TFO Lunch & Learn: Founder Conversations That Matter

Are you in LA today?

I'm in Minnesota. I'm live in Minnesota.

You are live. You're just by Zoom or whatever we call it.

Is it chilly today?

Yes, it's October now. Talk to me again in like June. It's going to be chilly every day until June.

And our business partner here at the Family Office, Candace Powell, joining us as well. So, this is kind of nice because we're here live. In person and live on screen.

Yes.

And this is our first time that we're going live on LinkedIn, is my understanding. Is that correct?

We're streaming to other things through the internets, and I'm really— yeah, I don't know all of it, but you might be watching us on LinkedIn or YouTube.

Very cool.

And other places, maybe.

That's awesome. And people can type in their questions and Jackie can answer.

Yes. I believe if you're on the Zoom, you can type in your questions and we'll see them, but feel free to drop all your questions on whatever streaming service you're using because we still will receive those questions. And a lot of times we do entire episodes just answering questions that people have.

So maybe for the people that are new to it, what is Lunch and Learn? How'd this even come about? Why are we doing this? Who are we? Anybody?

Who are you?

Anybody?

Bueller. We, we started this, I don't know how long ago, but it was before we did the Capital Edge Summit. And the idea was that we have taken our collective years and years, decades even, of combined experience, education, and are putting it into a central place where we can help other founders learn from— I'm borrowing this from you too. I know you call it OPE, other people's experiences. So we are the founder's advocate, and we can explain what that means or why, why there's a need for founder's advocacy. But yeah, this Lunch and Learn is meant to be a place where we come on and we talk through different topics that are relevant or have been relevant to us in the past, and we think and hope are now helpful and relevant for other founders.

And I think, you know, just to give a little bit of background. So I started my first company, gosh, almost 50 years ago now, which is hard to believe. And over those decades of putting it together, we've done a little more than $3 billion in capital raising. We've been international as well as domestic in those. Jackie serving as general counsel to both the family office, as well as to a number of the ventures that we have led. Candace has been dragged along willing And not always so willing on some of these ventures, as well as venturing out on your own and doing a number of different things. And Jackie, same with yourself, you know, bankruptcy trustee for your background before joining us at the family office. And so all of that, I think, brings this unique perspective. Not only do we have our own internal perspective, but it's the other companies that we've been able to work with. And in that, today we're talking, we have a topic actually.

We do have a topic. So today's topic, the way the Lunch and Learns work is we take, you know, kind of a topic, or like I said, we might take a question in, you know, one of our past episodes and kind of make a whole topic on that. Today's topic is the business you built may not be the business you own. And there's layers to this from, we're going to dive into the legality of the ownership pieces, discussing what ownership What equity, what that actually looks like, what that entails, owning the business versus owning the IP, owning the assets, what it looks like when you go into any sort of transaction, your personal liability in that, but also the fundamental piece of you started a business and what it turns into over time. Does the intention of it change? Does it make more sense to take a smaller piece of the pie for a bigger opportunity. So there's a lot of layers to this question. And I think let's start from the assumption that a lot of founders, you know, I see people with cards and they'll put founder CEO on their business card, right? Mm-hmm. And the whole thing is, I built it, so I own it. I want to dive into that statement a little bit more. First of all, separating the creating value from the actual legally owning and controlling, but also questioning, do you own it?

Well, Jackie, from a legal standpoint, I mean, I believe I already know the answer to this, but you can be a CEO and have zero ownership in a company.

100%.

Yeah. You can also be a founder and own literally 0% in a company as well. So neither of those determine that you are an owner. However, uh, a CEO that is truly an employee, which should be an employee position, has a lot more protections in most cases than an owner, let's say a manager member in an LLC.

Mm-hmm.

Right. So because we'll talk a lot of times. Okay. Yeah. A lot of times people will sign manager member. We just had a client that did this the other day and even their counsel has never been into necessary litigation to where opposing counsel a lot of times will try and blend the two together So they lose all protections because again, in most states, employees have protections and owners have protections because in most cases, owners are only liable up to the amount of money that they invested into it because they're not running the company. It's when you merge the two together, you run into a lot of risks.

