the art and observations of Ranjit S. Mathoda

Saturday was a big day for Microsoft and Yahoo, with Microsoft CEO Steve Ballmer offering about $33 a share for Yahoo, and Yahoo CEO Jerry Yang stating that the Yahoo board had concluded that undervalued Yahoo by about $4 a share. Microsoft decided to walk away.

A few hours earlier, about 1,700 miles away, Sue Decker, Chief Financial Officer of Yahoo, and Bill Gates, Chairman of Microsoft, who are both on the board of Warren Buffett’s Berkshire Hathaway, happened to be meeting in front of 30,000 people attending Berkshire Hathaway’s annual meeting. Given the momentous meeting between Ballmer and Yang that was to happen later in the day, I kind of wondered what they said to each other. Now I’ve found out:

Sue Decker: Should I kiss you hello? Or will people think we’re getting married?
Bill Gates: Don’t!
[stands up swiftly and shakes her hand]

According to Sue Decker, at the time she spoke to Bill Gates she thought Steve Ballmer would accept Yahoo’s higher asking price, and was surprised they didn’t. Here’s Sue Decker stating all of this and describing in insightful detail Yahoo’s past, present and future:

(http://edcorner.stanford.edu/authorMaterialInfo.html?mid=1975)

There are lots of ways of sharing a hypertext link or a thought on the web, but none of them work the way they should. The current morass of sharing systems include: sharethis, the facebook bookmarklet, the friendfeed bookmarklet, the twitthis bookmarklet, the reddit bookmarklet, the google reader share button, share with notes button, and bookmarklet, delicious (good luck inserting the periods), sociable, and a few hundred dozen others I am probably forgetting (sorry).

Although some of these systems are more elegant than others, they all suffer the same flaw. All of these methods of sharing either assume (a) you want to share the link on just one website community (facebook, friendfeed, twitthis, reddit) or (b) you want to share the link on more than one website community by using multiple clicks, logons, etc. (sharethis, sociable).

The truth is, most of the time I want to share something, I want to share it across all of the communities I belong to with one click. I often want my input to go everywhere, perhaps with some customization. The communities on the other side can decide what’s important to them (using the friendfeed hide function, the reddit vote down function, etc.). Yet there is no tool that lets you easily share a link, thought or idea across all of the different websites out there with one (or a minimal number) of clicks.

C’mon Internet, hurry up and fix this. Like you did last time: my request and the response.

The best movies I’ve seen in the last year are Vitus and The Lives of Others. Vitus is about how extremely bright children are often treated and The Lives of Others is about the job of oppression and the strange nature of trust.  Since both movies are complex and interesting, there’s alot more to say about them then that, but I’ll let the movies do the talking.

The trailer for Vitus: http://www.youtube.com/watch?v=JfAZ0nBV1Zg

The trailer for The Lives of Others: http://www.youtube.com/watch?v=n3_iLOp6IhM

I’m hoping I can soon add wall-e to my favorite movies.

In the United States the process of incorporating a company is needlessly difficult. Entrepreneurs get to make a bewildering choice between a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, a c-corporation, an s-corporation, a limited liability company, and a host of other choices.

Each type of legal entity has different attributes and requires a multitude of different forms and procedures. Whether you can choose one of these entities is based on some strange and unusual criteria you must meet, which often can be cleverly circumvented by the proper paperwork (for example, although an s-corporation is limited to 100 shareholders, those shareholders can be companies or trusts themselves, allowing you to indirectly expand the number of owners).  Each of these entities gets treated differently by the taxation system on the federal, state and local level, and on an income and payroll level.

Google returns 39 million documents for the word “incorporate” but do any of them cleanly and simply explain how to go about it? The process is so complex and the source material for how these rules get decided is so dispersed across different federal and state agencies that the advice given is often wrong.  The advice lots of lawyers give can be wrong too.  I know, I’m a former large firm lawyer, and I’ve seen people misunderstand the consequences of certain choices.

Incorporation is so complex that various different services of highly different levels of quality have sprung up to tackle it. These vary from $50 incorporation services that often offer poor explanations of the consequences of different incorporation choices to $3000 services at large law firms.  The complexity of the incorporation system is really only to the advantage of the advisors.

Hernando de Soto has explained that for a country to unleash its capital and generate wealth it needs to remove the barriers to entrepreneurs seeking to pool and use capital (see my review of his book).  Muhammad Yunus has explained and demonstrated (wikipedia) even those in great poverty are entrepreneurs, if only they are given access to the opportunity.  It is past time for the incorporation process to be reformed.  Even an incorporation process that costs $100 bars the entry of many people who would like to start their own company (and in California incorporation carries government and tax fees of at least $900, not including advisor’s fees).

How should reform be implemented? Some principles to ponder:

• There should be a single federal website (company.gov) you go to to start a company in any of the 50 states or on a federal level.
• The website should give you a checklist of attributes you would like your company to have.  Check whether it is a nonprofit, for profit, a social business, limited liability, pass through taxation, etc.
• Each attribute you choose should clearly list the prerequisites and effects (pros and cons) of choosing it.
• Regardless of what attributes you choose for your company, there should be a single form you fill out to file taxes for the company.  This form should be the same across all companies.
• Servicing a lawsuit against a company should be as simple as uploading a claim on the federal website.  Companies, the press and the public would easily and freely be able to find out about new claims.
• States should have the freedom to add new attributes to the federal website for companies incorporated in their state, so that innovation in corporate forms is not curtailed.
• Incorporating on the federal website should automatically create your unique taxpayer identification number, and potentially provide further plain language information on how to start and fund your business.

Complexity in the incorporation processes is similar to complexity in the taxation process, creating unfair advantages for those who can afford the best advice. Refining the incorporation process could be a stepping stone to tackling reform of the tax system.