifty $100,000 prizes over a five-day period.

While the fraud appeared to have been perpetrated by only one key employee of the promotion company, and not by the company’s management, eight people were originally arrested, leading to a total of 21 indicted individuals.  The relationship between McDonald’s and Simon Marketing broke down in a pair of lawsuits over breach of contract, eventually settled out of court, with McDonald’s’ claim being thrown out and Simon receiving $16.6 million.  Although McDonald’s was not involved in the fraud, it came under much criticism for what appeared to be lax oversight of the promotion company.

In 1995, St. Jude Children’s Hospital in Memphis, Tennessee received an anonymous letter postmarked Dallas, Texas, containing a $1 million winning game piece. Although game rules prohibited the transfer of prizes, McDonald’s waived the rule and is making the $50,000 annual payments.  Investigations later indicated, and Jacobson himself admitted, that he had sent the winning piece to the hospital.

Gambling

Gambling is the wagering of money or something of material value (referred to as “the stakes”) on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods.  When gambling is mixed with business there are certain laws and rules that a business owner must know and understand. 

The law of gambling can be simple, or enormously complex.  For example, all gambling requires consideration, chance and prize, legal terms that must be analyzed by gaming lawyers.  In the United States, illegal gambling is a Federal crime if done as a business.  However, each of the states has its own laws regarding the regulation or prohibition of gambling.

Generally, gambling may only be conducted at festivals of charitable organizations that last for no longer than a period of four consecutive days and are held not more than twice a year or for a period of five consecutive days not more than once a year. Craps, roulette, and slot machines are not permitted at festivals.  The gambling must be conducted on the premises owned by the charitable organization or leased from a qualifying organization.   Card drawings are held at many different places frequented by business professionals such as restaurants, networking events, and company gatherings.

Many companies are indirectly involved in gambling and games of chance in business.  For example: ARF hires businesses to conduct bingo games and printing companies print scratch-offs for gambling.

There are many aspects to gambling in the business world so it is very important to understand the differences between games of chance and gambling and how they affect a business.

Multi-Level Marketing or MLM’s

Posted in: ABR Handouts, Blog by Whitney Recker on | No Comments

 Click here to see previous Anderson Business Roundtable topics.

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation.  Other terms for MLM include network marketing, pyramid selling, and referral marketing.

Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing.  Some people equate MLM with direct selling, although MLM is only one type of direct selling.

MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, over-priced products and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion.  Not all MLM companies operate the same way, and MLM groups have persistently denied that their techniques are anything but legitimate business practices.

“Network Marketing” and “Multi-level Marketing” are generally considered to be synonyms, and a subset of direct selling.  While “direct selling” and “network marketing” refer primarily to the distribution system, the term “multi-level marketing” emphasizes the compensation plan more. Network Marketing tends to be modern preferred term, however many other terms are also used, including word-of-mouth marketing, interactive distribution, relationship marketing and others.  Further, there has appeared a variation on network marketing that is not strictly speaking multi-level because the compensation is not based on the spread between levels but rather the compensation is paid out to everyone who qualifies.  Critics have argued that the use of different terms and “buzzwords” is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams. Some sources classify multi-level marketing as a form of direct selling rather than being direct selling.

The Direct Selling Association, an American industry body, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in 1999.  Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and later introduced multi-level compensation plans.  By 2009, 94.2% of members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales.  The DSA has approximately 200 members while it is estimated there are over 1000 firms using multi-level marketing in the US alone.

MLM businesses operate in the United States in all 50 states, and in more than 100 other countries. New businesses may use terms like “affiliate marketing” or “home-based business franchising.” However, many pyramid schemes try to present themselves as legitimate MLM businesses.

The United States Federal Trade Commission states “Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors.  They’re actually illegal pyramid schemes. Why is pyramiding dangerous?  Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited.  And when a plan collapses, most people – except perhaps those at the very top of the pyramid – end up empty-handed.”