Right. To say it another way, and every state is different, right? If you are, a lot of states have what's called a Limited Liability Company Act. You'll have the Delaware Limited Liability Company Act. The Montana Limited Liability— you know, name the state. The Limited Liability Company Act sets out what type of liability the member may have, what type of liability or protection the manager of an LLC might have. So when you're forming a company and you go to the operating agreement of the company, which is just an agreement among the members and the manager as to how the company is going to operate, A lot of those things are built in, and you can build in some different parameters, but you've— in some cases, you have to go with what the statute says. And so, the statutes in each state will prescribe, if you're the member of a company, here's where your liability may fall. If you're the manager of a company, here's where you're liable— here's what you're liable for. And simultaneously, here's where you get protection.

So, if we go Down, I guess we're getting probably way too legal and way over too many people's heads, my head included in some of this, even though I have a couple law degrees. But the reality is a CEO should be an employment position, not a description as an owner.

For protection purposes, we would say yes, usually that would be a strong recommendation. Yeah.

And if you go to the largest type corporations, let's go. A CEO may have stock, but because they have stock, they're not considered the owner. They're still an employee, and generally their boss is the board, and the board's boss is the shareholders.

Of a corporation. Yeah,

in a corporation model, right? And an LLC can also follow that if the agreements were set up that way, subject to the states.

Can I highlight something that we see? Take us back. I want to take us back because I think a lot of the founders listening today are probably going to be, probably going to resonate with this range that we see. I would say even our clients that we work with, up to tens of businesses that are, you know, tens of millions of dollars, we still see a level of fluidity in how they sign binding agreements. I— We see CEO, we see manager-member, owner, founder across their documents, right? Like consistently, we are still seeing that. I want to take it down because we have founders sitting on this call today who may still be signing those documents that way. I want to highlight we're not giving legal advice, but this would be questions you should be asking yourself. You should be asking your legal team. You should be pulling your documents and assessing how are you signing these documents? How are you committing and identifying yourself on these things? What should their question be? What should the founder sitting on this call today, what should their question be to their team in how they proceed going forward when they sign these documents and, and overall their structure?

So this goes to The model that I talk about with the chessboard. So for a fair amount of founders, they start off with their company. And so you can be a founder, you can be an entrepreneur. It doesn't mean that you have to be either to be both, or you can be both, you can be neither. But in business ownership in the United States, through the setup of all these entities and organizations and the lawsuits that have happened over time, the banks and the regulators and even individuals have all tried to keep the founder basically on the chessboard, actually as a piece on the chessboard. Whereas the thought is you have an LLC to be able to protect you, or you have a corporation in order to protect you, which would have been years ago a sole proprietorship or not even deemed as a sole proprietorship. It was just you put a shingle out and that was the deal, right? Yeah. So the reason we call it the Founder's Advocate and where we have the Founder's Law Group even is we're uniquely positioned to guide the founder in this scenario. And where that shows up is usually along the line of the founder always talks about, or oftentimes talks about, oh, I have a lawyer, I have a lawyer, I have a lawyer. And in reality, the lawyer is generally hired by the company.

Yeah.

For the company's best interests. And the founder and the company can diverge on best interest, especially when litigation happens.

Yes.

Right. But also when borrowing happens, a, you know, the ideal is when a bank is lending to a company and then they ask for the founder and their spouse's personal guarantees, that's no longer lending to the company. That founder is essentially borrowing the money that they personally guaranteed and putting that into the company. Because that personal guarantee says it's the same, almost, it's exactly the same as writing a check and putting it into the company.

Well, and how this plays out, we have seen, we have had clients or people that even came to us in the past that didn't end up being clients, but they had a regulatory challenge and their spouse who had no involvement in the organization and maybe didn't even have any documented involvement as far as ownership goes, was still pulled in personally, their personal assets roped in. They thought, oh, well, we did this so smart. We put the house under the spouse. And so that way— but at the end of the day, when you've so intertwined yourself and your identity and tied it with the organization, those protections are no longer necessarily as effective.

Yeah. It's almost unlimited to the amount of stories that you could hear. All that it takes is a regulator to say, oh, you improperly transferred this, or you were trying to violate something, or you were trying to hide assets, or— and they just have to make the inference, not have it be fact. And it can cost tens of thousands and even hundreds of thousands of dollars that generally ends up in a settlement, not even into actual proper litigation. type scenario. Anyway, we're so far down the rabbit holes.

Let's talk about, because you talk about this a lot, let's talk about control and title. Can control matter as much as title?

I

think people care so much about the title that goes on their business card and their email signature, and we see that a lot. There's like what they want to be identified as on their organization. And I think in some ways there's this beautiful piece to that because there's a level of pride. And you've worked really hard to get here, so nobody wants to take that away from you. And let's talk about the difference between control and title.

