Business Insider Magazine-vol 4-issue 3-2009-web Issue

F I NANCIAL CRISIS WATCH: Find i n g t h e B o t to m o f t h e Ec o n o m i c D ow n t u r n The Los Angeles South Bay B2B Magazine • Second Issue 2009 • Volume 4, Issue 3 • www.BusinessInsider.us • Complimentary Copy

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Green Biz

5 South Bay Organizations Upping the Eco Ante

The Real Estate Weather Report: Keep Umbrellas Handy and Make Hay When the Sun Shines

Legal Pro Doubleheader: Survive a Lawsuit and Select the Right “Entity” for Your Business

Technology Insider Doubleheader: Digital Publishing Makes Magazines Greener and Surviving the Recession With Efficient IT Planning

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housands of homeowners are learning the hard way how short-sighted mortgage opportunities can devastate their financial situation. In the current volatile mortgage market, a mortgage is no longer just a mortgage. It is a financial instrument that needs to be woven into the fabric of your short and long term financial plans. As a Certified Mortgage Planning Specialist and Certified Liabilities Advisor, I take a financial planning approach to mortgage lending and debt management to effectively maximize tax advantage while structuring your financing with safety and liquidity in mind.

Ken Roberts CMPS, CLA President Certified Mortgage Planning Specialist Certified Liabilities Advisor 30 Years in Real Estate

In today’s real estate market environment, you can no longer afford to do business with anyone who’s not a tried and true seasoned professional. Do not trust one of your life’s largest financial transactions to someone that’s new, part-time or doing mortgages on the side. Likewise, make sure you deal with a Realtor that is at the top of their game and experienced in how to thrive in our current environment. For you, it may well be the difference between success and failure. The game has changed. Play to win!!

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A Truly Holistic View of “Sustainability” Humanity faces dire consequences when we destroy the sustainability of our ecosystem. In this “Green Biz” issue, we profile five local organizations committed to doing business in an ecologically sustainable manner while teaching others to do the same. “Sustainability” is a word that has been horribly ignored by our civilization for much too long. We live in the “here and now” with little or no thought for what led us here or what unsustainable living could mean for our future. We do this in the way we exploit the environment and take our chronically flawed economic system for granted. It’s no accident that both are collapsing before us. More green in the environment is a good thing. More green in the form of green ink on currency not sustained by genuine production has proved a very bad thing. The latter unsustainable form of “green” is the root cause of the wild swings the global economy has experienced over the last generation. Business Insider Magazine strives to help you understand “sustainability” in all forms, whether they be ecological or economic. Many of our columnists share useful insights on ways to run your business more effectively so you are in a better position to cultivate the dollars circulating in the market. This is something every business must continue to do at all times. It’s a given that we will be working harder for the foreseeable future. However, the businesses that survive this unprecedented economic downturn will be the ones that work smarter—or better yet—wiser. It also helps to gain a deeper understanding of the economics that set the stage for our activities. This is where Business Insider Magazine strives to go deeper to expand your understanding of issues and events affecting our economy that continue to mystify the corporatecontrolled media. It’s really not a mystery at all if you simply open your eyes and take a closer look. Take a close look at this issue and I expect your eyes will open considerably wider. Regards, David Whitehead Publisher

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I n This Iss u e. . .

Cover Story:

Green Biz

5 South Bay Organizations Upping the Eco Ante ... 8 Legal Pro Doubleheader: Litigation Insider: 7 Steps to Surviving a Lawsuit ... 10 Incorporation Insider Protect Yourself and Your Business By Selecting the Right “Entity” ... 20 A Real Estate Pro’s Perspective The Real Estate Weather Report ... 12 Publisher’s Perspective The Empire With the Invisible Throne ... 16 The Financial Crisis: Finding The Bottom ... 18 Technology Insider: Digital Publishing Makes Magazines Greener ... 6 Efficient IT Planning is Key to Recession Survival ... 7 South Bay Calendar of Business Events: Save the Date! ... 22

BUSINESS insider MAGAZINE The South Bay Los Angeles Business-to-Business Magazine Publisher & Editor David Whitehead Contributing Writers DeeAnn Flores Chase, Ken Roberts, Kurt Schlichter, Brian Simon, David Whitehead Graphic Design & Production David Whitehead Copy Editing & Proofing Brian Simon

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Advertising Sales Manager David Whitehead Assistant to the Publisher Alexandra C. Hart All correspondence may be emailed to: [email protected] Or mailed to: Business Insider Magazine P.O. Box 1032 Palos Verdes Estates, CA 90274 (310) 872-9732 www.BusinessInsider.us www.TheBizBoard.net BUSINESS insider MAGAZINE Welcomes Input From The Community: Business Insider Magazine will consider running articles and columns from qualified business professionals on topics of interest to the South Bay business community. Although many editorial contributors advertise in Business Insider Magazine, strict guidelines are enforced to ensure topical editorial content, unless packaged as part of an advertising supplement, is objective and only includes topically relevant perspectives. Editorial contributors may not directly promote themselves or their companies except in their italicized biographies. Editorial content is not intended as a sales pitch for specific products or services repsesented by the contributor. It is our goal to present relevant information local business professionals can use to run their businesses more effectively. Business Insider Magazine makes every attempt to provide business decision-makers with current and accurate information. However, Business Insider Magazine disclaims any implied warranty about the correctness or accuracy of information published in Business Insider Magazine and www. BusinessInsider.us or its appropriateness for a particular purpose. You assume full responsibility for using the information and understand and agree that Business Insider Magazine is neither responsible nor liable for any claim, loss, or damage resulting from its use. Opinions and/or claims of Business Insider Magazine contributing writers and advertisers do not necessarily reflect the opinions of the publisher. © 2009 BIM Publications & BUSINESS indider MAGAZINE All Rights Reserved

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TECHNOLOGY INSIDER

Digital Publishing Makes Magazines Greener! By David Whitehead

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ecause every publication I have ever been associated with was produced with computers, I have spent my entire career wondering if we would always be publishing with ink and paper. Unlike most publishing professionals of my generation, I was never bonded to the idea of chewing up pulp. Although I have no timeframes in mind for going totally digital with Business Insider Magazine, I could end up making this decision before I retire with the last of the baby boomers. “We’ll do print as long as it makes sense” is the mantra espoused by many in today’s publishing industry. For many, it’s no longer about if but when digital will become dominant over traditional print. Five months prior to this writing, we began phasing out our online .pdf edition of Business Insider Magazine in favor of the high-resolution Adobe Flash digital format. So far, we have cultivated additional online readers equal to about 15 percent of our print distribution, and this total continues to increase over time. This impressed me because current platforms for “flip-page” magazines require readers to navigate and zoom through vertically designed magazine pages on their horizontal computer screens. Despite this and other limitations in using conventional computers as portable reading devices, a core segment of computer users are choosing to read digital publications. In fact, some publishers are producing horizontally designed versions of their print publications for easy viewing on conventional computer display screens. And this is just the beginning. Print Publishers Largely Divided on the Impact of Digital Publishing I recently participated in an online discussion with publishing professionals from around the United States on their experiences with digital publishing. The general consensus is digital will play a significant role in our future, but how much impact it will have or if it will at some point eliminate print is hotly debated. First, even though significant reader gains have been made because these readers are coming from the World Wide Web it is difficult to qualify them to know if they are relevant to a particular publication’s print display advertisers. In fact, the “paper defenders” point out there is no collected data indicating print advertisers will buy more because a publication is available online as a digital flipmagazine. I personally take this observation with a grain of salt because print publishers made similar justifications for ignoring the impact of the Internet. They were stunned when entire classes of traditional display advertising migrated online and stayed there.  S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

Forward-thinking publishers understand the obvious potential for this technology to catch on in a big way. There are also premium publication platforms that do track the full range of reader statistics. ZMags, a Boston-based company, asserts that publishers are using their advanced platform to qualify readers, earn revenue and know the cost/revenue ratios of the digital magazines in relation to the numbers of online readers. The Next Technology Wave Poised to Rock Print Publishing What’s further troubled traditional publishers already coping with the worst crisis to hit our industry in decades is a new technology that could make digital formats the dominant publication media in the not-too-distant future. A new gadget hit technology consumers with a whisper while creating lively debate in the print publishing community. It’s an e-book reader called the Amazon Kindle. Marketed by Amazon.com, this device at first glance looks like a simple gizmo donning a small vertical screen with a typing keypad below it and a few simple navigation buttons on the sides. I’ve seen flashier calculators, but like the unassuming iPod, this device packs tremendous power that will undoubtedly have a transformative impact on print publishers. What has drawn the ire of our industry paper pushers is its screen technology. Rather than using a traditional Liquid Crystal Display (LCD) screen, it uses a new electrophoretic technology delivering print-sharp screen resolution that does not require battery-consuming backlighting. Conventional LCD screens are assembled mostly by hand through an expensive bulk manufacturing process that must be conducted in a sterile environment. In fact, the limitations of LCD technology have somewhat stymied the evolution of personal computers and other electronic devices. At least it has until now. The newer generation screen displays will roll off the production lines with a process similar to printing. They will be much cheaper to produce, lighter, can run for about a week on a battery charge, and are seen clearly without glare in bright sunlight. Advanced versions of new-generation screen technology are expected to be thin and flexible. Imagine a magazine-sized screen that can be rolled up like a scroll and tucked away in your pocket. Some people are already calling this “electric paper.” Sprint recently started an ad campaign to prep cell phone users for the paper-liberating devices to come. Continued on page 29 2 n d I ss u e 2 0 0 9