In a 2004 Staff Advisory letter to the Direct Selling Association, the FTC states:

Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from purchases of goods and services that are not simply incidental to the purchase of the right to participate in a money-making venture.

The FTC warns “Not all multilevel marketing plans are legitimate.  Some are pyramid schemes. It’s best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.” and states that research is your best tool, giving eight steps to follow:

1)      Find — and study — the company’s track record

2)      Learn about the product

3)      Ask questions

4)      Understand any restrictions

5)      Talk to other distributors

6)      Consider using a friend or adviser as a neutral sounding board or for a gut check

7)      Take your time

8)      Think about whether this plan suits your talents and goals.

Although there are some negative connotations about MLM’s there are also positives to them as well:

• Easy entry into business
• Low cost
• Proven system (like franchinsing)
• There is a lot of support avaliable
• You have to go through an educational process
• You are essentially creating a home based business that includes certain tax deductions
• Potential to work in an industry you have passion for
• Social components
• Almost eveybody is a perspective customer

Some MLM’s have found great success and have many employees and clients.  Some of these popular multi-level marketing companies are: WFG, Primerica, Herbalife, WMA, Amway, Prepaid Legal, Pampered Chef, Mary Kay, Ignite, and Shakley.  These companies are great examples of how an MLM should be conducted and run.  Some of them offer incentives and great benefits to their associates giving them the confidence to boost their sales.   For example, some MLMs use free products, vacations, and even free cars as incentives.

Optimizing for Local Search

Posted in: ABR Handouts, Blog, Business Development, Business Planning, Technology by Mallory Malloy on | No Comments

You have probably noticed that most searches now bring up local business results on Google SERPs (Search Engine Results Pages) even if you do not put the location in the search query. Now, if you are asking the question, “Why are the local results showing up if I did not search for anything local?” you are asking the wrong question. The right question would be; “Why do I not show up in that list?”

Recently, Google started putting more emphasis on local search results and universal search. “Local Results” is when Google displays local businesses relevant to your search query. For example, if you search for “Plumber”, you will see that local businesses from Google Maps are displayed right above the fold along with website results. If you do another search for “Plumber Miami”, you will get the same results if you are actually in Miami that is. What does this mean?

This means that Google is doing something, which they have not done for the past 8 years; they are displaying local results based on your computer’s IP address and location. The reason is simple; it’s more relevant. After extensive research and analysis for billions of searches, they came to the conclusion that most users are searching for local results for certain search queries, like services for example.

This will better illustrate the point. If you search for “Internet Marketing”, you might be looking for just info, so no local results are displayed. However, if you search for “Internet Marketing Services”, you will see that local results do show up. This is because you are looking for “services” so you would prefer someone local and close to you. At least that’s what Google thinks. And at least, you are given the option not to choose the local results.

How does this affect small business?

Small local businesses have more power now to get leads from Google Searches. All you really need to do is submit your business to Google Local. Of course, some optimization does help in this process and if you have multiple locations, you are going to get more visibility. By doing this, Google is providing a unique and vital service to the user. Remember the days of yellow pages where you had to look through thousands of pages to find a service or a plumber? Not anymore; you can search for just plumber without even writing your city and you are instantly shown results, businesses, reviews, phone numbers, and websites.

For previous Anderson Business Roundtable topics click here.

What is Intellectual Property?

Posted in: ABR Handouts, Blog by Whitney Recker on | No Comments

Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.

IP is divided into two categories:  1) Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and 2) Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.  Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.

Issues of Intellectual Property

Patent:

Patent usually refers to an exclusive right granted to anyone who invents any new, useful, and non-obvious process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof, and claims that right in a formal patent application. The additional qualification utility patent is used in the United States to distinguish it from other types of patents but should not be confused with utility models granted by other countries. Examples of particular species of patents for inventions include biological patents, business method patents, chemical patents and software patents.

Prospective changes in patent law:

The patent system hasn’t changed much since 1952 when Sony was coming out with its first pocket-size transistor radio, and bar codes and Mr. Potato Head were among the inventions patented. Now, after years of trying, Congress may be about to do something about that.

