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This article by Kathleen McGinn Spring was prepared for the September 17, 2003 edition of U.S. 1 Newspaper. All rights reserved.
LLCs Gain in Popularity
<B>Victor Elgort, a senior partner at law firm Norris
McLaughlin & Marcus, started out to be an engineer. But his timing
was off. "Astronauts had just landed on the moon," he recalls.
The big excitement was over, a recession was beginning, and, he adds,
"I saw that students one and two years ahead of me were having
a hard time finding jobs."
Using analytical skills, Elgort reasoned that the traits that make
a good engineer — including analytical skills — are the same
abilities that make a good attorney. "You have to break a project
down into its parts," he points out. "There is a systematic
application of rules."
So, leaving his new profession, Elgort, a 1973 Rutgers graduate, packed
up and headed to Cornell, where he obtained a law degree, which he
later followed up with an advanced degree in tax planning from New
Interesting, the successful practice of engineering or law is not
dissimilar to the successful set-up of a new business of any type
or size. Analytical skills are essential because there are important
choices to be made before a single piece of business takes place.
Yet Elgort, who spends many of his days helping to launch companies
— or to combine, separate, or expand them — sees that entrepreneurs
are often in too great a hurry to make careful choices.
"Everybody is so focused on the need to get up and running that
they don’t take the time to think about long term consequences,"
he laments. And when problems arise, he adds, "it’s often too
late to un-ring the bell."
One of the first choices an entrepreneur has to make is that of the
legal form his business will take. Is it better to make the new venture
a corporation or a limited liability company (LLC), or maybe a sole
proprietorship? Or does it even matter? Elgort provides insight and
advice when he speaks on "Choice of Business Entity in New Jersey:
How to Do It Right," on Thursday, September 18, at 8:30 a.m. at
the Best Western Palmer Inn. The cost for this program is $279. For
more information, call 800-930-6182.
Business formation is up. Fresh from lay-offs, IT professionals are
thinking of starting software development companies and former HR
directors are launching corporate training firms. Personal service
businesses are shooting up left and right as Boomers delay — or
come out of — retirement to put long-deferred entrepreneurial
dreams into play. Biotech remains active; restaurants continue to
open; and there is no dearth of attorneys and accountants ready to
hang their shingles.
No matter what the business, there is an urgency to pin that first
dollar to the wall — whether literally or figuratively. Slow down
just a little, is Elgort’s advice. Setting up the business properly
from the beginning can save untold dollars down the road.
While the possible permutations are endless — "No two businesses
are ever the same," stresses Elgort — there are some guidelines
that apply across the board:
free to make their venture any type of entity they think best. But
some are not.
"Professionals are subject to regulations by state or federal
agencies," says Elgort. These agencies establish a list of permissible
forms of business entity. "There are 22 or more different regulatory
agencies governing licensed professionals," he says. This situation
is in flux, and Elgort sees less restriction in the future, but for
now, any professional needs to check with his licensing agency before
choosing a business entity.
broker form a business that will have offices in northern New Jersey,
southern New York, and eastern Pennsylvania. Each state has different
regulations governing the establishment of a real estate company,
and the entrepreneur has to conform to all of them.
Think of where your customers are, says Elgort. Think of where your
manufacturing facilities are. If your business has tentacles beyond
the boundaries of the Garden State, setting up a business entity may
involve conformity to more than one set of rules, and the advantages
of a particular form of New Jersey business entity may be lessened
— or erased altogether.
establishing a business," says Elgort, "he is focusing on
taxes, liability, and insurance." That is all well and good, but,
he asks, "what about asset protection, wealth transfer, bringing
children into the business?" In setting up a business, think past
the first year or two, and try to consider as many future scenarios
fact, the first one was formed in New Jersey just about 10 years ago
— by Elgort. "It was part of Christie Whitman’s bid to make
New Jersey business-friendly," he says of the legislation that
brought the LLC into being.