Efficient IT Planning is Key to Recession Survival By David Whitehead

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he financial crisis may not be the only thing putting a strain on your business. If your IT upgrades didn’t keep pace with your growth during the boom years, chances are expensive inefficiencies are starting to get noticed. Surviving a tough economy requires all of us to be as efficient as possible, which means it’s time to take a hard look at productivity problems created by poorly planned IT systems. I have worked for several companies that allowed their IT to become grossly inefficient because systems were allowed to grow haphazardly with little or no planning. Let’s just say newspaper and magazine publishers are the poster children for bad IT systems. During the course of my career, I have seen some amazing debacles. The saga usually went something like this: An off-the-shelf system is purchased on the fly without taking growth or changing needs into account. When deficiencies inevitably occur, management hastily opts for quick fix add-ons instead of upgrading thoughtfully with the future in mind. This results in redundancies, unnecessary procedures that could be consolidated and all the other problems and mistakes that pop up when systems don’t share or use the same information. Case in point: I once worked for a fastgrowing company whose accounting issues grew beyond the reach of QuickBooks. The CFO refused to dedicate time or resources to properly upgrade the IT to keep things straight as we grew. He addressed everyday issues by instructing his staff to create a web of individual spreadsheets to manually reconcile what the main system couldn’t. As a result, it was impossible to know where the company stood in real time, and it was always a major research project to find out. This company eventually collapsed due to unexpected cash flow problems that often shocked the CFO. He was also amazed how difficult it was for the company to op-

erate profitably. But none of this surprised me after spending several years working for him. On the operations side, the company heads also planted too many IT seeds that bore incompatible fruit. They had to manage projects and ongoing information for client servicing, which in many cases held the same information used on the sales, accounting and finance sides. When they were very small, they used Microsoft Project to manage production issues and ACT, which is really a sales contact management software, for client servicing. When they formed a business development team, they started a separate ACT database for sales. And to make matters more complicated, they serviced customers by keeping the contact information on spreadsheets. This happened because different managers picked their off-the-shelf solutions of

Continued on page 30

I realize that during a booming economy, companies get too preoccupied with their core business to notice the monsters they often create with their IT management. Bad feelings and finger pointing result when these kinds of problems lead to horrible mistakes or create a productivity gridlock.

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choice rather than forming an IT team to create a consolidated system that made sense not only for what the company did, but also for how it planned to grow. Their disjointed systems worked just fine for a number of years when the company was small. But when they grew substantially, the information in all of these databases grew unwieldy. Staff laboriously inputted the same information in different systems that not only couldn’t communicate with each other, but were often not even accessible to the very people who needed it. Even if you had access to the system, it was a chore to find anything if you didn’t work for the department that maintained it. They eventually began to transfer production and client servicing from spreadsheets to a custom-designed Filemaker system, but the CEO refused to allow this type of com-

6/20/2008 4:16:06 PM

S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 

COV E R F E AT U R E

Green Biz

5 South Bay Organizations Upping the Eco Ante By Brian Simon

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hile entire nations must grapple with the harsh implications of “global warming” and how to address it, it will ultimately take cooperation on an individual grass roots community

level to spread the message espoused by leading scientists to make a meaningful impact across the country. With that in mind, a number of South Baybased businesses, agencies and cities have already made their mark on the green front. Here is an overview of a few notable contributors to the cause. Homestead Realty West Makes Environment a Realty Show When thinking about traditional “green” businesses, real estate companies typically don’t come to mind. But last fall, Manhattan Beachbased Homestead Realty West became the first business in the South Bay and the first real estate office in the country to achieve green certification through a Hermosa Beach-based firm (Green Certifications) that uses at least 110 separate criteria—and virtually no paperwork in the process—to assess a business’s environmental performance and, if that business passes muster, then recognize the accomplishment.

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Efficiency, reduction and conservation are the key areas considered, with various subcategories attached. So businesses that like to think of themselves as “green” can actually take specific steps to get there and then flat out prove it with an independent certification. “We had to get our office as environmentally friendly as possible,” said Sabine Birkenfeld, Realtor and Certified International Property Specialist who joined Homestead in the early ‘80s. To qualify, the company took a number of steps, including keeping recycling bins in the office; using environmentally-friendly cleaning supplies and paper products; conserving electricity by not keeping computers on at night and using energy-efficient bulbs; and contributing dollars to local environmentally supportive projects such as the Redondo Beach Sea Lab. “We also encourage clients from out of town to rent hybrids,” added Birkenfeld, who said that one challenge for Realtors is that they have to use cars to get to the properties for previewing and showing. “We can’t walk our clients around. Because we do a lot of driving, we have a carbon offset program where each year, depending on the mileage driven, we buy wind power credits.” Homestead Realty West began its quest for certification about a year ago. “You fill out everything you do step-by-step,” said Birkenfeld, who admitted that some goals are difficult to achieve, such as finding a local printer who uses environmentallyfriendly inks to make up business cards, or locating a green pest control outfit. Though getting certified certainly costs the company money, it may also bring it some new business as well to potentially help offset the price of the aforementioned offset. “We’re just in the beginning stages of getting the word out, so ideally we want attract the types of clients who are likeminded and are supportive of someone like us who also care about the environment,” said Birkenfeld. “At the same time, we hope it will raise awareness and inspire others in the community to follow suit. The next trend will be green housing where homes 2 n d I ss u e 2 0 0 9

are getting more environmentally efficient. I think it will turn into something spectacular eventually. All our agents are really excited about it. It’s still all so new.” Speaking of housing, Homestead recently moved into a new energy-efficient building with tank-less water heaters, low-flush toi-

lets, and landscaping that requires minimal watering. “Everything new that gets built will have stricter standards,” added Birkenfeld. Meanwhile, the real estate world itself has upped its own green ante. The National Continued on page 14

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L I T I G AT I O N I N S I D E R

7 Steps to Surviving a Lawsuit By Kurt Schlichter, Esq, Attorney at Law

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s the economy worsens, more businesspeople find themselves being sued. Getting sued is no fun even in the best of times. You are minding your own business when some vaguely disreputable gentleman steps up and hands you a batch of papers, announcing that you have been served. Reading the “Complaint for Damages,” you do not recognize yourself. The facts are all wrong and many of the allegations are outright lies. The “plaintiff ” has accused you of all sorts of misconduct and claims everything you did was part of some deliberate scheme designed to defraud him. Welcome to the world of business litigation. Now what? Understand first and foremost that lawsuits are about money; you need to look at litigation from a business perspective. The key to coming through litigation with the optimal outcome is to understand the process and to make smart, well-reasoned business decisions at each of the seven critical steps. Step One: Stop, Think and Lawyer Up You have read the complaint and you are furious. Your first idea is to reach for the phone and give your opponent a piece of your mind. Or maybe you think that once you explain what really happened, he will drop the suit. These are bad ideas. Plaintiffs tend not to sue unless they are serious about their objective. You are not going to talk your opponent – or his lawyer – out of the lawsuit. You are more likely to just say something that will come back and haunt you. You need professional help – not only for the technical legal matters, but because you are emotionally involved, and emotional decision-making is bad business. Unless you think do-it-yourself surgery is a good idea too, you need a lawyer (and if your company is a defendant, you must have a lawyer). Litigation is a harrowing, frustrating process, so you need to pick a lawyer who is not only technically proficient but one with whom you can relate. Talk to several. Find one whose personality suits you. If you are chatty and need hand-holding, do not hire a ringer for Mr. Spock. If you think General Patton was a little restrained, do not retain Mr. Rogers, Esquire. And do not delay. The clock starts running once you have been handed the papers. You would be shocked at the number of intel10 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

ligent businesspeople who are served with a lawsuit, put it in an “in” box and do nothing until the notice of default arrives in the mail. Step Two: Determine Your Budget You have settled on a lawyer. Now you need to figure out how to pay for her. The best defense is one where someone else pays the bill. Your insurance policies might provide a legal defense as well as pay a judgment against you. Tell your lawyer about your insurance coverage – business, auto and even home. Insurance usually covers claims in which you are accused of doing something unintentional, like causing an accident. It typically does not cover intentional wrongs, like fraud or claims that you breached a contract. If there is even the most remote possibility that the insurer will “accept your tender,” make your claim. Yes, it may make your premium go up a couple hundred dollars a year, but considering that many business lawyers charge north of $300 per hour, you may as well use your coverage. Your ability to pay for your defense is key to determining your initial strategy, just as finances are key to your routine business decisions. Even a mid-sized case can cost $50,000-$100,000 in legal fees through a verdict. If you are paying the fees yourself, you will need to put a substantial amount down as a deposit and then pay the monthly bill. Ask for an estimate, understanding that the final total will likely end up higher. If you cannot afford to defend yourself, you need to know that when evaluating your options. If you win, the other guy has to pay your attorney fees, right? Sorry. Except where the dispute is on a contract with a provision for the recovery of legal fees, parties generally bear their own attorney’s fees. All you get back if you win is a judgment for some of your outof-pocket costs, like filing fees. Step Three: Responding Sometimes the best response is no response. If you have no assets and no way to fund a defense, perhaps it makes sense to let the other side take a default judgment. A judgment that cannot be collected is no judgment at all. Similarly, if the claim against you is big enough – and does not involve fraud or similar wrongs – you might consider bankruptcy, which could discharge the entire claim against you along with many of your other obligations. Sometimes talking is the best plan – perhaps your lawyer can settle the case early for a reasonable amount. Usually, you will end up responding to the lawsuit. The most common response is an “answer.” This is a document that essentially denies everything the complaint says and asserts various defenses. Another option is a “demurrer.” A demurrer is a motion that es2 n d I ss u e 2 0 0 9