The House is considering a measure known as the America Invents Act that would mark a fundamental change in how patents are reviewed and the biggest revision to U.S. patent law since 1952.   A key provision of the legislation would give the patent office more power over its funding by allowing the agency to alter its fee structure and keep Congress from diverting fees for non-patent purposes.

The America Invents Act would simplify the application process and bring U.S. patent law into better harmony with the patent law of other countries, most of which operate on the “first-to-file” system rather than the “first to invent.”  It would also eliminate costly interference proceedings at the United States Patent and Trademark Office (USTPO), and reduce U.S. applicants’ costs in seeking patent rights outside of the United States. 

The proposed law would switch U.S. patent priority from the present “first-to-invent” system to a “first-to-file” system.  The proposed legislation also modifies the prior art definitions of the patent law.  Acts and prior art that bar a patent will include public use, sales, publications, and other disclosures available to the public as of the filing date, other than publications by the inventor within one year of filing (inventor’s “publication-conditioned grace period”), whether or not a third party also files a patent application.  Applicants that do not publish their inventions prior to filing will receive no grace period.  The proceedings at the U.S. Patent Office for resolving priority contests among near-simultaneous inventors who both file applications for the same invention are repealed, because priority will be determined based on filing date.  An administrative proceeding—called a “derivation” proceeding, similar to that currently used within some interference proceedings is provided to ensure that the first person to file the application is actually an original inventor and that the application was not derived from another inventor.

How to file for a Patent:

The first hurdle an inventor must clear is to demonstrate that their invention is useful, novel and “nonobvious.” As long as the invention performs some function of use and actually works, it fulfills the utility requirement. Generally if the invention is new, different, and previously unknown, it passes the novelty test. The third prong, “nonobviousness,” is described by the U.S. Supreme Court as whether the differences between the invention and a previously patented invention would be obvious to an ordinary person familiar with the field where the inventions are used. The inventor or her attorney or agent conducts an exhaustive search of existing patents to make sure the invention will pass the three tests.

The application process is the next step.  It is wise to use the aid of an attorney for this process because a utility patent application is a uniquely written narrative document that must satisfy very stringent standards as to form and content.

Patent applications contain three sections describing the specifications of the device; the claim, or description of what the thing does; and an abstract summarizing application. The specification section is subdivided into sections that make the case for why the invention deserves a patent, what other patents exist in the field, how it is put together and how it works. The application also usually contains detailed illustrations of the invention.

Once the application is filed with the U.S. Patent and Trademark Office, a patent examiner checks it to make sure it is properly drawn up and meets the legal requirements to grant a patent. While this sounds simple, it normally involves a great deal of back-and-forth communication between the examiner and the inventor’s agent. In practice the examiner often rejects the application, and it is up to the inventor to persuade the examiner to reverse his decision. Jester reports that this process can take two years or more.

Trademark:

A distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities.

• ™ (for an unregistered trade mark, that is, a mark used to promote or brand goods)
• ℠ (for an unregistered service mark, that is, a mark used to promote or brand services)
• ® (for a registered trademark)

How to file for a Federal Trademark:

1. -Make sure you know what a trademark is and whether or not you need one.

2. -Search for a conflicting mark, you can search the USTPO to see if there is a similar mark to the one you are looking to trademark.  If there is, it might not be worth moving forward with.

3. -File the application on the USPTO website.  You will need to pay $275 for the filing fee and you will not be reimbursed if your application is rejected. 

4. -Your mark either moves to the Intent-to-Use stage or receives an office action rejection.  If your mark moves to the Intent-to-Use stage that means a lawyer has reviewed it and it is currently protected. 

5. -The USPTO publishes your mark in the Official Gazette.  If another party thinks your mark might damage theirs, they must either file an opposition or ask for an extension of time within 30 days. If no one protests, the mark is yours to use with a (TM).