How many startups, you know, it's kind of like, um, we talk about grade inflation in schooling. Um, title inflation is a real thing in that every single early stage, and I have been there too,

has a

robust

C-suite.

They have a C-suite of CMO, CXO, CEO, CPO, whatever it is.

Everybody's C-suite.

Everybody's a C-suite.

CAO right now, Chief AI Officers are blowing up.

Oh.

Yeah, that's exactly, I mean, it is so many.

Yeah.

And what I love about it is the picture of where you've got the CEO who is also the chief bottle washer and they are the car, you know, they take care of the dogs and

they, you know,

all of that. Bill's chief,

I'm the Chief Whimsy Officer because we just were getting to pick and I was like, well.

Yeah, I just want to do this. Yeah.

I'm the Chief Whimsy Officer. That's what I want.

I think what's fun is when you finally move to the position of— you get the most freedom when you no longer have a C title in reality, right? So there's a big part about having control versus having ownership versus having responsibility. The responsibility of running the company when you can get to a point where it is the team members that have a job, that they have a paycheck, that they do that and then they share in the profits for that. Ownership is basically defined as sharing in the profits. Putting money in or putting in intellectual property, which is one of the things we do for carve-out quite a bit, is the founder oftentimes put in not just the money but put in the ideas. And stripping that away so that you can have the payment for the ideas. And, you know, I have— there's a wonderful writer out there on LinkedIn, and I apologize that the name's not coming to me, but they say when you can attribute the actual dollars from the IP, that's when the IP becomes valuable. So when you've got a process and you came up with the process and you named that process and it's uniquely you and you have it Trademarked and properly set up through the intellectual property process. And then you can show, attribute 20% of, let's say, the company's $10 million a year revenue. So $2 million a year of that revenue is off of that IP. Then you can take a multiple and say, okay, well, that $2 million is worth $16 million in actual value, separate than the company value. That's owned and ideally owned outside It also has better tax advantages. It has different opportunities that have limited risk because when the company comes in, you can have— Jackie, you know this— UCC filings. I mean, how do we— we wrap that thing up so tightly that it just keeps it protected even against, in most cases, the regulators, right? Mm-hmm. It keeps it very separate. And again, when I talk about regulators, it's not to do anything improper. It's to say that they oftentimes will do stuff improper. when they come in to do companies. And until they're proven wrong, and just look up Powell v. SEC, 52 years of the SEC doing something fundamentally unconstitutional. And until they are ready to go up to the Supreme Court, they don't back away from that. It takes a lot of money and a lot of time to be able to do that. So in most cases, that doesn't happen. So you need to set up these protections and how to do that.

Yeah.

As our takeaway for the founders that are listening, What are those protections? I think, I think first of all, it's really important to be aware, going back to the question, Candace, the difference between title and control. It's— there's a rub, right? Because as a founder, you have the idea and you're trying to build something. And part of building something is making decisions and delegating and giving direction. And you're kind of the captain of a ship unless you hire someone else. If you're the founder and you bring in that CEO and say, I'm going to trust you please go run with this and implement your vision. It's hard because founders are building something and they're often offering a good or a service that solves a problem. And they're out creating, you know, creating jobs, creating commerce. But at the same time, and that's the way it has to be, that's how businesses get run. At the same time, the problem comes when someone like Tom mentioned, a regulator comes knocking and says, not who's your owner, But who's your owner or who controls the company? Who was the decision maker? Who signed this? It's that, that is where the rub is. So often—

We just saw that, Jackie, right? So that irregular from 6 years ago said, well, you had attachment to this state because you signed it.

Right. So if that person or those people come knocking, asking questions, what is our best Guidance to founders on how to reconcile that. Again, there's a rub. There is an inherent need for a founder to be somewhat of a decision maker or have some level of control to get this business moving, implementing, operating, have achieved some level of success. And then there's this risk that goes hand in hand with that.

And a lot of times To open doors to new opportunities, you do have to have some level of exposure. You do have to have some level of what you're willing to do, right? They wanna see that you're— I mean, we see it a lot. Founders a lot of times are putting a lot of their personal assets, they're putting their name, they're doing personal guarantees. You can't even get in with the bank unless you acknowledge that you are the decision maker, you are the owner, that you are on the line at the end of the day. And so this world is putting you in a position where you're constantly— so I can imagine our founders are sitting here going like, this is cute, but I'm still not sure what I'm supposed to say I am, and how do I actually reduce the risk on that? How do I sign a document right now? What do I say? So I think there's layers to this, and some of it does change and adapt as you scale, you're also— your percentage of ownership may and likely will shift and change, and your control may also likely shift and change.