sentially says that even if everything in the complaint is absolutely true, the plaintiff is not entitled to win. Demurrers rarely kill a case completely; they are best in more complex cases for cutting down the number of theories against you. They are also expensive, but where appropriate they are invaluable. Step Four: Discovery and Motions Much of the time spent in litigation is in the “discovery” process, where your attorney gathers evidence by demanding documents from the other side, sending them written questions and taking “depositions” – interviews of parties and other witnesses with lawyers and a court reporter present. Discuss discovery strategy with your lawyer to ensure you are getting the most bang for your buck – weigh the costs versus the benefits of each step in your lawyer’s discovery plan. The other side will also do discovery on you. You will be verifying your discovery responses (which your attorney drafts) under penalty of perjury, so be truthful and complete. Eventually, the plaintiff will take your deposition. Remember to provide truthful, clear answers and avoid saying snarky things that will reflect poorly on you should the transcript be read to the jury. Take your discovery obligations seriously – if you fail to respond in time or truthfully, the results can be disastrous. Your attorney may suggest making a “Motion for Summary Judgment” (“MSJ”). An MSJ is different from a demurrer in that you can use some of the evidence you have gathered to ask the court to rule in your favor because all the basic facts of the case are undisputed. Contract cases where there are a lot of documents are often good MSJ candidates; cases where the evidence is primarily the contradictory testimony of the parties are bad MSJ candidates because the facts are disputed. MSJs are an invaluable tool for defendants because they have the capacity to kill a case outright without going to trial, but they are hard to do correctly because of the many procedural rules. MSJs are also expensive, though not nearly as expensive as a trial. Step Five: Settlement The fact is that 97 percent or so of cases never go to trial. Some are dismissed voluntarily – yes, occasionally plaintiffs just abandon their lawsuits. Others are defeated by demurrers or MSJs. The majority, however, are settled. Settlement is not exactly a step, but a process. You can settle at any time. Figure out early on what you would pay to settle your case. Paying on a claim you know has no merit is galling, but your monthly legal bills will dramatically demonstrate that principle comes with a hefty price tag. Again, in business litigation, the wisest decisions are business decisions. The courts love settlement – it clears their dockets – and order 2 n d I ss u e 2 0 0 9

formal settlement talks in almost every case. Sometimes this takes the form of a settlement conference in front of a judge. There are also professional mediators. The judge or mediator will work with the parties, point out weaknesses in their cases and try to create a compromise. You will need to be personally present, along with your lawyer. Sometimes you will feel pressured to settle – perhaps even by your own lawyer. That is not necessarily bad; they might be telling you something. However in the end, the decision to settle is always yours. Abraham Lincoln started his career as a lawyer – nobody’s perfect – and urged his fellow lawyers to try to settle: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser -- in fees, expenses, and waste of time.” —From Abraham Lincoln’s Notes for a Law Lecture, dated July 1, 1850. Of course, Lincoln is less famous today for his willingness to compromise than for his steely resolve as he led the United States through its bloodiest war to the unconditional surrender of its opponent. Step Six: Trial The laws of probability dictate your case is unlikely to be tried to a verdict. But some cases cannot and should not be resolved. You need to be prepared to be one of that three percent. First, decide whether or not you want a jury. The parties can “waive a jury” and let the judge act as the finder of fact instead of only ruling on issues of law. Juries are often best where your case has a large emotional component. Consider a judge when you depend on a clear but perhaps nitpicky application of law. Trial preparation is an expensive endeavor. Expect that your atContinued on page 25

Understand first and foremost that lawsuits are about money; you need to look at litigation from a business perspective. The key to coming through litigation with the optimal outcome is to understand the process and to make smart, well-reasoned business decisions at each of the seven critical steps.

S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 1

A R E A L E S TAT E P RO ’S P E R S P E C T I V E

The Real Estate Weather Report Keep Umbrellas Handy and Make Hay When the Sun Shines

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f the real estate climate was reported like the weather, it might sound something like the following: “Expect the stormfront in the South Bay real estate market to continue with cold temperatures, scattered showers, and occasional gale force winds in the middle class areas, gradually giving way to partial clearing and a warming trend for first-time buyers with the worst behind us for the high-end market.” One of the barometers of the real estate climate is the number of foreclosures being filed in a city. While this really doesn’t paint the whole picture since need to take into consideration the number of short sales (where the sellers owe more than the home is worth and the bank agrees to take the loss and allow the homeowner to walk away) and other distressed sales, it’s a pretty good indicator. As the flood of distressed properties subsides, a more normal market will emerge with real live people as sellers rather than institutional sales dictating market values. Let’s look at the number of properties in foreclosure where the notice of default has been filed and the clock is ticking, along with properties recently foreclosed on and sold at a trustee sale. Remember, if a property is in foreclosure, it doesn’t mean it will go to sale. Homeowners may redeem their home by paying the amount in arrears and thus cancel the foreclosure. As of this writing, the number of homes either in the process of or recently foreclosed upon in the South Bay looks like this: Manhattan Beach – 69, El Segundo – 27, Hermosa Beach – 56, South Redondo Beach – 84, Palos Verdes, Rolling Hills – 53, Rancho Palos Verdes – 105, San Pedro – 384, Torrance – 624, Hawthorne – 513, Lawndale – 222, North Redondo – 112, Lomita – 81, Harbor City – 161 and Gardena – 605. As you can see, sellers are still weathering the storm. On the national real estate scene, the Mortgage Bankers Association reports that during the first quarter of this year, 12 percent of all homeowners with a mortgage are behind in their payments. And half of those, or six percent, are borrowers with good credit and fixed rate mortgages! This tells us that job losses are wreaking havoc with the well qualified borrowers as well. This is in stark contrast to almost 46 percent of all subprime mortgages currently in default. For buyers, however, and especially first-time buyers, you could find yourself in the eye of the storm with blue skies and warm weather. The affordability index in the Western States has increased 40 percent from a year ago and is at a 30-year high. This is due to a combination of falling prices and historically low mortgage rates. If that doesn’t lift the gloom, there is a federal tax credit of up 12 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

to $8,000 for first-time buyers that earn $75,000 or less as single filers, and $150,000 or less for those married filing jointly. (With joint income over $150K, there is a gradual phase-out of the credit going to zero at $170K combined). This is a tax credit that reduces the amount of federal income tax you pay dollar-for-dollar by up to $8,000, as calculated by taking 10 percent of the purchase price, not to exceed $8K. (For more information go to http://www.federalhousingtaxcredit.com/2009/home.html). Another silver lining in the cloudy forecast is a $10,000 state tax credit for new construction purchases by first-time or existing homeowners between 3/1/09 and 03/01/10, with no income restrictions. Break out the sunglasses, sunscreen and swimsuits! There is $100,000,000 allocated by the state for this on a first-come, firstserve basis. (For more information, go to http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml). Many of us noticed that mortgage rates rose dramatically in the first week or so of June. This potential cold front could develop into another major storm, causing the economy to stall and double dip. The Fed knows the foundation of a sustained economic recovery is rooted in shoring up the real estate market. The home value freefall needs to cease, and jobs need to be created before consumer confidence and spending can return. The mortgage rate spike occurred for several reasons. First, toward the end of May, Bill Gross, the “Warren Buffett of the bond world” who manages the PIMCO Total Return Bond Fund, came out and stated the possibility exists that the United States could lose its AAA rating as a creditor by the rating agencies. Next, we got a few flickers of positive economic news. Not good news—just economic data that disappointed less! But what really caused a mortgage bond selloff and drove rates up is what some are calling “the Fed’s dilemma.” As we may recall, mortgage rates initially dropped at the end of last year. The Fed made the announcement that it was going to buy mortgage-backed securities from Fannie Mae and Freddie Mac directly, and committed $600 billion toward that end. Accordingly, rates dropped from the 5.25-5.50 percent range to the 4.50-4.75 percent range virtually overnight. Because the Fed became a buyer, it decreased supply and increased investor demand, ultimately pushing rates lower. Now, however, the Fed is issuing record amounts of treasury bonds to finance the corresponding record amount of spending. That is creating a glut of supply, weakening demand from investors and pushing rates up. So the Fed is buying mortgage bonds, trying to push mortgage rates lower, with money borrowed from sell2 n d I ss u e 2 0 0 9

For buyers, however, and especially first-time buyers, you could find yourself in the eye of the storm with blue skies and warm weather. The affordability index in the Western States has increased 40 percent from a year ago and is at a 30-year high. ing treasuries causing rates to go up. This is kind of like that time the kitchen sink was stopped up and you took the plunger to the left side of the sink and pushed the water down only to have it rise right back up on the right side! The Fed needs to find a way to continue to pressure mortgage rates lower again until the economy truly finds a foothold and moves in earnest toward expanding again. Part of the trick will be to convince foreign investors like Japan and China to continue to buy our treasuries, which will help mop up the excess supply that is hitting the market. If foreign demand wanes, it causes bigger supply and less demand, forcing up rates to attract investment dollars. The good news as of this writing is that mortgage bonds are starting to rally again, causing mortgage rates to improve. Rates had increased about one percent from

the previous lows to the mid-five percent range currently. Many feel (and many more hope) that the bond market sell-off was an overreaction and that it is just part of the incredible volatility we continue to experience in the stock and bond markets on our long journey back to economic recovery. And participation at the treasury auctions has been met with reasonably good participation by foreign investment. We don’t know how low rates will go as a result of this rally. What we do know is that the economy may be finding a bottom soon. Some feel the so-called “Great Recession” may officially be over this year. But it may take far longer for a new crop of jobs to be cultivated. That’s what the average American really needs to see in order to declare the recession is history. Mortgage rates are good and improving again. Real estate prices have declined and

here in the South Bay, they may have bottomed out as well. The affordability index is the best in decades. Generous tax credits are available for home buyers. FHA financing allows buyers to purchase with as little as 3.5 percent down. Conventional financing requires just 10 percent down with loan amounts up to $729,750. With 20 percent down, there is financing available on loan amounts up to $1 million; and from 25 percent down to $2 million. So if you’re a first-time home buyer or looking at making a move-up purchase, your timing couldn’t be more perfect. You may find yourself one happy camper who made hay while the sun shines!n Ken Roberts is a mortgage planner with over 30 years experience in the South Bay real estate market. Ken can be reached at (310) 534-6200.