6. -Receive your Notice of Allowance and start selling!  If no oppositions occur, you’ll receive a Notice of Allowance (NOA) within 12 weeks of your mark being published in the Official Gazette. Then the clock starts ticking.  You’ll have 6 months to use the mark in commerce.  Once the mark has been used (i.e. a product with the mark has been successfully sold and you have proof of purchase), a Statement of Use (SOU) must be filed.  If you need more time to sell a product, you can pay a fee and file for a six month extension.

7.  -File the Statement of Use, When you file a SOU, you must send pictures of the products you’ve been selling as well as proof of purchase (receipts, etc).  Successfully filing the SOU will move your mark (which you’ve been using with a TM) from the intent-to-use stage to a full-blown, registered trademark (R)!  Beware of the unavoidable $100 SOU review fee.

How to file a State Trademark in Ohio:

1. -To register a trademark or service mark in Ohio, you must submit to the Ohio Secretary of State’s office the application form prescribed by the Secretary of State (form 555). The prescribed form includes instructions for its completion and a description of each classification of goods and services for which a mark may be registered. The form must be notarized and be accompanied by a specimen of the mark in use (for example, as it appears on letterhead). The mark must be in use prior to filing the application.
2. -The Trademark/Service Mark Application (form 555) may be requested by phone at (877) 767-3453 or e-mail at busserv@sos.state.oh.us, obtained in person from the Secretary of State’s office, or downloaded from the Secretary of State’s Web site at: www.sos.state.oh.us. The filing fee for a Trademark/Service Mark Application is $125, payable to the “Ohio Secretary of State.” Expedited service is available by marking the “Expedite” box on the application and including the additional $100 expedite fee. 

-          The registration is effective for a term of 10 years and can be renewed up to six months in advance of the expiration date. The renewal fee is $25.

-          A trademark or service mark may also be assigned to a new owner. The assignment may or may not include the goodwill associated with the mark, depending on the agreement between the original and new owners.

-          You must submit a specimen of the mark with your application for a trademark or service mark. An acceptable specimen is one that shows the mark in use.  For example, if the mark is used on letterhead or business cards, an acceptable specimen is a piece of the letterhead or a business card displaying the mark. An example of an unacceptable specimen is a hand-drawn sketch of a mark.

1. -If your application for a trademark or service mark is submitted and is denied, you may appeal for reconsideration by calling or writing to the Corporations Counsel at the Secretary of State’s office. Written requests for reconsideration must be supported by legal authority and must be accompanied by a copy of the application in question, including a specimen of the mark.
2. If a written appeal is denied, the applicant or applicant’s attorney will receive a written response from the examining attorney explaining the reason(s) for such denial.

Trade name:

A trade name is any name used in the course of business that doesn’t include the full legal name of all the owners in the business.  In the case of a limited partnership, corporation, or LLC, it’s any name that differs in any respect from the name registered with the Secretary of State. 

Why you should register a trade name?

The purpose of a trade name registration is to provide a record of all owners of a business.  You must register your trade name in order to file a lawsuit on behalf of your business.  This means a lawsuit for any purpose, not just lawsuits related to use of the business name.  Registering your trade name doesn’t protect the name from use by others.  The right to use a trade name belongs to the one who first uses it in connection with their business.

How to register a trade name:

You can register your trade name by using the Master Business Application.  All you need to do it list the name/names you want to register on the Master Business Application.  There is a $15 non-refundable processing fee, and $5 fees for each name your register.

-The Master Business Application also allows you to change the trade name of your business.

-You can also search the State Department of Revenue and the U.S. Patent and Trademark Commision to see if anyone else is using your trade name.  Even if you do not find any matches to your trade name it does not mean that it is not being used.  It might be in use but not registered.

Squatting:

Cybersquatting (also known as domain squatting), according to the United States federal law known as the Anticybersquatting Consumer Protection Act, is registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else. The cybersquatter then offers to sell the domain to the person or company who owns a trademark contained within the name at an inflated price.