There's groups out there, Loughlin being one of them, but I know a number of others that say, you know, they use the term Rockefeller, build a Rockefeller Trust. And what that theory was is control everything, own nothing. And I wish it would be that simple because if just because you don't own it doesn't mean that they don't still come after you, trust me, right? Type scenario. So you can set up all of that. It does protect the assets. So it allows you to take a little bit more stand-up risk scenario because you know that your family's still going to be okay at the end of the day, but it doesn't mean they won't absolutely throttle you in it. But, you know, take it down to a smaller, smaller level. So Candace, you've owned a coffee shop. that had wine, right? Sold wine and coffee at that time. And I remember that the food, whatever the— and rightfully so, these people come in because you guys are serving food, you have other things. But like the food— It

was my first brick-and-mortar business.

The EEOC, the Equal Employment Opportunity, whatever it is, comes in. And if you weren't doing something properly, which actually the previous owner wasn't, On the taxes.

So many things.

On the, on the, on the employment.

I'm the successor liability in that one.

Right. So all of a sudden you're cleaning out tax liability that had payroll taxes that they actually didn't want to attribute it to the company. They were going to attribute it

to me,

even though I didn't

own the

business at that

time.

Right, right. And then we had the person that came in and said, oh, you're playing music on Wednesday nights for free.

Yep.

You're not even playing music. You have a band, a person coming in and they're doing sheet music. And do they have their—

The licensing?

Yeah, the licensing for that. So you're going to get this again.

Yeah, I got hit with a fine for somebody playing music and not having the proper licensing.

Then you had another one, which was your father has— is serving because it's free, serving alcohol. And I had to go get my alcohol awareness card.

Yes, I did get stung with, but I knew in advance that everybody had to have their alcohol awareness card.

So, I could, I had to have an alcohol and I had to have it on my person.

On your person.

Or you could get a $500 fine and I could get a $500 fine. Yes. And you could lose your liquor license.

And I could lose my liquor license. Yeah.

All of these things.

So many things in that, that was my first, that was like my early 20s fun little business that I really wanted. Growing up watching Friends, I thought owning a coffee shop had to be the best thing ever. I highly advise against it. I did it and I'm never doing that again.

Big dreams. You were going to be the next Starbucks.

Yeah. I didn't know that I wanted to be the next Starbucks. I just, I think I just wanted that lived experience. And I think that's also okay. I don't think every business needs to feel like they need to be the next big thing. In some ways, being a business owner is so much fun and the freedom of just being able to go, I'm filling this void in my life right now and this is So how much did

you make money at that?

I, I wouldn't know how to make money at that. I didn't—

You did sell it for a profit. You did sell it for a profit, which was great. You didn't, but you didn't take a paycheck much of that time.

Yeah, I worked, um, and at the end of the day, I was working 14-hour days, 7 days a week. Um, it was, it was just brutal, brutal, brutal, brutal work. And I, I was Strapped to that business. I could not.

So the freedom, the freedom idea was— Yeah.

Freedom. It was fun, but it was, it was hard. And, and when you're doing that and not getting paid, um, and then getting hit with fines and things every few months, it's just like, ugh, man. But I—

They do make it very difficult.

We, we joked about it after I sold it. So part of it was I didn't really have you super involved in the transaction, and so I didn't Get the benefit of, cuz I was, I was like 24, so I knew everything. Uh, I was way smarter than you at that time.

Still am.

And, uh, but at the, at that time we joked that was an MBA I made. I, I learned so much in that business. Other businesses I had owned before that weren't a brick and mortar, like they weren't So, and this was my first real business where I had like employees and things like that. Yeah, I couldn't. So, I got what I needed out of that experience and I was so exposed. Tiny exposures as far as relative to what I have had in other businesses. I'm like, I would take a $500 fine any day. That was fine. But it prepared me for the next businesses. So, don't discount those early— No, they're huge.

They're huge learnings. They're so great to learn. Yeah. But, but you had, you had 100, you had about 100% control.

Yep. Yep.

You had about 100% liability, even though it was in an entity.

Yep.

Right. And all of that was put on the place. And these are how the companies grow because most founders that we run, they, even if they do have their MBA, they still, there's still so much to know. I mean, Jackie, we were talking about this earlier today. We have all this law schooling and all this law experience, and we're still like, and we can't do that over there. Nope, we don't know that about that over there. We— nope, nope,

right?