The legislation passed in the summer of 1993 and went into effect
in January of 1994. Elgort attended a ceremony in Trenton to celebrate
the state’s first LLC. Elgort will not reveal the name of that first
LLC. The business is still his client, and, he says, "I don’t
want to be mentioning clients’ names." He does say, however, that
the pioneer LLC is a family-owned business with sales of about $10
to $15 million a year.
In his view, the LLC, which has most of the advantages of a corporation,
but is more flexible, and easier to administer, did, in fact, give
New Jersey a business edge. In most respects, for most businesses,
it is the way to go.
sites that give advice about business formation — and that generally
provide the service for a fee — state that an LLC is to be avoided
because it is not taken as seriously as a corporation. Banks may hesitate
to lend money to an LLC, the online legal advice sites say, and other
companies may hesitate to do business with them.
Some of that may have been true years ago, says Elgort, but he is
seeing that such fears have largely died down. "At first, banks
were worried," he says. They feared that an LLC would free an
entrepreneur of all liability, and that, therefore, they could be
left holding the bag in case of a default.
Here again, the online advice sites seem to mislead, stating that
LLCs do, in fact, free their owners from liability. This is a common
perception among entrepreneurs, says Elgort. And it is wrong. There
are a number of reasons for choosing an LLC, but counting on it to
act as a shield against all liability is not one of them.
The LLC’s owner is on the hook for any obligation for which he gives
his personal guarantee. In the real world, that covers just about
everything. Certainly, says Elgort, "banks have the negotiating
power to demand a guarantee." In other words, if a kite shop owner
wants a bank loan, he is going to have to sign for it, perhaps pledging
his home or his stock account as collateral. Should the kite shop
go under, he would be responsible for making good on the loan.
Letting banks know this, says Elgort, was all it took to make them
comfortable with LLCs.
The LLC does offer some liability protection, though. Suppliers, says
Elgort, may not have the clout to demand a personal guarantee. So,
should a business go under, its owner might not be personally liable
for business supplies and the like.
of the times when a corporation can be a better choice is the case
where a new company is quite sure that it will be going public. Theoretically,
an LLC can go public and can issue "units" rather than shares
of stock. But, at least for now, potential shareholders are much more
comfortable with stock.
LLC to a corporation, and the consequences generally are tax neutral.
The converse is not true. When a corporation becomes an LLC, "the
tax consequences can be dramatic," says Elgort. "Essentially,"
he says, "you are liquidating the corporation."
There are often ways to mitigate the tax bite, but doing so takes
time and expert advice.
corporations in the dust, LLCs are now the top choice with new New
Jersey companies. This is so, says Elgort, because they are so much
easier to form and to administer, and because they carry substantial
flexibility in taxation. A corporation, for instance, has to have
a board of directors, officers, an annual meeting, and bylaws. LLCs
need none of these things.
But LLCs are free to adopt any or all of these corporate trappings.
They can mimic a corporation in almost any way.
many one-person businesses would operate as sole proprietorships,
but now, even these very small businesses can reap the advantages
of an LLC. There have been a number of amendments to the original
LLC legislation. One, in 1998, declared that an individual can own
At the other end of the spectrum, says Elgort, an LLC can be a large
company with hundreds of millions of dollars in annual sales.
to pass-through their business’ net profits — or losses —
and figure the tax as they would on personal income. Or, the owners
may elect non-pass-through treatment, in which case the tax liability
would remain with the entity.
or expensive, says Elgort. He cautions, however, that a new business
owner consider the choice in a broader context. This is particularly
true when more than one person is going to be involved in the enterprise.
Issues of management, succession, buy-out rights, and more are best
A little analytical thinking done in advance, as Elgort’s career path
amply demonstrates, can pay outsize dividends for the new entity —
whatever its form — for decades to come.
Media is pulling out from under a tech-induced haze.
"For the last five or six years, people got very excited about
technology and its promise," says Rod Ammon, president of
Stonehouse Media. "It put a spanking on all of us."