The term is derived from “squatting”, which is the act of occupying an abandoned or unoccupied space or building that the squatter does not own, rent or otherwise have permission to use. Cybersquatting, however, is a bit different in that the domain names that are being “squatted” are (sometimes but not always) being paid for through the registration process by the cybersquatters. Cybersquatters usually ask for prices far greater than that at which they purchased it.  Some cybersquatters put up derogatory remarks about the person or company the domain is meant to represent in an effort to encourage the subject to buy the domain from them.

Yet another approach is “namejacking” (or “name jacking”) which is accomplished by purchasing an individual’s name as a top-level domain name, for example John Jones equals JohnJones.com, JohnJones.org, etc. Setting up a website allows the purchaser to capitalize on any searches done for that name. For example, if John Jones has a thriving professional practice (perhaps he is a doctor, a lawyer, a financial professional, or real estate agent – or any other profession which interacts with the public on a regular basis), there is a high likelihood that potential clients will do some research on the internet before doing business with Mr. Jones.  If Mr. Jones has been “name jacked” then someone else owns johnjones.com and that website will appear at or near the top of any searches for the name “John Jones.”  These “name jacked” sites are typically set up to sell high-profit items like ebooks and/or various business opportunities and require few purchases to be profitable.  As the name-jacked domains are set up using non-trademarked names and they have a purpose other than selling the domain name back to an individual, they circumvent the “Anti-cybersquatting Consumer Protection Act” (ACPA).  Since people frequently search the web to find out information, name jacking provides low-cost web traffic to the name-jacked website.

Court systems can also be used to sort out claims of cybersquatting, but jurisdiction is often a problem, as different courts have ruled that the proper location for a trial is that of the plaintiff, the defendant, or the location of the server through which the name is registered.  Countries such as China and Russia do not view cybersquatting in the same way or degree that US law does.  People often choose the UDRP (Uniform Dispute Resolution Process) created by ICANN because it is usually quicker and cheaper ($2,000 to $3,000 in costs and fees vs. $10,000 or more) than going to court, but courts can and often do overrule UDRP decisions.  In Virtual Works, Inc. v. Volkswagen of America, Inc. (a dispute over the domain vw.net), the Fourth Circuit Court of Appeals created a common law requirement that the cybersquatter must exhibit a bad faith intent in order to confer liability.  This means that domain names bearing close resemblance to trademarked names are not per se impermissible.  Rather, the domain name must have been registered with the bad faith intent to later sell it to the trademark holder.

Some countries have specific laws against cybersquatting beyond the normal rules of trademark law. The United States, for example, has the U.S. Anticybersquatting Consumer Protection Act (ACPA) of 1999.  This expansion of the Lanham (Trademark) Act (15 U.S.C.) is intended to provide protection against cybersquatting for individuals as well as owners of distinctive trademarked names.  However, even notable personalities, including rock star Bruce Springsteen and actor Kevin Spacey, failed to obtain control of their names on the internet, which indicates the lack of protection afforded to the average businessman or individual.

Cybersquatting and Google:

As a result of a recent decision against Google in the USA, a new weapon should be considered by trademark owners like Microsoft in the battle against cybersquatters.  If misspellings or other versions of trademarks are registered as domain names by third parties who are earning click revenue from Google’s adsense program, suing Google may be an option worth considering.

The adsense program effectively allows Google to profit from cybersquatting.  To understand why that is, it is worth taking a look at how Google’s Adwords program works. 

When a surfer searches for specific terms Google’s search results along the top and on the right hand bar of the page are the advertisements of businesses who are participating in Adwords – that is paying Google to feature their ads 

Adwords involves ‘bidding’ on keywords, so that whenever your desired keyword is searched on by a surfer (for example, Azrights bids on the keywords ‘register trademark’) your ad will appear among the results.  As such your site stands a chance of being visited (clicked on) by the surfer.  As these surfers are specifically looking for the product or service that your website offers it is a good way of promoting your services to potential buyers Each time a surfer clicks on one of youre ads, you pay google something  for the click.  Some keywords are more expensive than others.  If only very few advertisers are bidding on a keyword that term will be less competitively priced. 