Have Your Sales Commissions Declined With the Rest of the Economy? See if We Can Help You Fill the Gaps. If you’re a 1099 sales pro interested in a part-time position earning generous sales commissions while keeping your current position, give us a call. Business Insider Magazine is seeking a parttime Advertising Sales Representative to sell display advertising to South Bay companies. We pay commission percentages above the industry average, offer a chance to work locally and will provide guidance to ensure your success. If you are an experienced sales pro from the real estate or financial services industries, this opportunity could be ideal for your situation. Call (310) 872-9732 or email your resume to [email protected] to learn more about this opportunity.

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S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 3

G R E E N B I Z COV E R F E AT U R E

“We’re just in the beginning stages of getting the word out, so ideally we want attract the types of clients who are like-minded and are supportive of someone like us who also care about the environment,” said Birkenfeld. “ Sabine Birkenfeld, Homestead Realty West Continued from page  Realtor Association now offers a two-day Green Designation Program—a two-day course that teaches real estate professionals how to list and market green properties, while passing on vital information to their clients about the latest green standards and initiatives. “It’s an ongoing process where you try to do better each month and each year in order Sabine Birkenfeld to achieve a higher and higher percentage of green activity,” said Birkenfeld. “You just have to make a concerted effort to be conscientious.” Cities Lead the Way to Greener Pastures In order to encourage businesses and residents to jump on the green bandwagon, city governments must lead by example. Several South Bay communities have developed environmental action plans and incentives to do just that. Even before a recent spate of green activities, the City of El Segundo boasted a strong track record in environmental responsibility. El Segundo is among the top handful of cities in California in diverting solid waste to recycled products or other uses. Also, at least half of the water used in El Segundo is reclaimed, cleaned and recycled for use. That statistic leads the state. On a related note, El Segundo recently garnered recognition for its water conservation program from Southern California Edison as part of the latter’s annual Flex Your Power awards, and received grant monies from regional water agencies to launch banner programs spreading the message about reducing water use. Meanwhile last year, El Segundo became the first South Bay community to become part of the globally acclaimed “Re-Use-It” network—an online forum where citizens can ensure their unwanted stuff doesn’t end up in a landfill, but instead gets into the hands of those who truly need those items. El Segundo adopted its own environmental action plan in January 2008 containing more than two dozen priority items to consider as 14 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

steps to achieve “a more green and sustainable community.” Major categories include energy conservation, solid waste reduction, community design standards, community environment, transportation, environmental health, water conservation and environmental council. An Environmental Committee, appointed by the El Segundo City Council last fall, has taken on a large workload of green items, including a green building ordinance. “We’re also working on creating a green building resource center inside City Hall for residents and developers to obtain literature on green building,” said El Segundo Senior Administrative Analyst Lauren Mahakian, whose job includes handling all of the City’s environmental outreach. Speaking of green building, the City hopes its new Fire Station 2 now under construction will achieve LEED certification for environmental responsibility. Additionally, El Segundo continues to look at ways to reduce greenhouse gases while also saving itself some money over the long haul. Over the past year, it has installed LED traffic signals, replaced multiple office machines with all-in-one energy-conserving equipment, and picked up a couple of gas-efficient hybrid vehicles. To engage the community, the City scheduled several eco-events this year, including a free composting workshop that took place in May, a high-efficiency toilet giveaway on June 13 and a free gardening and landscape workshop on June 27 where residents learned how to create ocean-friendly gardens using indigenous plants and water-efficient devices. Lauren Mahakian On July 2, the City hostsed its second annual Environmental Expo. More than 1,000 people attended the inaugural event last year that featured a variety of green and conservation-related vendors. “This year, we had electric bikes and vehicles, eco-friendly racing cars, electronic waste recycling dropoff, and (Assemblymember) Ted Lieu available to answer questions about state legislative efforts regarding water conservation.” Mahakian said women could also donate their unwanted business attire to the non-profit organization Working Wardrobes, which helps 2 n d I ss u e 2 0 0 9

“It’s a great opportunity for the City to look at what policies to implement to help the environment, and what we can do in the future. The programs span across all departments of the City, including public works, parks and recreation and community development. There’s much to be done, but everyone is very knowledgeable and committed to making it happen.” Sona Kalapura, City of Manhattan Beach women in difficult financial shape or those who have endured other life crises to build confidence to enter the workforce. “This is a wonderful cause that helps both the environment and women in need,” said Mahakian. In September, El Segundo hosts the second annual South Bay Environmental Excellence Development (SEED) awards event honoring groups and businesses that have exhibited top-rate performance in environmental sustainability and targeting areas such as alternative energy, energy efficiency, environmental education and outreach, green building, and more. And finally, a series of free green workshops is set to kick off this fall. “This will provide perspective from both sides of the planning counter to educate residents, architects, builders and developers about various green topics,” said Mahakian. While such programs and events won’t solve the world’s environmental problems, every little bit helps. “If each individual community does its part, we can make a difference,” said Mahakian. While Manhattan Beach garnered widespread media attention last year when its City Council passed an ordinance banning plastic bags, that move was just one component of an overall commitment to environmental responsibility that began to truly take shape in 2007. In November of that year, the City of the Manhattan Beach re-

leased its comprehensive Green Report that, among other things, outlined a commitment to develop a Climate Action Plan (CAP) to reduce local greenhouse gases and carbon dioxide emissions to at least seven percent below 1990 levels by the year 2012. The 19-member Environmental Task Force (appointed by the Manhattan Beach City Council last summer to make recommendations on current green policies and future improveSona Kalapura ments) and Environmental Programs Manager Sona Kalapura oversee the CAP’s development. The City also created an interdepartmental Green Team to identify current “green” practices, and set the climate protection goal. The tight timeframe means the group has its work cut out for it. “When the City released the Green Report, it included an assessment comparing 1990 levels to 2005,” explained Kalapura, whose position was created last summer. “Based on those numbers, we’ll have to reduce our carbon footprint 20 percent from 2005 levels alone.” Though the City has already taken such measures as using LED energy-efficient lighting and turning off computers after the Continued on page 26

“We’re also working on creating a green building resource center inside City Hall for residents and developers to obtain literature on green building.” Lauren Mahakian, City of El Segundo

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S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 5

PUBLISHER’S PERSPECTIVE

The Empire With the Invisible Throne By David Whitehead

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he United States has a schizophrenic nature when it comes to the word “empire.” This nation spent the first half of its existence defending itself against imperial domination. Then it spent the second half building an empire of its own. As a result, Americans are not comfortable hearing their nation characterized as an empire. Most prefer to think of their nation as a republic that occasionally issues imperial directives to defend its interests. When pontificating fails to persuade, the empire enforces global economic power through a curious combination of economic and conventional warfare. America was drafted into the imperial club by the old empires of Europe when their taste for imperial adventure was soured by two devastating world wars. A bankrupt United Kingdom had no choice but to relinquish its imperial role to the United States. The Bretton Woods agreement was the formal acknowledgment of this power shift. The new imperial throne is invisible. There are no formally acknowledged vassal states, although subordinate powers are expected to know who they are and act accordingly. And like all others that came before, America’s empire is destined to bankrupt itself if it holds to this course. Only the shadowy financial empires, which control capital that builds and destroys political empires, are in a position to capitalize most of the time. The founding fathers sought to avoid this fate for our nation and fought hard to keep old world imperial structures out of the Americas. However, the Monroe Doctrine proved a complete failure as this nation succumbed to the seduction of grandeur driven by treachery from dark corners in the financial world. We incorporated our new imperial position into our emerging nationalism. In the most convoluted way, America professed its republican values while denying 16 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

the actual dynamics of its empire and how it affects the rest of the world. I think this explains many of the moral contradictions that divide this nation politically. It also places us in a very dangerous position. Dangerous because of the empire’s long-term implications and more so because its existence is virtually ignored by most of the American people. Whose Throne is It Anyway? The invisible empire took its current form in the early seventies. The Nixon administration, under the orchestration of long-time Rockefeller family colleague Henry Kissinger, re-invented what appeared to be a collapsing U.S. economy. America became the spearhead for the emerging global economic order. During this period, most nations transitioned from self-sufficient to interdependent. Economies that once depended on their own sinew to leverage their resources while defending their sovereignty through balanced trade succumbed to a system that made them dependent upon one another. Arcane monetary policy was key to the emerging order. It’s one thing to have global reserve currencies backed by the wealth and economic output of a sovereign nation to help stabilize the global economy. It’s quite another to create internationalized currencies like the Euro representing unions of less-than-sovereign nation states. And should the shifting paradigm lead to the further internationalization of central banks to restore order to the global financial system, a dollar that is genuinely sovereign may no longer be possible. To put the financial crisis facing the U.S. in perspective, Richard C. Cook, a former analyst for the U.S. government and frequent contributor to the website GlobalResearch.ca, recently juxtiposed 2 n d I ss u e 2 0 0 9

some shocking statistics regarding the impact of the nation’s aggregate debt: “During fiscal year 2009, the U.S. Treasury is on track to pay over $500 billion just in interest payments to finance the already-existing debt. New debt this year will likely exceed a trillion dollars. The total debt burden on the economy as a whole could reach $70 trillion by 2010, with annual interest payments for individuals, households, businesses, and all levels of government likely to reach $3 trillion out of a $14 trillion GDP that is now in sharp decline.” First, the $500 billion in interest payments just on the existing debt cancels out a good chuck of the $787 billion stimulus, which by the way will accrue its own compounding interest down the road. The trade deficit, which peaked at over $750 billion in 2006, has dropped markedly due to the decline in demand for consumer goods. However, the U.S. has not reported a positive balance of trade since 1975! The reported federal deficit reached above the $10 trillion mark this past year and will undoubtedly rise more as the war in Afghanistan escalates. However, according to Cook, the combined obligations of the nation are approaching $70 trillion. This is $5 trillion more than the planet’s annual productive output of $65 trillion! That’s why economists with the courage to acknowledge the math are getting apocalyptic with their forecasts. The Dawn of Radical Intervention The last time the central bank forced the economy to make a radical correction on its own, it caused The Great Depression. You could say The New Deal was the first radical intervention to alleviate this kind of calamity. But few questioned how radical it was in 1971 when the U.S. went off the gold standard while the dollar remained the world’s reserve currency. I personally had to do a great deal of reading to understand why this was a dangerous position for the U.S. economy. To be fair, I would have to say many financial experts at the time would have had difficulty knowing why this was dangerous themselves without the benefit of hindsight. The financial community pushed the limits of abuse far beyond what any reasonable person could have imagined 38 years ago. Economies can function off the gold standard if the agency entrusted to issue currency ensures money supply has a rational relationship with GDP. Currency should be issued in quantities necessary to facilitate commerce while retaining a stable value that also facilitates beneficial trade free of mounting deficits.