There is paradox here. Some of the fancy tech-enabled stuff is gone.
Stonehouse Media’s web page, for example, no longer opens with an
elaborate show of sound and motion. "We used to have a 60-second
intro to the website," says Ammon. "Now it’s a straightforward
approach." But at the same time, technology’s reach into all kinds
of media messages is multiplying.
The market for the creation of these messages, meanwhile, is slowly
building after a long drought. At the same time that technology was
confusing some clients, and disappointing others, their receipts,
hurt by the recession, were dropping. Media spending was cut from
any number of corporate budgets.
"No question," says Ammon, "it’s been a difficult time
in the media business." He does see signs of a turnaround, though.
Clients have some dollars to spend once again, and are ready to learn
about all of the new ways in which they can reach customers, train
staff, and educate the public.
Ammon joins a panel discussion on "Where the Work Is: Selling
Yourself Creatively and Finding Your Niche" at the Princeton Media
Communications Association on Wednesday, September 24, at 6:30 p.m.
at the Sarnoff Corporation. Also speaking are Tom Sullivan,
president of Princeton Partners, and Debra Newton, president
of Newton Gravity Shift. The event, which includes a light supper,
is free for PMCA members, and $15 for others. Call 609-818-0025, ext.
146, for more information.
Ammon founded Stonehouse Media, which has offices at 989 Lenox Drive,
eight years ago with James Paulus. They had been working at Videosmith,
a media company with offices in Philadelphia and Princeton. When a
decision was made to close the Princeton location, Ammon and Paulus
decided to open their own shop.
Ammon, who grew up in Summit, studied communications at Northern Michigan
University (Class of 1987), and then went to work for PBS in Michigan,
where he was vice president of marketing and sales.
When Ammon and his partner started Stonehouse Media, he says, "we
knew technology was coming." And come it has. Where print once
led the parade, with television following, there is now an explosion
of options, and each requires a special expertise. The way you deliver
a message over a cell phone, Ammon points out, can be very different
from the way you deliver it over the Internet.
Nevertheless, for media companies, he is convinced, it is time to
"get back to basics." Here are some suggestions for winning
business by doing so:
concentrate on just exactly what it is that the client does, and who
exactly it is that he needs to reach.
says Ammon. "We looked at what we knew. We looked at what relationships
were successful, and what relationships were a waste of time. Then,
we zeroed in on all the things that had been worth the time."
As an example, the shop had done some work for fire investigation
companies, producing some large-scale training tools. After terrorism
exploded into everyone’s consciousness, Ammon’s company realized that
many kinds of organizations would need the same type of training programs.
Using the types of materials it had already prepared, it added a number
of new clients, including the Secret Service and the Department of
Media had long been the medical field. Looking around, Ammon and his
staff realized that pharmaceutical companies had a need to communicate
with both their over-the-counter customers and their prescription
drug customers. At the same time, both pharmaceutical companies and
healthcare providers had a growing need to train their people.
The lesson for Stonehouse, and for every other media company, says
Ammon is "take advantage of what you claim to have expertise in."
Focus on your core competencies, is his advice. "The really good
agencies," in his opinion, "really learn about a product or
shops, uses a number of freelancers. "On some days, we have five
people working on a project," says Ammon. "Other days, it’s
50. We’ve had as many as 90." These freelancers, at least those
who have been offering their services for any length of time, are
intimately familiar with boom and bust cycles. They’re either working
like crazy, or not working at all. The same can be true for agencies,
says Ammon, and the answer is the same: "Keep marketing."