Google uses a number of third party sites to display its advertiser’s ads, in order to promote your ads more widely.  Amazon is an example of a third party site that participates in Google’s adsense program.  So, for example, if you are looking at books about brands and trademarks on Amazon you will notice some ads by competitors about trademark registrations. 

Similarly, many  domainers or ‘click farmers’ websites and parked pages also participate in adsense, so that their parked pages or websites will feature lists of Google’s featured ads.  Sometimes such pages purely exist as a page of links, such as trademark.co.uk does for trademark ads. 

If a cybersquatter has registered a misspelt trademark name such as MIROSOFT they too are likely to use a parked page to receive Google’s ads.  Their page will feature a selection of ads by Microsoft’s competitors or by businesses offering similar goods and services to those that Microsoft would sell.  So, the technology Google uses clearly enables it to decide which of its advertisers have suitable ads for such a page, and therein lies the argument as to the liability Google should bear for the wrongdoing.

The third party site receives a share of Google’s revenue.  So if Google collects 60 cents per click from the advertiser it may pay 20 cents a click (this is a complete guess) to the owner of the third party site.  Therefore whenever a surfer clicks on an ad on a third party’s site rather than on Google’s own search result page the surfer’s click generates revenue for the cybersquatter (a term that applies to anyone who has registered someone else’s trademark as a domain name).  What’s more it is Google that has created the possibility for the cybersquatter to earn anything from its wrongdoing.  Google’s practice was successfully challenged in the recent litigation by Vulcan Golf in the US District Court in Illinois see here.  They argued that under the Anticybersquatting Consumer Protection Act (ACPA) Google’s role in facilitating such profiteering by cybersquatters should attract liability.  The court agreed.

Of course, there are perfectly legitimate uses of parked pages, and it is difficult for anybody to claim rights in names like ‘trademarks’.  Therefore, the question is to what extent Google should be expected to police the rights of trademark owners.  Where should it draw the line when if it notices that the parked page could possibly belong to a cybersquatter rather than to a legitimate domainer who has good reason to own a domain name, that on the face of it might be someone else’s trademark. 

While for brands like Microsoft it may be quite clearcut that a variation of the name Microsoft is likely to be held by a cybersquatter, it is not always easy to know whether or not a domain name is actually infringing someone’s trademark rights, especially where the brand name is a generic word like APPLE.

Copyright:

Copyright is a set of exclusive rights granted to the author or creator of an original work, including the right to copy, distribute and adapt the work.  In most jurisdictions copyright arises upon fixation and does not need to be registered.  Copyright covers a wide range of works, including newsletters, articles, photographs, videos, graphics, maps, sheet music, dramatic works, paintings, architectural drawings, sound recordings, motion pictures and computer programs.  However, some things cannot have copyrights such as legal documents and recipes (although the book containing the recipe may be).

How to register for a Copyright:

-The easiest way to register your copyright is to file a copyright registration online.  The US Copyright Office has an online copyright application process that you can complete from the comfort of your own home, at any time of the day or night.  You’ll need to pay a $35 fee for online copyright registration, but, after that, your work is protected.  If you find that someone is infringing your copyright after you’ve registered it with the US Copyright Office, you’re in a good position to file legal proceedings and take legal action to protect your copyright.

-The second fastest way to register a copyright is to complete your copyright application electronically, print it and mail it. The US Copyright Office has an electronic form in PDF format that you can complete in Adobe Acrobat or Adobe Reader. This electronic form is called Form CO and is available from the US Copyright Office Web site. You simply type in the information in Adobe, print it and mail it, along with a $45 fee, to the address provided on the form.

-The third option for registering a copyright is to complete paper forms and register by mail. This is the least efficient option, as it takes the US Copyright Office longer to process these paper applications. Unlike the electronic registration options, different categories of works require different paper forms, so make sure you complete the correct paper forms when registering by mail.