Because the Federal Reserve is owned by private investors and operates for profit, conflicts of interest develop at many levels that favor ultra-wealthy financial speculators and ultimately do great harm to the American people they are entrusted to serve. And as the issuer of the world’s key reserve currency, foreign investment frees the Fed from keeping the money supply closely tied to the nation’s real productive output. Instead, they leverage the wealth of nations who must hold dollar reserves to function in the global marketplace. This allows the Fed to expand the money supply to irrational levels while incurring mounting debt along the way. Developing nations in turn play their currencies off those of the consumer nations in the West. This radically altered the way many of us earn our livings today. The process the Fed uses to create money via the nation’s banking system also creates interest, as does the leveraging of foreign investment. The debt gets packaged and repackaged again in countless ways that make it questionable whether it can ever be repaid. The process used to get currency into the market is more of a lending process than a reflection of the nation’s actual wealth. Whoever thought it was a good idea to package the debt of people and institutions operating in this kind of environment as investment instruments to be sold back to many of these same indebted consumeroids was either not paying attention or deliberately creating a massive Ponzi scheme. In the wake of 9/11, most people barely noticed when the Federal Reserve bottomed out interest rates. This occurred right after the dotcom crash at a point when the economy was due for a correction. Instead of letting some overdue austerity set things right, the economy was flooded with easy cash. People in a position to capitalize speculated their way to the good life. This is the system of the last 38 years reaching its apex and it is running out of steam fast. The current bailout strategy is more about repackaging and expanding debt to astronomical levels, which won’t create real prosperity. The system must change and change soon. But to what? Putting Humpty Together Again First I will address what we can’t do, which is business as usual. If we let the dollar implode, the American people will not be in a position to regain control of our money supply and ultimately our desContinued on page 24

... should the shifting paradigm lead to the further internationalization of central banks to restore order to the global financial system, a dollar that is genuinely sovereign may no longer be possible. 2 n d I ss u e 2 0 0 9

S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 7

PUBLISHER’S PERSPECTIVE

The Financial Crisis:

Finding the Bottom By David Whitehead “The recession is over!” So proclaimed our perpetually upbeat sales manager as he sauntered into an early morning meeting in the spring of 1994. The authority he relied on to substantiate this dubious claim was an overly optimistic news report. His dutiful employees, including myself, didn’t quite know what to make of this. We were still encountering enormous resistance while good customers continued to call on us to advertise their “going out of business” sales. This depressing stream of new business predicated on helping long-time companies liquidate their inventories in short order continued for some time. In fact, the national recession was officially over by the time Bill Clinton entered the White House in 1992. However, defense cutbacks following the 1991 Gulf War kept the pain lingering in the South Bay for several years. Most businesses didn’t see real prosperity take off again until 1997 when the dotcoms and a newly revitalized real estate market moved things up again. We had to wait for the recession to end and look back at the historical data to know where the bottom that mattered actually was. And I expect we will have to do that again in a few years when things settle down. Perhaps asking, “When will we find the bottom?” is the wrong question. Instead we should ask, “What is the bottom?” The “bottom” in an economic downturn is the point when enough money has been eliminated from the economy from interest paid on current and previous debts for the maestros of finance to orchestrate another money bubble to move things up again. That’s what the dotcom and real estate booms were really all about. And not surprisingly, both of these booms crashed as quickly as they rose. What’s different this time is the economy has become so bloated with debt that government officials and central bankers are hor-

The modern U.S. economy relies on foreign investment to provide the cash necessary to run the financial and service sectors where most Americans earn their living. ..The next four decades will require something entirely different that probably won’t involve our precious “dead presidents.” 18 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

rified to let the economy find the bottom on its own. Hence the unprecedented waves of multi-billion dollar bailouts and stimulus packages created out of thin air. If “bottom” is supposed to mean the lowest point the economy can fall, then what we are looking for is not really a bottom at all. It’s a low point in a continuous cycle that has had many low points. But it certainly is not the lowest point attainable. That means it is not inconceivable for the aggregate burden of debt to create the kind of “bottom” that is really a precipice for a greater fall. Could this be the bottom tantamount to Wall Street’s greatest nightmare? If the economy ends up where it appears to be going, the answer is a resounding “yes.” However, the same maestros of finance who brought us to this point have shown remarkable creativity in developing new economic models flashy enough to perpetuate lucrative business cycles for decades. The current model is undoubtedly reaching its end. So what could they do to save us from our impending oblivion? It certainly can’t be another stimulus that can never be supported by our economy. Or can it? Spring Blooms Uncertainty and Special Drawing Rights The only thing that bloomed this spring was more uncertainty. The first quarter of 2009 saw multi-billion dollar bailouts, reversals of fortune for global manufacturers and desperate anticipation for this economic crisis to find its “bottom.” However, consumer confidence soared in May as the Obama administration’s $787 billion stimulus packages started to take hold— at least in people’s minds. An industry group called The Conference Board told Reuters in late May that its index of consumer attitudes jumped to 54.9 in May, up from a revised 40.8 in April. This is well above earlier forecasts centered around 42.0. This represented the biggest one-month jump since April 2003, attributed to belief at the time that the Iraq war was coming to a rapid conclusion. However, does this mean a genuine recovery is in progress? Death and taxes are not the only things in life that are certain. We forget about interest due on the money we create through borrowing at the central banking level. That means the $787 billion stimulus is certain to lead to an even deeper bottom to be averted by, well, another multi-billion or perhaps trillion dollar stimulus the economy could never hope to support. This is a bad habit we just can’t seem to break. Does this mean the financial judgment day is close at hand? Can we expect to see Seven Horsemen from the Bank for International Settlements appear to reveal our final dispensation? The best financial experts cannot agree on this point. However, it would behoove us to examine some alarming events that have recently taken place. 2 n d I ss u e 2 0 0 9

Special Drawing Rights Paint Bleak Picture for the Dollar The G20 nations recently authorized the International Monetary Fund, the post-war global banking house run by Europeans, to inject $250 billion into the global economy using an obscure mechanism called “Special Drawing Rights.” SDRs bypass the leading reserve currency to instead issue funds based on a basket of major world currencies. This relic of the post-war Bretton Woods agreement is a tool that has “lain dormant for half a century.” In effect, SDRs create a super global currency to help relieve the financial crisis. But wait a minute; don’t we already have a super global currency? Well since the end of World War II at least, we did. It was called the U.S. dollar. Before that, it was the British pound. And as long as the dollar keeps its official designation as the world’s key reserve currency, it technically is the global currency of choice for international settlements. In fact, despite the dollar’s rapid decline, 64.5 percent of international settlements are still transacted in dollars. However, SDRs are a serious challenge to the status quo because they decrease global investment in U.S. dollars. This is not a hohum financial detail. It could be catastrophic for the nation’s economy if the dollar loses its special status. The modern U.S. economy relies on foreign investment to provide the cash necessary to run the financial and service sectors where most Americans earn their living. The last 38 years of deindustrialization made running the economy on foreign debt business as usual for the United States. The next four decades will require something entirely different that probably won’t involve our precious “dead presidents.” China has been pushing hard for SDRs to assist it in dealing with its “dollar glut” created by the massive imbalance in foreign trade. That means it would no longer be obliged to reinvest these excess dollars back into the U.S. economy. I know many people have the 2 n d I ss u e 2 0 0 9

misconception that China has accrued most of America’s wealth. The reality is that it is addicted to our currency to keep its own economy from collapsing, and it does hold most of our foreign debt, which may never be repaid. Remember, China created an enormous monster it needs to feed with a currency much stronger than its own. If dollar dope won’t cut it anymore, China will turn to the financial pushers in Europe willing to service its habit. If this sounds like the 18th Century opium trade reemerging in another form, you’re not far off. And don’t forget, this is the same monster that produces just about everything we use while Chinese workers earn less than a dollar an hour in our money for their efforts. In some ways, the Asian economies are worse off than we are. But the imbalances are more to blame than policies of any particular nation state that is trying to cope with the situation. Could SDRs signal the demise of the U.S. dollar? This of course depends on how and to what extent they are used. However, it is generally agreed the dollar can’t retain its value if foreign investment flees on a large scale. And the Achilles Heel of foreign investment is debt. That’s why the ability of central bankers and the US Treasury to deliver bailouts to deal with the financial crisis won’t address the underlying reasons why the financial system continues to collapse. The world’s nations cannot go on indefinitely investing in a currency so heavily laden with debt that it is no longer a sound investment by any practical economic standard. The paradigm is shifting because it must. But what form will the new global economy take? Read the column: “The Empire With the Invisible Throne” (page 16) for a deeper perspective.”n David Whitehead is the Publisher of Business Insider Magazine. He can be reached by email at [email protected]. S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 9

I N CO R P O R AT I O N I N S I D E R

To Incorporate or Not to Incorporate?