It's like, there's no way that you could possibly have all of the experience or knowledge in there, and anybody that thinks they do—

No, no,

no. It's also interesting. I don't want this to turn into a show of just like It's all risk. They're coming for you. Right.

Don't do it.

Yeah. I want to, I want to have some actionable, good guidance that we can offer to people. But on that note about control and the topic for today, kind of like all of a sudden the business you're running is different from the business you started. Think about those founders too. Again, here's another rub. Those founders that think they have the correct amount of ownership or the right amount of control, and then somehow through a transaction or something gets subverted and all of a sudden they're kicked out of their companies. That happens too, and that's something to be just cautious of. Yeah, you build your baby and then the baby gets taken.

That's, I mean, that is the foundation of how we grew our company. So, in the late '80s when I'm down in Silicon Valley and we're dealing with the venture capitalists at that time, and I'm still a banker banker at that time. And I was watching as these founders— and I had already owned a couple companies at that point— but I'd watch the founders with these ideas. And the venture capitalist model at the time was to come in and get the founder out as quickly as you possibly could for as least amount of money as you possibly could. And you even saw it happen to Steve Jobs, right? Oh, he's screwing up. Get him out. Boom. And then they realize they lose the creativity. So in most cases, for many of the founders, it's not the implementation, it's not the specific how do you build something and continually do that in the proper way. Usually you can hire somebody that does those individual skills much better. But it is one, the tenacity and the chutzpah to take the chance. And say, I'm going to do this. I'm going to bet my name, my fortune on this outcome and take it forward. And that's a unique personality. That's the founder. And that founder should be rewarded. That does not mean they should be the CEO.

Right.

Right. Maybe they should be. Maybe they do have the skill sets to be the CEO. Maybe they do need to be driving in there. The other part was, Jackie, you said about, um, we have so many founders that believe when we're doing capital raises that they need to keep 51%. Because for some reason they believe if they have 51%, somehow they retain control of that company. And we have lots of times we've seen somebody have 99% and lose control of the company. Right. Number one way is through borrowing. The bank comes in, they take it. Yeah. We have a client that's going through bankruptcy right now that all of a sudden he's removed as the CEO. Right. And his ownership is being crammed down to almost zero. And the lenders all own his company. Right. Yeah. I mean, that's, that's what the end of the day—

I was going to lead into, I think ownership is this kind of terminology that it may appear like you own it on paper, but when you look at how much maybe you have leveraged, how, what your structure is at the end of the day, you may really in reality Not. And again, that's not to scare anybody. It's to encourage everyone to go take a look, to really take the time to understand what it is that you own and recognizing that, you know, which entity is earning the revenue. Where's your revenue coming in through? And that's where the IP can come in as well. If your IP is what is earning a lot of the, the revenue at that point, that's a fantastic You know, transition, if you have that properly documented and the ownership properly done, that can be a really beneficial structure depending on the type of business that you're in and what you're looking to do on the go forward.

And so we started the show— sorry, Tom, go ahead.

No, I was just gonna say, so what's important on that also is to build the value. So I'm going to jump out there for a second. One of our niches has become helping founders remove themselves from the company so that the company becomes more valuable and can have a large exit. We've used a number of different examples in there. So if the founder still holds a number of the ideas within there, if they're still operating as the CEO, which actually means they're out there calling on the biggest clients, When any problem comes, they're the ones who's solving it. When it comes time to sell or exit that company, they can't. Somebody comes in and buys that company. They actually then golden handcuff that founder for staying there. So they really don't get bought out. They get paid to be a future employee for that company as they transition that. The second part that we do that I think is, to your point, really big is we help a lot of founders never go through the exit, but to exit their capital back off of there. And that's a really big deal because most founders in $10 million companies around, most of their wealth, 80% of it is estimated to be in the company. I just was having breakfast with a founder in Taos last week. And sure enough, they've got their couple houses and different things. But sure enough, when they exited, over 80% of the wealth came off of their company. Yep. Right. And so, and it's like, wow, you guys did really well. But almost all that, and if that company had gone through a downturn, all that money's gone. And so partly what we do is we help those founders structure that exit of the capital so they can redeploy that so it's safe for their family, their kids, whatever they want to use it for, their future education, all the different things, their philanthropic ideas. How do they do that? And that's a big difference of control and ownership and future freedom.

Yeah.

Sorry, Jackie, I totally took you off board.