No matter how much work there is today, it is imperative to keep an
eye on keeping the work flowing tomorrow.
is more important. Networking? Well, it’s not a total waste of time,
opines Ammon. But getting out and schmoozing pales in importance next
to the daily imperative of turning out exceptionally good work —
again, and again, and again.
tune, but play it for all it’s worth. There are so many new tools
available, and mixing them up can be effective — and great fun,
Stonehouse has a client, Avecia, a pool and spa company, with a new
product. "It’s a chlorine alternative," explains Ammon. To
teach salespeople in pool companies all across the land about the
new pool-cleaning option, Stonehouse created a training program on
a CD-ROM. Despite the proliferation of the Internet, CDs are still
important, he points out, because so many people still do not have
access to fast connections. But, while a dial-up connection doesn’t
work well for video-intensive presentations, it works wonderfully
So salespeople learned about chlorine-free pool maintenance through
a CD-ROM, and then logged onto the Internet to test their new knowledge
— and to gain certification. An added benefit of putting the Internet
in the mix was that Avecia could know exactly how effective its campaign
"It’s like watching the stock market!" exclaims Ammon, clearly
thrilled with the hybrid technique. "You can watch the results.
You can tell which store is using the training."
The hybrid approach also works well in other settings. "Companies
in the medical industry would love to do broadband online training,"
Ammon finds, but the bandwidth is still not there. It’s coming —
probably soon — but in the meantime, putting the training on a
CD, a DVD, or even a reel of videotape, and then putting the testing
online, is a good solution.
The Garden State’s image isn’t tied too closely with
truck farming anymore. It’s more of a technology kind of place. Well-known
as the birthplace of television, and as fertile ground for telecom
and pharma, it is not often linked with movies. Tinsel town? Nah,
no one thinks of New Jersey that way.
At least not yet. But at this very moment, scores of movies, television
dramas, and commercials are being filmed from Bergen County right
down to the shore. "It relates nicely to the technology industry,"
says Michael Glass, director of Statewide Training Programs
for Mercer County Community College. "There is a whole new aspect
of the kinds of things that people can do with computers."
This convergence is one reason that MCCC decided to hold the area’s
first Entertainment Technology Conference. Subtitled "Exploring
the New Frontiers of Entertainment Technology," the event, which
Glass is busy organizing, takes place on Thursday and on Friday, September
25 and 26, at the Conference Center at Mercer County Community College.
The cost is $295, but $99 with a college ID. Call 609-586-9446 to
"We were looking for topical conference topics to help with economic
development," says Glass, "and entertainment came to the forefront."
A further impetus for holding the conference now is
the news that Hollywood special effects studio Manex has firmed up
plans to locate a facility in Trenton, in the Roebling Center. Glass
says that exact plans are still being worked out. But MIX, an industry
publication, wrote in July that Manex has purchased seven buildings
on which to develop the Trenton Studios Development Project. Plans
include converting 89,000 square feet of existing floor space into
production offices, post-production, visual effect, sound, rendering,
and classroom facilities.
Manex has entered into a redevelopment agreement with the Mercer County
Improvement Authority (MCIA) and the City of Trenton for assistance
in the development of its new facilities. The agreement includes capital
improvements of approximately $25 million by the end of phase two.
Both the City of Trenton and the MCIA have approved the company’s
Two weeks before the conference kick-off, Glass says that it is not
yet certain whether representatives from Manex will attend the conference.
Many other speakers have signed on, however, and, says Glass, "we’re
adding speakers every day."
Michael Uslan, New Jersey resident and executive producer of
the Batman movies, gives the keynote. In addition to his Batman fame,
Uslan is an Emmy Award-winning producer of many television shows and
movies, a cartoonist, an author, a lawyer, and a noted authority on
Acknowledging the convergence Glass sees in technology and entertainment,
the conference offers three tracks: Movies, including special effects,
digital cinema, and production; Video, including streaming video,
animation, broadcast TV, and production; and Desktop, including streaming
video, DVD creation, multimedia, and video games.
Topics include "Design Direction and Zen," "Go Shoot Yourself:
One Day Movie Making," "Making Corporate Videos," "Blurring
the Line Between Gaming and Reality," "Adobe Encore DVD,"
and "Career Opportunities in Multimedia and How to Position Yourself
to Get Them."