Protect Yourself and Your Business By Selecting the Right “Entity” By DeAnn Flores Chase, Attorney at Law

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f you are thinking about starting a business, no doubt you have pondered the question, “Do I need to form a business entity?” The answer is a resounding, “Yes!” Unfortunately, we live in a very litigious society. Statistics tell us that an estimated 50,000 lawsuits are filed daily in the U.S., with nearly 1.4 million filed in the State of California annually. You should take steps to protect your wealth before you ever get served with a lawsuit against your business. A business entity provides personal liability protection from the debts and obligations of the business because it has its own legal identity separate and apart from its officers, directors, shareholders, managers or members – even if the entity consists of only one person. If you are sued based upon an occurrence arising during your business operations, a properly formed and maintained business entity can limit exposure to a judgment solely to the assets of the business-and not your family. It is imperative to form a business entity before you sign a lease, contract, franchise agreement, or otherwise start to do business. Once the entity is properly formed, every agreement must be signed in the name of your business entity. Forming a business entity before you start conducting business can not only provide personal liability protection, but can also allow your entity to develop corporate credit. Many business owners defer the formation of a business entity until after they have done business for some time. By that time, however, they have incurred start-up costs and debt that will unfortunately be reflected on the individual owner’s personal credit. At that point, it is not possible to simply “roll over” the individual debt to a “limited liability” company. And it is quite difficult to unravel the business assets and obligations from the personal ones. Waiting to form the entity until after you have been in business for a year or more means that you must in essence “start over” when forming the entity at a later point. Now that we’ve established that it’s best to protect your personal and family assets and build credit, the next step is to determine which type of business entity is right for you. Whether you are going it alone or with another person, the choice of a proper business entity should be made in close consultation with a business law at20 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

torney and your tax advisor. Business entities include: General Corporation (“C-Corp” or “S-Corp”): If properly formed and maintained, a corporation provides protection from personal liability for the debts and obligations of the corporation for its officers, directors and shareholders. “C” Corporation: A traditional “C” corporation involves the issue of “double taxation.” The corporation is taxed on its income at the corporate level, and its shareholders are taxed on distributions of income in the form of dividends on their personal income tax. In order to maintain a corporation, corporate formalities must be maintained, such as annual meetings and the keeping of minutes. A “C” corporation has some tax benefits, such as deductibility of health insurance premiums. “S” Corporation: A corporation that has made an election to be an “S” corporation for federal income tax purposes is treated as a sole proprietor or partnership for tax purposes, known as “pass through” taxation; thereby, avoiding “double taxation.” “S” corporations have many limitations in their structure, such as limits on the number of shareholders, citizenship requirements for shareholders, and issuance of only one class of stock. Limited Liability Company (LLC): As with a corporation, a limited liability company (LLC) provides personal liability protection for the debts and obligations of the business. LLCs also have “pass through” taxation where the income and losses pass through to the individual members’ tax returns. An LLC may elect to be taxed as a corporation. It can be managed by all of the members or can have centralized management in one or more of the members, known as “managers.” If properly formed, an LLC does not need to maintain corporate formalities, such as holding meetings and keeping minutes. In California, an LLC may not render professional services, which include services lawfully rendered only pursuant to a license, certification or registration under the Business and Professions Code, the Chiropractic Act, the Osteopathic Act or the Yacht and Ship Brokers Act. However, the California Attorney General has opined that such services do not include services rendered pursuant to a nonprofessional occupational license under the Business and Pro2 n d I ss u e 2 0 0 9

fessions Code. Notably, neither the Contractor’s State Licensing Board nor the Department of Real Estate will issue a corporate license to an LLC. Professional Corporation: A professional corporation is appropriate for medical and therapeutic practices, accounting and finance, and legal professions. The requirements for professional corporations vary according to the governing body regulating the practice of a particular profession. Some professions require corporate registration with the governing body; others do not. Many professional corporations are limited with respect to who can be officers, directors or shareholders in the corporation. Careful analysis is necessary to ensure that a professional corporation complies with the requirements for its particular profession. And now a word or two about DBAs. DBA stands for “Doing Business As.” A DBA is formed by filing a Fictitious Business Name (FBN) statement with your clerk in the county (or counties) where business transactions will occur. A DBA is not a business entity, and provides absolutely no personal liability protection for the individual or individuals conducting business. After a business entity is formed, it may be appropriate to file an FBN for the entity if it is anticipated that the business entity will transact business under a fictitious name that differs from the name reflected on its registration documents. What else is NOT a business entity? Sole Proprietorship: A sole proprietorship is one person alone. He or she will have unlimited liability for all debts of the business, and the income or loss from the business will be reported on his or her personal income tax return along with all other income and expense he or she normally reports. A sole proprietor often does business under a fictitious business name as a “DBA.” General Partnership: In a general partnership, each of the two or more partners will have unlimited liability for the debts of the business. The income and expense is reported on a separate return for tax purposes, but each partner then reports his or her pro rata share of the profit or loss from the business as one line on his or her personal tax return. Limited Partnership: With a limited partnership, each of the general partners has unlimited liability for the debts of the partnership, but the limited partner’s exposure to the debts of the partnership is limited to the contribution each has made to the partnership. However, a limited partner may be deemed a general partner if it determined that he or she actively participated in the management of the entity; and therefore, he or she may then have the same unlimited liability for the debts of the partnership. Ultimately, liability protection depends not only upon proper for2 n d I ss u e 2 0 0 9

mation, but proper maintenance to provide the personal liability protection provided by law. Failure to do so will allow a creditor to “pierce” the veil of liability protection in order to collect against the personal assets of the individual owners of the entity. In recent years, many companies have come into the marketplace telling you that you do not need a lawyer to form a business entity, make a contract, or get a trademark. But the truth of the matter is that the money you “save” by doing it yourself can cost you thousands more dollars in the future. Why take the risk?n DeAnn Flores Chase has spent the last 12 years counseling and defending individuals and businesses of all sizes. She has successfully defended her business clients against a broad range of claims, including contract and lease disputes, trademark and copyright infringement, and catastrophic injury and wrongful death claims. Ms. Chase’s focus on liability protection comes from the successful handling of all aspects of litigation for individuals and businesses of all sizes. To obtain a FREE copy of Ms. Chase’s report on “The Four Common Mistakes Business Owners Make,” visit her website www.sbblmb.com and enter the promo code, “BIM.” DeAnn Flores Chase A Law Corporation – South Bay Business Lawyers 310-546-8111. Email: deann@dfclawcorpcom.

A business entity provides personal liability protection from the debts and obligations of the business because it has its own legal identity separate and apart from its officers, directors, shareholders, managers or members – even if the entity consists of only one person. S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 2 1

CALENDAR OF BUSINESS EVENTS

Save The Date! Manhattan Beach Chamber of Commerce For more information about the events listed, call 310545-5313 or go to www.ManhattanBeachChamber.net. Mixers: Wednesday, July 15, 2009 14th Annual Joint Manhattan Beach, Redondo Beach and El Segundo Mixer in the Park Chevron Employees Park 5:30-7:00 p.m., El Segundo Blvd. just west of Sepulveda. Admission $5 Non-Members Palos Verdes Peninsula Chamber of Commerce For more information about the events listed, call 310377-8111 or go to www.PalosVerdesChamber.com Breakfast Mixer: All Breakfast Mixers take place 7:15-9 a.m. on the first Wednesday of the month. Cost: $15 if RSVP is made; $18 without an RSVP or for guests. Full breakfast is served. Wednesday, August 5, 2009 Belmont Village 5701 Crestridge Road, Rancho Palos Verdes. Redondo Beach Chamber of Commerce and Visitors Bureau For more information about the events listed, call 310376-6911 or go to www.RedondoChamber.org Mixers: All mixers are held 5:30-7:30 p.m. on the dates listed. 22 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

Admission is $5 for chamber members or $10 for guests (includes 1 drink ticket). Wednesday, August 26, 2009 Redondo Beach Chamber of Commerce Regional Mixer Seaside Lagoon 200 Portofino Way, Redondo Beach. Network Café Enjoy a great lunch and learn about Redondo Beach Chamber members and their businesses while promoting your own. Each person will get to present a 30-second commercial in front of the whole group. Advanced reservations are required and will save you $5. Members with reservations are $20 and guests and members without a reservation are $25. Network Café is held 11:30 a.m.1:30 p.m. on the dates listed. Thursday, September 10, 2009 Network Café - Ruby’s Diner 245 Harbor Dr., Redondo Beach. Thursday, July 09, 2009 Buca di Beppo 1670 S. Pacific Coast Hwy., Redondo Beach. Local Professionals Invited to Networking Meeting Local business professionals are invited to a meeting for a local chapter of Leads Club, a national networking organization. The luncheon meetings are held every Tuesday from noon to 1:30 p.m. in the Riviera Village, Redondo Beach. To learn more, visit: www. rivieraleadsclub.com. For reservations call: Carlene Delight: 310 259-0488 or Jerry Bottomley: 310 8908195.n 2 n d I ss u e 2 0 0 9

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S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 2 3