No, you didn't. You didn't. We're right on with that. That's how we opened the show, was talking about the founder being on the board. So can you explain that metaphor a little bit? What is the board? And kind of second part question, if someone, a founder, is really on the board and they're, I don't know, it doesn't matter, year 6, right? Is it too late if they're in the middle of a mess? Can they get off the board? Can you do those 2 questions? What's, what's the board? Give us that metaphor.

Let me back— yeah, let me back up on that. The best time to plant the tree, as you guys often hear me say, is an old adage. The best time is 30 years ago. The second best time is today. It is rarely too late, uh, to get off the board. It's just what are you going to pay to get off that board and how much is it going to take for time. So some of the trusts and different things take upwards of 6 years to be able to actually get mature enough within there. So the best time to start it is now. We're working with a young founder, Jackie, you know this, and it's like, no, you want to take care of these problems before they ever show up. And he's, you know, fortunate and he's intelligent, he's got great people around him, and so he's getting a lot of this stuff implemented in there because storms will happen. It happens to everybody. It just is. If you live long enough in this business, in any business, it's gonna happen. So by the board, What I mean is, and it happened because my kids are growing up and Harry Potter came out and then the movies came out, but we were talking about wizard chess. And I had already said, people would say, oh, I play 3-level chess or different things. I'm like, it's really interesting. In this wizard chess, you're the piece on the board instead of where everybody else is playing chess. Even Bobby Fischer, they're moving chess pieces around the board, but if that piece, if they lose that game, they're not injured. Right. Their ego may be injured, but they're not personally injured. If you're playing wizard chess from Harry Potter, you get killed, you die. And that is regulators and bankers and most everything is about trying to put the founder on the chessboard as a piece and keep them on there so that they're fully engaged always. And so part of what we do at the founder's advocacy at our founder's office Is to make sure and protect the founder and the founder's office to give them maximum freedom. And that's really the structure of how we look at it. And we talk through a lot of these experiences, not just ours. A lot of them are OPE, other people's experiences of things we've dealt with. And you look at it and you say, how do we get you off as early as we possibly can? And how do we keep you off? Now, that's not to limit opportunities. That's actually to maximize those opportunities and to maximize wealth. Mm-hmm.

I think this is a really important conversation to keep going. And I'm curious, you know, with this new launch onto the different platforms, it'll be great to see some of the questions. So audience members, please feel free to submit your questions and we may be able to address them in another episode. But I do want to leave the audience today, we're, you know, we're going to be wrapping up shortly. So I do want to leave the audience with a couple things like What should they do? What is the next step that they should be taking today?

Well, for one, we offer a couple of free tools. So no obligation, nothing to do. You go out to thefoundersoffice.com and it'll be up on the board and you can see what is out there. One of them is our Compass product, right? I don't know if that's—

Not live yet. It's not live yet. Yes. But we'll put up that code shortly. Yeah.

We do have a capital alignment method that you can take a look out there. So we'll back up to that for just a second. One of the fastest, easiest ways seemingly for people to grow their company is to get a bank loan or even a private party loan. And those companies will look at saying, okay, you sign personally on this. And I had the experience of a number of years ago, uh, when we had a national mortgage bank and me and my partners, we looked at it one day and this was before the mortgage meltdown. And it was a company that had been around since '92. Wow. So it had, I mean, it had a, you know, a huge portfolio. And at the time the warehouse lines were $1 billion. And we looked at each other and said, do you have $1 billion? I don't have $1 billion. You don't have $1 billion. So this personal guarantee actually means nothing, but let's, let's sell this company. Because at that point we didn't have $1 billion. Said, this is ridiculous to have billion-dollar guarantees. All of us had been some banker limits within there. By the way, others at that time looked and said, I don't have $1 billion, so let's just blow and go because this— Personal guarantee doesn't mean anything. So we were able to wind that down, uh, because of those personal guarantees. And it became very critical to not borrow with personal guarantees any longer at that point, because either the company had to be able to stand on its own, or I was then getting a loan to put the money in, but I needed to really understand the difference of those 2.

So that's, that leads me to the, some of the questions to lead off with today, and then we'll dive into what this QR code is, but when was the last time your governing documents were reviewed? You know, do you know which entity owns your brand, your content, your software, domains?