-The fee to register by mail with paper forms is $45, but this option takes longer than registering by mail with an electronically completed document. The US Copyright Office does not make these paper forms available online, so you’ll need to request them from the office and they will mail them to you via regular United States Postal Service.

Protections from infringement:

Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or selling the patented invention. In many countries, a use is required to be commercial (or to have a commercial purpose) to constitute patent infringement.

The scope of the patented invention or the extent of protection is defined in the claims of the granted patent. In other words, the terms of the claims inform the public of what is not allowed without the permission of the patent holder.

Patents are territorial, and infringement is only possible in a country where a patent is in force. For example, if a patent is filed in the United States, then anyone in the United States is prohibited from making, using, selling or importing the patented item, while people in other countries may be free to make the patented item in their country. The scope of protection may vary from country to country, because the patent is examined by the patent office in each country or region and may have some difference of patentability, so that a granted patent is difficult to enforce worldwide.

A non-disclosure agreement (NDA), also known as a confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects nonpublic business information.

NDAs are commonly signed when two companies, individuals, or other entities (such as partnerships, societies, etc.) are considering doing business and need to understand the processes used in each others business for the purpose of evaluating the potential business relationship. NDAs can be “mutual”, meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party.

Non-Profit Organizations

Posted in: ABR Handouts, Blog, Business Planning by Whitney Recker on | No Comments

A nonprofit organization (abbreviated as NPO), is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.   Examples of NPOs include charities (i.e., charitable organizations), trade unions, country clubs, trade associations and public arts organizations.  Not all non-profits are charitable.   Most governments and government agencies meet this definition.  NPOs are partially exempt from income and property taxation.

Ownership is the quantitative difference between for- and not-for-profit organizations.  For-profit organizations can be privately owned and may re-distribute taxable wealth to employees and shareholders.  By contrast, not-for-profit organizations do not have private owners.  They have controlling members or boards, but these people cannot sell their shares to others or personally benefit in any taxable way.

While they are able to earn a profit, more accurately called a surplus; such earnings must be retained by the organization for its self-preservation, expansion and future plans.  Earnings may not benefit individuals or stake-holders.  While some nonprofit organizations put substantial funds into hiring and rewarding their internal corporate leadership, middle-management personnel and workers, others employ unpaid volunteers and even executives may work for no compensation.  However, since the late 1980s there has been a growing consensus that nonprofits can achieve their corporate targets more effectively by using some of the same methods developed in for-profit enterprises.  These include effective internal management, ensuring accountability for results, and monitoring the performance of different divisions or projects in order to better benefit from their capital and workers.  Those require satisfied management and that, in turn, begins with the organization’s mission. 

NPOs are often charities or service organizations; they may be organized as a not-for-profit corporation or as a trust, a cooperative, or they may be purely informal.

Sometimes they are also called foundations, or endowments that have large stock funds.  A very similar organization called the supporting organization operates like a foundation, but they are more complicated to administer, they are more tax favored, and the public charities that receive grants from them must have a specially determined relationship.

Foundations give out grants to other NPOs, or fellowships and direct grants to participants.  However, the name foundations may be used by any not-for-profit corporation — even volunteer organizations or grass roots groups.

NPO’s like country clubs are different.  They exist for the benefit of their members.

In the United States, nonprofit organizations are formed by filing either bylaws and/or articles of incorporation in the state in which they expect to operate.  The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and own property as any other individual or for-profit corporation may do.

Nonprofits can have members but many do not.  The nonprofit may also be a trust or association of members.  The organization may be controlled by its members who elect the Board of Directors, Board of Governors or Board of Trustees.  Nonprofits may have a delegate structure to allow for the representation of groups or corporations as members.  Alternatively, it may be a non-membership organization and the board of directors may elect its own successors.