PUBLISHER’S PERSPECTIVE

Continued from page 17 tiny. However, globalization advocates care more about the destiny of the global economy than the national interests of any particular nation state. This is important to note because whether it happens after the current stimulus strategy burns out or a few years from now—depending how long it takes for the system to completely fail—expect people in high places to propose an internationally controlled central banking system, ostensibly to restore stability. For the United States, that will probably mean something like the proposed North American Union, but they could try to disguise this by linking existing central banks and letting individual nations keep their currencies, at least in name. This is inevitable because most nations of this world issue currency from privately-owned for-profit central banks based on the 1694 Bank of England model, which, operating as separate entities, are designed to provide a money supply for self-sufficient nation states—not the interdependent unions of nations we have become. The U.S Federal Reserve is actually a privately-owned bank that lends money to the government at interest. It has little or no accountability to anyone except its own private investors who transact most of their business secretly away from public scrutiny. Imagine an internationalized central bank empowered to do the same thing for the entire world. The potential for abuse would be enormous, and if we find ourselves under its heels, there would be no way to escape it. We can’t go on forever allowing deficits to mount exponentially, creating boom/bust economic cycles that have grown so ferocious they are now tearing the nations of this world apart. “The [central] bankers are on the run, feverishly trying to use the collapse of the current system to steer us toward an ‘Amero’-style North American currency, or a one-world private banking system and privately-issued global currency that they and only they control,” Ellen Brown, J.D., author of the book Web of Debt, recently stated in a letter to President Barak Obama calling for a return to Lincoln’s monetary policy of issuing currency interest-free from a U.S. Treasury that is not controlled by Wall Street. “We the people will not accept those solutions, however, no matter how bad things get. We demand real solutions that empower us, not further enslave us.” I would expect further internationalization of the central banking system to be laid out as the only possible solution in the midst of an enormous crisis while anyone bold enough to stand up for the au-

tonomy of their nation will be ridiculed and discredited. But don’t believe there are no viable options available and don’t let the media spin (which I expect to be brilliant wordplay at its finest) shut you down from analyzing this. There is simply too much at stake to let our initial fears dull our sensibilities to the that point we passively hand our country over to the global financial system and whoever it is that actually runs it. Allowing globalism to flourish unchecked is not free market capitalism. This is what the late Georgetown University historian Carroll Quigley described as “monopoly capitalism.” The 1890 Sherman Antitrust Act, which has been curiously marginalized in recent years, was implemented to prevent this sort of thing so markets remain truly free for diverse entrepreneurial activity. It’s ironic to note that monopoly capitalism has more in common with communism than genuine free market capitalism. In fact, laissez faire capitalists abhor free markets for all but themselves. If you study the history of global financial power, it reveals the most elite among the world’s financiers don’t care whether capital is concentrated publicly or privately so long as it is in a position where they can control it. “Permit me to issue and control the money of the nation and I care not who makes its laws,” is a frequently referred to quote made in the 18th Century by M.A. Rothschild, founder of the famous European banking dynasty. Politics and Money In the left/right political debate, we waste a great deal of time arguing about matters of functional irrelevance while the “hidden hand” is content to pick our pockets from either side. World Bank Group President Robert Zoellick recently stated in a speech he gave addressing the global financial crisis before the recent G-20 summit in London that major international banking institutions need more power to monitor national policies. “If leaders are serious about creating new global responsibilities or governance, let them start by modernizing multilateralism to empower the World Trade Organization, the IMF, and the World Bank Group to monitor national policies,” Zoellick said. “Bringing sunlight to national decision-making would contribute to transparency, accountability, and consistency across national policies.” I’m all for transparency, but here’s the problem I have with this statement, which mirrors countless statements echoed relentlessly in the international financial community: It is impossible to cre-

We don’t want central banks issuing currency for profit any more than we want the military starting wars for profit. Fiat Money is an instrument of law, and we get on dicey ground when we empower a privately-owned institution to originate law from which it profits.

24 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

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ate meaningful “global governance” without marginalizing national sovereignty in the stated areas of jurisdiction. And what area of jurisdiction is more important to national sovereignty than domestic banking and monetary policy? The United Nations in its current form is “global government lite” compared to what Zoellick just described. What Zoellick calls for is global government jurisdictions centered on banking and monetary policy with real authoritative power. In this world, whoever controls money ultimately controls everything else. That’s why these folks don’t need to micromanage everything to influence the outcome of just about every decision we make. They know this well and they rely on the fact most of us are unaware of their agenda and tactics. The only way for citizens at large to protect themselves and their nations from this closely guarded insider power is to keep their nations sovereign and to make their governments truly accountable to the people—something they have not been for a very long time. It’s as crucial for governments operating by the consent of the people to keep their monetary system under their control just as they would control the military. We don’t want central banks issuing currency for profit any more than we want the military starting wars for profit. Fiat money is an instrument of law, and we get on dicey ground when we empower a privatelyowned institution to originate law from which it profits. This means the agency entrusted to issue currency should be a genuine government agency and no secondary layers of interest or debt should be tied to the money supply itself. This would ultimately be better for honest chartered banks, the business community and citizens at large. And if we do this, the rest of the world will stop rolling their eyes when we espouse our republican values with each imperial directive. n David Whitehead is the Publisher of Business Insider Magazine. He can be reached by email at [email protected]. 2 n d I ss u e 2 0 0 9

Continued from page 11 torney will spend one or two hours preparing for every hour actually in the courtroom. This includes writing briefs and evidence motions, preparing exhibits, and reviewing testimony and discovery. Trial usually begins with a conference with the judge over procedural details. Next are arguments on “motions in limine” – these are vital, as they determine what evidence the jury can and cannot see. Sometimes the case is won or lost on these motions. Jury selection is next. The judge and both attorneys question the potential jurors and try to strike from the panel those they feel will be unfavorable. Once a jury (usually of 12) is selected, the lawyers give their opening arguments, plaintiff first. The plaintiff must prove his claims “by a preponderance of the evidence” by showing that his claims are more likely than not true. The plaintiff puts witnesses up first, and the defense then gets to cross-examine them. When the plaintiff “rests,” the defendant presents his case. After the defense “rests,” the plaintiff gets a short chance to put on rebuttal evidence. The lawyers then argue the case to the jury, and then the jury deliberates. The court will “instruct” the jury--that is, read largely pre-written explanations of the key issues of law applicable to the case. The jury’s verdict requires a 9-3 or better vote on each issue. The winning party will then have a judgment in her favor. Note that having a judgment against someone is not the same as collecting a judgment from someone. If the judgment debtor has no assets, there is nothing to collect. If the judgment is against Continued on page 29

Business litigation is a long, complex process that takes considerable time and money. The key is to think about your business goals and resources at every step in the process, and to work with a legal professional who understands your needs.

S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 2 5

G R E E N B I Z COV E R F E AT U R E

“South Bay businesses and residents are encouraged to learn about water conservation programs, both indoor and smart landscaping outdoors.” Marilyn Lyon, SBESC Program Manager Continued from page 15 workday is over, it is continually in the process of reviewing any and all potential eco-friendly changes. Besides judging the environmental benefits of a given decision, short- and long-term cost-effectiveness must also balance out the equation. Kalapura detailed a list of Manhattan Beach’s key green accomplishments and programs, which include permit fee waivers for solar panel installation, purchase of hybrid cars for public safety and a CNG Dial-a-Ride vehicle, installation of drought tolerant planters along downtown as well as recycling containers along the Strand and city parks, green workshops for seniors, and an extensive energy audit and water rate study. New programs include battery recycling, unwanted medication drop-off, and Sharps (needles, syringes, lancets, etc.) material disposal. The City also holds a number of green events during the year, most recently a Reusable Bag Day, Solar Homes Tour, and Earth Day celebration. Meanwhile, a dedicated “Going Green” page on the City’s website updates citizens about ongoing and upcoming environmental programs, events and initiatives. Outreach is a vital aspect of Kalapura’s job. In addition to overseeing the CAP, Kalapura also serves as a point person for public education on green issues and liaison to the Environmental Task Force. “It was important for the Council to involve the community to make Manhattan Beach the greenest city it could be,” she said. “The backgrounds and expertise of the people on the Task Force are very impressive, so we’re very glad to tap into our local talent pool.”

The task force holds public meetings on a monthly basis and makes recommendations to the Council on areas dealing with carbon emissions reductions, solid waste and recycling, green building and water conservation. “It’s a great opportunity for the City to look at what policies to implement to help the environment, and what we can do in the future” Kalapura said. “The programs span across all departments of the City, including public works, parks and recreation and community development. There’s much to be done, but everyone is very knowledgeable and committed to making it happen.” South Bay Environmental Service Center: The One-Stop Shop for Eco Info While individual cities and businesses have taken it upon themselves to carry out their own green initiatives, others need a little direction. Thankfully, help is out there. Describing itself as the “South Bay’s local clearinghouse for energy efficiency, water conservation and environmental information,” the South Bay Environmental Services Center (SBESC) assists public agencies (including cities and school districts), businesses, commercial property owners and residents of all ages in the quest to go green. According to its mission statement, SBESC exists to “significantly increase the availability of information and resources to the people in the South Bay region to help them save water, energy, money and environment.” Through partnerships with the South Bay Cities Council of Governments, The Gas Company, Southern California Edison, West Basin Municipal Water District, the City of Torrance , and

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Graduate Courses the Sanitation Districts of Los Angeles County , SBESC sponsors ongoing free workshops, seminars and outreach speaking eventsme if I had anything to agents asking geared to resi- was so sell since there much Lyon demand Marilyn dents and business owners to help them establish “bestgreen practices.” The agency also providesa wealth of valuable information (both on-line and at its Lawndale-based on ural waterfalls, ponds, and offices) high-end everything from utility rebate incentives irrigation systems that have become and refrigerator recycling to green building and solar technology. Through SBESC, Fortunately for Garcia, he had built you can get water conservation tips as wellas a list various “no-cost things” can tele thatof would help him stayyou afloat do right now to save energy and money. between the down years of 1990-92. Solar is the just Iron one example a more “In ’90, Curtainoffell and effithe cient power source promoted by SBESC.Information about biomass, wind, hydro,and geothermal is readily sands began to applications lose their jobs and available on the agency’ s website. property values dropped. A big black Meanwhile, SBESC’s Energy EfficientPlus (EE+) program helps businesses and agencies save energy by joint procure-ment of energy-efficient equipment suchas refrigerated vending machines aurocketing beginning in 2000.that Other tomatically power down when dormant,and computer network power management cia and other contractors enjoyed a software. six-year run unparalleled at any time “South Bay Home businesses and appreciated residents are previously. values encouraged to learn about water conser-vation programs, both and good. smart struction peaked, andindoor life was Continued page 28 28 Continued ononpage