Let's go back to that first one. So there are many, many, many attorneys that will help you do your documents, or you can go out to legalzoom.com and do your documents, and the LLCs will definitely help you without understanding what it is to be a manager member. This is, this is, this is member-managed type company. And again, that has different liabilities versus having an actual manager, even if it's another entity that's the manager. And without thinking through that, we have, we have a particular case where we say an LLC that has a husband and wife or a partnership, whatever, husband, husband, whatever it is, you know, they're married couple. So it can even be 2 people. By the IRS standard, it's called a disregarded entity. And you can have any attorney or most any attorney say, oh, that's no big deal. And you'll have most accountants say, oh, it's much more efficient because we can just pull this all the way through your tax returns. And what ends up happening on that is if you ever get in front of a jury and you're trying to get the LLC protection and they say, well, the IRS considers this a disregarded entity, And it must be a disregarded entity. Try and explain that in litigation. It'll never happen. So it's best not to do that. Right. So that's a very simple question that most of the attorneys out there that you deal with aren't going to answer it in an effective litigation manner.

So, so today's like kind of a thing. Review, review those entities, review your governing documents. Take a look. How are they set up? How are they structured? Which entity owns what? What? And your brand, your content, your software, your domains, your data,

your house,

your proprietary methods. Yes. So

let's just take it into the rentals. How many times have we seen in our history where they'll set up a rental LLC to own the rental properties and then every— to save money, to save $600 a year, they'll use that LLC for all of their rentals?

Yes.

And what that does is that takes all the assets and puts it all into one bucket that gives it liability from any one of those. If you just simply look at that model and say, no, that's not— if it can't cover the $600 cost for having the LLCs, maybe you shouldn't be doing that property.

Right. So if you were selling the— this is one thing that I think we, we, we stress to people because sometimes people come to us and they have an offer on the table or they need to sell quickly. But if you were selling your company In 3 months, in 6 months, what would need to be cleaned up? Even if you're not planning on selling, what would need to be cleaned up? It's probably best that you clean that up now.

Yeah. You know, the problem is— so this is also the reality of having been founders a lot of times. What is the founder most likely most concerned with? Making payroll, revenue today. How do we maximize this? What's the next idea? How do we attack? Wanna clean up that mess.

No, nobody wants to.

Somebody else is gonna— let's just push it in the closet right now and let somebody else deal with that down the road. Yeah.

Yes. But you will think there have been, there have been times on both ends of that spectrum. There have been times where past us did us, future us, no favors.

I do.

I'm cursing past us for going, oh my God, why didn't I fix this? And then there's been times where past us really did future us a solid. And we're like, ooh, thank you. We didn't know this problem was going to creep up. And thank God I took care of this when I did. And so think about your future self and save yourself, your future self those problems.

So the thing that I go to criminal law, Jackie, here, officer knocks on your door, says, hey, can I search your house? What's the right answer?

Do you have a warrant?

Exactly. 100% of the time. 100% of the

time.

And yet what they do is they say, well, you must be hiding something. It's like, that's not what it is. It's constitutional law. You can't walk on my house and I'm not going to let you do that. So you are violating it unless I allow you to. So that's not to say you're hiding anything. That's to say you actually understand your rights and not allowing the authorities through guilt to take that and take away your rights. And that's fundamentally what our country is about, right? If you look at that and say, this is where we stand. So setting things up is not because you're going to do something wrong, because if you do something wrong, of course there should be— I mean, and there's a big difference between error of intent and error in judgment and just, you know, making an error. Come on. So don't set those things up because it's the reality that it's so complex. Just the IRS rules alone are volumes and volumes, but the SEC, your state regulations, everything else that can go on, you can have the food police come in and say, what are you doing? Right? So, so you set those up to protect you as the founder because most of the employees have an awful lot of protections, as they should. But the founder keeps putting that chess piece on the board and everything's set up to do that. Mm-hmm. So the best time to do that and start talking about that and going through and looking at them is today.

Today. Yep. So not to continue to make this Lunch and Learn a homework session, but we apparently really like to give out homework. So we're going to switch over to all of the wonderful QR codes that our team has put together. I cannot see that far on the screen. So let's see, Jackie, I'm going to have you pull those up. I couldn't read what it was for, uh, because it's a little far away from me.

Okay. I

think one was for the Founder's Office.

Yep. So we've got some QR codes popping up.

It's loading on my side.

Okay.

This is the Founder's Office Compass demo. This is a platform with a ton of tools centralized. They have free tools. You can go ahead, go in and explore. Use this QR code. It'll take you to the Compass dashboard. And you'll get a little demo of how the Compass works and kind of all the different tools that are available there.