A primary difference between a nonprofit and a for-profit corporation is that a nonprofit does not issue stock or pay dividends, and may not enrich its directors.  However, like for-profit corporations, nonprofits may still have employees and can compensate their directors within reasonable bounds.

The two major types of nonprofit organization structure are membership and board-only.  A membership organization elects the board and has regular meetings and power to amend the bylaws.  A board-only organization typically has a self-selected board, and a membership whose powers are limited to those delegated to it by the board.  A board-only organization’s bylaws may even state the organization has no membership, although the organization’s literature may refer to its donors as “members”.  The Model Nonprofit Corporation Act imposes many complexities and requirements on membership decision-making.  Accordingly, many organizations have formed board-only structures.  The National Association of Parliamentarians has raised concerns about the implications of this trend for the future of openness, accountability, and understanding of grassroots concerns in nonprofit organizations.  Specifically, they note that nonprofit organizations, unlike business corporations, are not subject to market discipline for products and shareholder discipline over their capital; therefore, without membership control of major decisions such as election of the board, there are few inherent safeguards against abuse.  A rebuttal to this might be that as nonprofit organizations grow and seek larger donations, the level of scrutiny rises, including expectations of audited financial statements.

After a recognized type of legal entity has been formed at the state level, it is customary for the nonprofit organization to seek tax exempt status with respect to its income tax obligations.  That is typically done by applying to the Internal Revenue Service (IRS), although statutory exemptions exist for limited types of nonprofit organizations.  The IRS, after reviewing the application to ensure the organization meets the conditions to be recognized as a tax exempt organization (such as the purpose, limitations on spending, and internal safeguards for a charity), may issue an authorization letter to the nonprofit granting it tax exempt status for income tax payment, filing, and deductibility purposes.  The exemption does not apply to other Federal taxes such as employment taxes.  Additionally, a tax-exempt organization must pay federal tax on income that is unrelated to their exempt purpose.   Failure to maintain operations in conformity to the laws may result in an organization losing its tax exempt status.

Individual states and localities offer nonprofits exemptions from other taxes such as sales tax or property tax.  Federal tax-exempt status does not guarantee exemption from state and local taxes, and vice versa.  These exemptions generally have separate application processes and their requirements may differ from the IRS requirements.  Furthermore, even a tax exempt organization may be required to file annual financial reports (IRS Form 990) at the state and federal level.  A tax exempt organization’s 990 forms are required to be made available to public scrutiny.

Cloud Computing

Posted in: ABR Handouts, Blog, Technology by Mallory Malloy on June 15, 2011 | No Comments

Computing has come full circle. In the early days of mainframe computers, everyone interacted with large centralized mainframes through terminals. Wide area access to the huge computers were through long distance serial communications links, all hooked up to dumb terminals.

After that came the PC.

Everyone could now own their very own computer. People began to do cool things that once took millions of dollars. Businesses then wanted their employees to work together online, and client/server technology was born. Small companies, and departments of larger companies could now have their very own software applications using cheap servers. Client/server technology pushed computing capability out into the edge. Sun Microsystems said that “The Network was the Computer,” anyone remember that tag line?

Then came the internet.

Websites proliferated. People used simple software called browsers to access their applications which resided in the “cloud” somewhere. When more and more applications came about, their capabilities broadened. Soon people were able to do their everyday productivity stuff over the internet. Application providers needed some infrastructure that could cope with sudden surges in application usage.

Thus was born “cloud computing“.

Plain English Definition: Computer applications accessed over the Internet. Data and software are not stored on your computer, but rather on the “cloud” servers. 

Examples:

·         Google Docs/MS Office Live

·         Salesforce CRM

·         Humyo (online storage)

·         Webmail

·         QuickBooks Online

What does it mean?

·         Different cost structure: Monthly access fee vs one-time purchase

·         Lower capital investment

·         Where’s my data?  Security and privacy concerns

·         Greater opportunity for collaboration, team projects

·         Virtual work environment (blur between work and home)

·         Easier to sync information from different sources