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S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 2 7

G R E E N B I Z COV E R F E AT U R E “We look for the best way to educate employees on green issues and how to change their behavior at work ... Our goal is to educate them about going green so they in turn spread the message to their friends, family and people in the community to do the same.” Heather Ramirez, Tech Go Green, Director of Development Continued from page 27 landscaping outdoors,” said SBESC Program Manager Marilyn Lyon. On its online calendar at www.sbesc.com, SBESC lists virtually every eco event happening in the South Bay on a monthly basis. Torrance Firm Helps Businesses Go Green and Save Green A relatively new Torrancebased firm offers “sustainable business consulting” to help small businesses go green and save money in Heather Ramirez the process. Incorporated early last year, Tech Go Green sends field experts to offices to conduct energy audits, utility bill analyses, end-user surveys, and management interviews. The program aims to reduce a business’s carbon footprint, waste generation, and water and power usage while also encouraging recycling, energy-efficiency and use of post-consumer content. Tech Go Green’s staff members are trained in energy management practices with college degrees in environmental sciences as well as additional education from Southern California Edison. “We try to be as comprehensive as possible,” said Tech Go Green Director of Development Heather Ramirez, who said the on-site evaluations typically take a week from start to finish. “When we’re done with the walk-through, we give them a proposal that describes how sustainable they are and how they can become more sustainable. We hand-hold

them through the entire process and help them implement programs and policies by talking to local distributors and contractors.” The evaluations are meant to leave no stone unturned. For instance, an evaluation of Switzer Learning Center revealed that employees didn’t reset the thermostat after leaving the office. “They would adjust the temperature to too hot or too cold but didn’t change it back before they left,” explained Ramirez. “So we recommended installing lock boxes.” Going green doesn’t

28 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

always mean big investments. Many green solutions are simply creative everyday alternatives. To take their work to the next level, Tech Go Green is now developing a Torrance Green Business Program to provide businesses with the necessary technical assistance to become a “Certified Green Business.” To achieve certification, businesses must comply with regulations and adopt environmentally sound practices in energy efficiency, water conservation, solid and hazardous waste reduction, and pollution

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prevention. The program will eventually expand to the entire South Bay. While most environmental consulting can be pricey, Tech Go Green has managed to get around that obstacle. “We filed for nonprofit status so that the small businesses we work with wouldn’t be hampered by consulting fees,” she said. “This allows us to secure outside funding to cover those fees and allows businesses to spend more money actually implementing our recommendations.” Such recommendations are not only meant to be eco-friendly, but also help the bottom line. “It’s a win-win situation for the business and the environment,” Ramirez added. While Tech Go Green’s business analysis identifies every possible and even obscure energy-wasting behavior, one high-profile area is

the biggest offender: lighting. “You don’t need a consultant to tell you your lighting isn’t energy-efficient,” said Ramirez. “But lighting alone can save thousands of dollars. Also, bathroom fixtures and toilets can make a huge difference.” Ramirez added that changing employee mindsets is also critical. “We look for the best way to educate employees on green issues and how to change their behavior at work,” she said. “Turning on a screensaver doesn’t reduce energy consumption, for example. On the other hand, even if you install energy-efficient lighting, it defeats the purpose if you leave it on at night. Our goal is to educate them about going green so they in turn spread the message to their friends, family and people in the community to do the same.”n Brian Simon is a freelance writer who lives in El Segundo.

Continued from page 

blogs are already providing content available for download. The periodical market is set to explode when future generations of advanced screen technology offer full-size page display in color. However, we will still be reliant on LCD technology to stream moving pictures and video for the foreseeable future. But the road ahead is paved and the horizon is becoming clear. Sony has a competing product and iRex, a Dutch firm, launched a product last year. As new products are innovated and industry standards are set, it’s only logical that much of the paper we produce now will no longer be wanted or needed. But the demand to read will always be there and whatever form we ultimately use to deliver it, rest assured the publishers you have always known will be here to serve you. Most of them must need to break their pulp addiction. Perhaps the green revolution will knock some sense into them.n David Whitehead is the Publisher of Business Insider Magazine. He can be reached by email at [email protected].

Although constructed from rigid plastic and glass, the lightweight Amazon Kindle is the first device to reach consumers that uses electrophoretic technology. Originally launched in November 2007, this first-generation advanced electronic reader makes an extraordinary leap in functionality. It can download from a selection of 230,000 book titles, purchased for $9.99 each and delivered through existing wireless networks. The cost savings alone on book purchases offsets the $359 price tag for the device. Plus, Amazon.com provides wireless access with the purchase of the device. The system backs up all user downloads in case a device is lost or another one is purchased. If you want to use it to read your own documents, you can email your .pdf or Word files to the device and go to it. As with all first-generation technologies, the Amazon Kindle and its few competitors have notable limitations. Electrophoretic display screens are only available in black and white and the Amazon Kindle has a screen about the size of a paperback book. Despite its limitations, major newspapers, magazines and even

Continued from page 25 you, again consider settling. An amount less than the judgment plus a waiver of an appeal might just resolve the case. Step Seven: Appeal You can appeal an unfavorable judgment, but about 80 percent of appeals fail. That is not surprising, since appeals do not test the facts found by the juries, but rather the judge’s legal rulings. Things like the improper introduction of evidence or the incorrect application of law are typical appellate issues. What the court of appeals will not look at are facts – the court of appeal will almost never override a jury’s finding of fact. For that reason, and because it is extremely expensive, you should carefully consider whether to appeal. Business litigation is a long, complex process that takes considerable time and money. The key is to think about your business 2 n d I ss u e 2 0 0 9

goals and resources at every step in the process and to work with a legal professional who understands your needs. So if you should be handed papers, stop and take a deep breath. You are in for a fight, but you will improve your chances and minimize your losses if you understand what you are up against and approach it not as an emotional issue, but as a business problem to be solved as efficiently as possible. n Kurt Andrew Schlichter is a business litigator and a partner at Schlichter & Shonack, LLP, in Manhattan Beach, a six-attorney law firm primarily focusing on the representation of businesses and businesspeople ranging from Fortune 500 companies to individual entrepreneurs. He writes frequently on legal issues. This article does not constitute legal advice and does not establish an attorney-client relationship. Consult an attorney regarding your individual situation. S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 2 9

mpany and norto to little anies, proound. their to oice I phone keep

TECHNOLOGY INSIDER

Continued from page 30 prehensive IT system to be devised for the various departments that needed to keep and share much of the same information. The result was a disillusioned staff that got buried in muck, not to mention enormous expense to the company that could have

been avoided. Individuals also made frequent mistakes because they didn’t have the right information when they needed it. I realize that during a booming economy, companies get too preoccupied with their core business to notice the monsters they often create with their IT manage-

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30 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e

ment. Bad feelings and finger pointing result when these kinds of problems lead to horrible mistakes or create a productivity gridlock. And when the economy gets bad, you simply can’t afford to put up with it any longer. But the Catch 22 is that by this time, you may not be able to afford to do anything about it. It’s cheaper and easier to build and maintain a system correctly on the front end than it is to fix a badly conceived one. I remember how difficult it was to consolidate two ACT databases from different departments. When our IT pro finally did it, we still had duplicate entries all over the place that couldn’t be fixed with an automated procedure. Avoiding Gridlock and Problems The best way to avoid these kinds of problems is to implement integrated IT from the start. Evaluate and select software solutions that serve the broadest range of your IT needs. If similar information is shared between accounting, sales and other administrative staff, make sure you are not creating redundancies and ensure that specific individuals only have access to information related to their jobs that they are authorized to see. Most importantly, make sure the entire integrated system is secure from the outside. I always had the impression that techresistant managers were afraid sensitive information would get into the hands of the wrong people if they integrated their systems. Ironically, there is actually a greater risk when the system is screwed up. The best way to handle the situation is to hire IT experts with in-depth experience at creating the kind of secure system you need—an industry specialist if possible. If you believe your company will grow to a substantial size, you’ll probably need either a custom system or high-end software that is easily customized to your specific needs. It’s definitely worth the investment. Be careful how you put together a management team to make vendor and product selections. Remember that it is natural for managers to feel territorial about their own departments. This often leads them to focus on areas of the company they feel are 2 n d I ss u e 2 0 0 9

Event Resources important rather than on the company as a whole. The whole idea of integrated IT is to make the entire operation work in unison. Don’t let company politics sabotage this process, leaving you with an unbalanced or fragmented system. Whatever you decide on, don’t expect everyone to be happy with everything about it. You will need to make some compromises of course, and you will need a system that can grow with the changing demands of your company. Although smart IT people know how to effectively program your system, they don’t know your company as well as you do. Pay attention to how they create user interfaces for your staff while taking an interest in the way they create database fields and how those are displayed. Much of the information will be accessed behind the scenes in a consolidated relational database. However, make sure your staff gets a presentation they will understand as easily as the people who create the system. Think ahead to the information they will need on a regular basis. This comes first. While keeping like information together, make sure staff can access any information they conceivably might need without having to disrupt the work of others. Make sure there are secure sign-ons for sensitive information and ensure only people authorized to change the information in specific fields are able to do so. What you want to avoid is forcing people to search for things, which is one of the biggest productivity killers in the 21st Century workplace. Also, you want your employees to feel they are accomplishing something rather than jumping through the same hoops over and over again. The structure of your company’s IT system is a morale issue as much as a technology issue. Creating an integrated IT system from the get-go will save yourself a load of time, money and aggravation as well. And it may be the key to your survival during a down economy. n David Whitehead is the publisher of Business Insider Magazine. He can be reached by email at www.BusinessInsider.us. 2 n d I ss u e 2 0 0 9

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