This is the platform that is— it's 20 years in the making. This is the information, this is the process, this is the risk assessment, the, the just the brainpower of how we have helped our clients for, for 20 years. And so this is a tool we use on the back end that really it's, it's all of our process. processes that we follow and recognizing that at the end of the day, we really can only help so many clients. And, and this is a tool that we've been kind of slowly piecing together and, and plan on slowly releasing out bits and pieces and ideally the whole thing so that more founders have access to this. Because at the end of the day, our, our goal and our mission is to help as many founders as we can.

Well, let's put it in perspective. So at one point, Jackie, as general counsel, we were overseeing over 240 entities in our investment portfolio, right? Over $3 billion in capital expenditures across multiple jurisdictions, both federal, state, and international. And so this has come through those as the family office model that we grew into, because there wasn't a model we got to copy either, by the way. Yeah. It was, how do you manage through all these various pieces? And it popped up the questions and the risks. And the tolerance. But that's— so that's what that is. We're bringing that out to people. It's mostly a free service, if not all of it's a free service at this point. I don't know what it is. Right.

Looking for people just who want

to

try it out. Yeah. This is something we're kind of, like we said, we're slow rolling. We want something that's going to be of value in the marketplace. At the end of the day, we aren't going to put anything out that we're not proud to have our name on. And this is a tool we use. And so—

What's the next one we have up there? It's the next slide, whatever that one is. I don't know. We're new to this stuff.

We're new.

No next slide.

No next slide. No next slide.

Yes, there are.

I'm just teasing. There might— maybe there is. I don't know.

Well, I want to talk about—

well, let's see what the next slide is. Our other shows.

Our other shows. There it is. We're gonna let our dance mom promote us on this one.

I am so proud to be a sponsor of Women Talk Finance. You know, we hear an awful lot about there's not enough women entrepreneurs, there's not enough women that receive capital within this or get investors to pay attention to their companies. And the reality is, is, is my life has been surrounded by amazing women from the very beginning. I'm not just talking about, you know, yes, of course we all have moms, uh, cause we don't grow out of Petri dishes. But from that point on, I have amazing sisters. I have amazing daughters, amazing wife, and, and amazing business partners throughout all of this. And the single greatest thing that I've been able to see is that But they still get limited in the society that we're in. And so providing that opportunity, we've had the Results Oriented Women Fund that we had, but you guys are kick-ass and you have the show and you bring on interesting guests, including me once in a while.

Yes. You've been a guest. You're a timer.

I'm a 2-timer. I'm going for 5. I'm going to get the green jacket at some point. I'm going to get the green jacket, right? So, but that's Women Talk Finance. So, check it out. It's on all of your podcast places that you want to go.

Yeah. Please like and subscribe and click that auto download because that puts the new episodes that come out weekly into your podcast— Into your lineup. Into your lineup where you get your podcasts. It's ready to go for you. So, there you go. I'm guessing we get to promote you now. If you haven't already gone into the Powell Perspective, this guy, Papa P, has a new season coming out. He's got a rebrand and a new season coming out very soon.

Is it rebranded because now I'm gray-haired? You got these pictures going back to the '90s.

He was catfishing everyone before, so we had the hard talk so that you didn't have And, um, he is going to be this wise old man now, um, the— on his, on his podcast, The Powell Perspective. So make sure you like and subscribe. There's old episodes on there, they're incredible. Um, but we're really excited for this new season to come out. And so make sure you hit that follow button so that when it does drop and you have that auto download on, those new episodes land in your, um, podcast as well.

The Powell Perspective.

The Powell Perspective.

Yes.

So, all right. I think that was it.

Anything else? Is that all we got to do for the day? No, we get that we're being told no by the producer. Are we? Yes, we are done. No, wrap it up.

We got one more, it looks like. Oh, find us. We're everywhere. That first QR code under Tom's picture, that should be his Substack, then his Instagram, then his LinkedIn. For me in the middle, there's my LinkedIn. And then Candace, what's that little globe? Where do people find you?

Because I'm nowhere. Well, you can follow my dad for his get ready with me.

And don't forget the QR code in the upper left-hand corner, the Founder's Office. Our website is an adventure, a choose-your-own-adventure. So many resources, a lot of good info there.

I always wanted to be a YouTuber.

Yeah, you can see how he does his eye makeup in the morning. So, thank you

so much. Thanks

for— thank you, audience. Thank you, audience, for listening and for tolerating us as we figure out this in-person and remote setup. We're really excited to be doing this.

They hope to be Jon Stewart.

Yes. And we appreciate the questions. Please keep them coming. Even if you didn't watch this live, we do get the questions. And truly, we do whole episodes just answering questions. And those are really fun because we want to give