Entertainment is big business in New Jersey. Steve Gorelick,
associate director of the state’s Motion Picture and Television Commission,
says that last year the state hosted 801 projects. Among them were
70 features, two telefilms, and 153 TV series and specials.
A Rutgers graduate (Class of 1979), who studied film at New York University,
Gorelick has worked for the Motion Picture and Television Commission
since 1980. In the intervening years, he has seen a tremendous growth
in filming activity in the state. In 1980, there were 17 features
and 19 TV series. The numbers rose to 31 features and 90 TV series
in 1990, and really took off in the late 1990s.
Reasons for New Jersey’s budding film career include the tremendous
popularity of the state’s most famous crime family, the Sopranos.
So obviously of New Jersey — with its Turnpike intro and mix of
gritty old industrial streets and McMansion suburbs, the series helped
put the state on the entertainment map.
Upon getting Hollywood’s — and New York’s — attention, New
Jersey was more than able to follow through. "We have a wealth
of talent here," says Gorelick. "Crews don’t have to be flown
in." Then there is the state’s proximity to New York City. Add
generally cooperative towns, and New Jersey makes it easy for film
makers to operate efficiently here.
Gorelick’s commission works ceaselessly to make this so. He spends
a good part of his time scouting locations and even more of his time
talking to multiple officials in towns that would make for good film
locations. "Helping to pave the way," he speaks with mayors,
city councils, and police departments. "It’s everybody," he
says, "county agencies, Port Authority, NJ Transit." Filming
can be disruptive, so he lets everyone involved know what to expect.
Most towns are enthusiastic, and welcome the film crews. It is part
of Gorelick’s job to make sure that the welcome mat stays out. So,
in addition to prepping the towns, he works with the film companies
to make sure that they "work responsibly so that the towns will
welcome them back."
Gorelick enjoys going on location, and has even been drafted as an
extra from time to time. But, as anyone who spent any time watching
the filming of IQ or of A Beautiful Mind in Princeton knows, being
an extra often is not as much fun as it would seem. Filming is slow
business. "I’m impatient," says Gorelick. People are always
telling him that they want to get their kids into films. "Well,"
he says, "I tell them they have to be patient children."
An upcoming movie that Gorelick is eager to drop in on has a working
title of "Cookout." A Queen Latifah project, it is about the
drafting of a young basketball phenom. "Jason Kidd is going to
make an appearance," reveals Gorelick.
Movies are fun, but as Trenton’s near-obsession with Manex’s move
demonstrates, they are also big business. Last year, says Gorelick,
the entertainment industry pumped $70 million into the state. And
while everyone thinks of that money going to actors, directors, key
grips, and all the other delightfully enigmatic professions that roll
quickly by in movie credits, there are a huge number of industries
The Movie and Television Commission keeps a list of state resources
for movie makers, and the number of jobs represented is nothing short
of staggering. There are categories for day care providers, animals,
tutors, dry ice, portable toilets, water trucks, parking attendants,
paging companies, gift companies, music composition, mural artists,
insurance, hot air balloons, air freight, art dealers, and dozens
and dozens of others.
To encourage the activity that adds to the revenues of companies in
all of these categories, the state recently agreed to provide loan
guarantees of up to $1.5 million through the NJEDA to film makers
working in the state. This is a per-project guarantee, and is meant,
says Gorelick, to encourage small film makers, perhaps those with
$6 million projects who need a bit more money to make a project a
reality. "Many Sundance winners have been shot here in New Jersey,"
Gorelick points out, citing Two Family House, Clerks, and The Station
Agent. "Throughout the country," he says, "people are
worried about films going to Canada, Eastern Europe, Mexico, this
is a way to level the playing field."
Major supporters of the American Red Cross of Central
Jersey’s benefit performance of the Music Man include DeVry College
of Technology, Franklin’s Printing in Edison, Sovereign
Bank, WCTC Talk Radio, Englehard Corporation, IBEW
Local Union 456, and Johnson & Johnson. The performance takes
place on Saturday, October 18, at 8 p.m. at the State Theater in New
Princeton at Forrestal Village, is giving free admission cards on
Saturday, September 20, to all enlisted walkers in the Mercer County
Heart Walk, which took place on September 13.
The hotel also will donate money to the Heart Association on behalf
of all the walkers who attend the Culture Club on the 20th.
a hearing aid drop to benefit Help the Children Hear, a project that
alleviates the plight of lower-income hearing-impaired children.
Donations of new or used hearing aids, or of cash, are being accepted
at Bear Creek’s facility, at 291 Village Road East. For more information,
party for underprivileged children on Friday, August 22. Boomer, the
Trenton Thunder’s mascot, was the star attraction.
At the event, children were given book bags full of school supplies
donated by employees of Pfizer, Bristol-Myers Squibb,
Sarnoff, and The United Way.
<B>Stony Brook Millstone Watershed Association has
announced $100,000 in grants to 14 watershed groups throughout the
state. Funded by the Geraldine R. Dodge Foundation, the association
established the program to help strengthen the capacity of grassroots
watershed organizations to protect environmental resources in their
Awards ranging from $2,200 to $20,000 fund projects ranging from membership
development to volunteer monitoring patrols for watershed organizations.
Funding will enable organizations to teach environmental programs
in schools, offer guidance for municipalities on the upcoming stormwater
regulations, and to increase volunteer water quality monitoring efforts.
from the National Science Foundation under the computer science,
engineering, and mathematics scholarship program.
The four-year grant will enable the college to award 20 to 25 full
scholarships to academically talented, financially needy students
pursuing studies in the fields of computer science, engineering, mathematics,
and related technologies.
The college plans to combine these resources with the privately raised
funds for the Galileo Scholarships, which was launched last spring,
and build a community of learners supported by online integration,
faculty mentors, internship opportunities, and other learning activities.
For information contact Janet Thompson at 908-526-1200, ext. 8271.
nominations for the Class of 2004. The program is based on the belief
that a city’s greatest resource is the quality and commitment of its
civic leaders. It aims to expand and improve the network of civic
and community leaders who care about the city’s future and who are
committed to working together to make that future brighter.
Leadership Trenton seeks applicants who live or work in Trenton. Successful
applicants display evidence of professional accomplishments with indications
that advancement is in their future, clear potential to exercise civic
leadership, and a commitment to positive change for Trenton and the
The program is a collaboration of Thomas Edison College, the John
S. Watson Institute for Public Policy, and the Partnership for New
The application deadline is Tuesday, September 30. For more information,
contact Nelida Valentin at 609-777-4351, ext. 4255.
a blood drive on Tuesday, October 28, from 11 a.m. to 3 p.m. at a
Bloodmobile adjacent to the Forrestal Village Food Court. The chamber
reminds donors to eat within four hours of giving blood and to bring
a picture ID.
Call 609-520-1776 to schedule an appointment.
leadership and learning training project with offices in Princeton,
plans its first Benefit Evening on Saturday, September 27. The event
is entitled "Healing the Nations with Music." It kicks off
at 6 p.m. with a reception and seated dinner in the main dining lounge
at McKay Hall, Princeton Theological Seminary, followed by an evening
of choral music with the Choral Scholars in Miller Chapel.
A reception follows the concert.
According to organizers, 85 percent of all money raised will go directly
toward in-country projects and training scholarships. Tickets range
in price from $25 to $150. Call 609-921-8298 for more information.
in nine different alphabets on the Windows 2000 computers in the reference
department. Accessible languages include Arabic, Chinese, Greek, Hebrew,
Hindi, Japanese, Korean, Russian, and Urdu.
The capability may be used with such Microsoft programs as Word, Excel,
Access, PowerPoint, and Outlook. It is also possible to send multilingual
E-mail in Hotmail, Yahoo Mail, or any other Web-based E-mail account.
A PowerPoint guide on using the language features is available on
the library’s computers. For more information, call 732-390-6767.
Corrections or additions?
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