The Benefits Of Incorporating An Idea

“While theoretically and technically television may be feasible, commercially and financially it is an impossibility.” — Lee DeForest , 1926

(He was dubbed, the “Father of Radio” and a pioneer in the development of sound-on-film recording used for motion pictures. He had over 180 patents.)

As well as reprogramming your R.A.S. another benefit of reacting forward by incorporating your idea is neuroplasticity. What is that?

The short animation below sets the scene.

Neuroplasticity is a bit like, ‘fake it till you make it.’ The more we experience something new, the sooner it becomes habitual. One of the reasons many entrepreneurs struggle in the early phase of a startup is because the experience of being one’s own boss is new. It is harder to think and behave like the boss.

The secret is to fake it well before actually starting the company and the first step is to incorporate your idea. If you don’t yet have a winning idea, incorporate your name.

Dr. Lewis Terman, inventor of the Stanford-Binet IQ test conducted a longitudinal investigation of 1,528 gifted children with IQs at the genius level. The objective was to better understand the relationship between human intelligence and human achievement. It continued for decades and became world famous for its discovery that intelligence was the lesser of several factors that determined achievement.

Discipline and self-confidence were found to be more important than intelligence for achieving things.

Newton’s laws of motion state, “A body at rest remains at rest, a body in motion remains in motion unless acted upon by an opposing force.”

To become a successful entrepreneur you need to start thinking and behaving like one. It means you build self-confidence while at the same time rewire your brain to think like an entrepreneur.

With my first company I took this step to react forward immediately after the idea had popped into my head. Back then we were still in the days of dial-up internet so the process was more complicated than today. Then it took me several hours online whereas today, I can do this in a few minutes.

Within a few days of completing the process online, you receive a package of paperwork in the mail or an online link to the package. It contains your official registration, your unique business identifier number, and the articles of organization. All you have to do is an online Q & A and part with a small amount of money.

Now comes the second part of reacting forward. Print copies and paper your life with your newly registered idea. Put them in your car, at home, in every pocket you should have a copy of at least the registration page. For the first time, you’ll see your company/idea name in a bold header and your name and title as owner and CEO. It’s a thrill to see that, it gives you a massive psychological boost and jolt of self-confidence.

Your brain’s R.A.S. says, “hang on a minute, our host is onto something. This is REAL! This is a company and no longer just a crazy idea! She means business. Jeeze, we’d better start re-configuring our pathways to help her out. Red alert!! Synapses and proteins start getting organized. We’re a business-person now!”

That fires messages to the RAS to be on the look out for anything that supports the new idea and to filter out anything that is against it.

Your idea has magically just formed into a real company even though it does not have much substance to it yet.

That is not important.

What is important is, you have made it real. You have breathed life into an idea and created a tangible result. You are finally your own boss. If that does not make your stomach flutter with excitement and anticipation, you probably shouldn’t start a company.

Anne Procrastinates and Fred Reacts Forward

Recently, I was impressed by the quality of work done on a project at my home. Of the three-person team responsible for the remodel, Anne stood out as the best worker. She was the youngest and newest to the company, but went the farthest to ensure that I was a satisfied customer. She seemed to be the main source of inspiration for the other two, and she was also the one who had the most innovative solutions to problems.

I asked her if she had ever thought about starting her own company. Her eyes lit up, and she confessed that she was always thinking about it. Just as quickly, she listed all the reasons why she could not pursue her dream, the light in her eyes faded.

When I pushed a little to see what she had done beyond  having an idea, she reeled off a list of reasons why she had done nothing. She had insufficient savings. The economy was shaky. She was inexperienced. Because these were her thoughts, they had become her reality, and she lacked self-confidence. She was stuck in a neural-pathway-loop that had her always feeling she wanted to start a company, but never actually being able to react forward.

To break that neural-loop, and rewire her brain to a new way of thinking, I suggested she turn her idea into a real thing through the process of incorporation. Then I saw the new look in her eyes, first confusion, then fear. It’s a common enough reaction. Anne felt it sounded complicated and daunting. I explained how it’s neither of those things, then described the process and emphasized the positive psychological effects. She never acted on the advice and still works as a technician at that company.

Fred worked as a software engineer for a well-known company. He was always coming up with interesting product ideas. He acted on my advice to incorporate his best idea. Every time he glanced at the corporate paperwork he became more enthusiastic.

He said, “I started to think that perhaps it is not such a crazy idea. Then seeing the documents everywhere I went… I even kept a folded cover version in my back pocket at all times… somehow made it seem less and less crazy until I knew I had to do it. After all, the Google founders and people like Dell and Gates were just students, right? They had no business experience either. It got to the point where I knew I’d never be able to forgive myself if I didn’t try to do something with it. I know if I had not made the idea into a legal company, and kept reading the paperwork, I never would have had the confidence to try it out.”

Fred fleshed out a business plan during his spare time. He asked one of his best customers from his regular job for some feedback. He really just wanted to know if it was a crazy idea or not. The client loved the idea, and as chance would have it, he also had investor friends who were equally impressed.

Fred is now CEO of his own company and strongly backed by $5 million of investor funds. When I recently saw him, his confidence and CEO-like demeanor astonished me. He still has no business training or experience, but his neural pathways have rewired his way of thinking. Suddenly, he now thinks and acts like a CEO.

If only Anne could see his success and understand that it’s purely down to reacting forward in order to build self-confidence. That’s how it happens, but we must react forward first. Once in motion our brains do the rest.

When an idea is incorporated, it becomes its own legal business. This new business entity transforms the way the business is seen through the eyes of the law, and it often has more credibility with potential customers, vendors and employees.

Two years after Larry Page and Sergie Brin had started Google, Sun co-founder Andy Bechtolsheim wrote a check for $100,000 to an entity that did not yet exist and handed it to them. At first the founders were confused, but soon got the message. On September 4, 1999 they filed for incorporation in California as Google Inc. Larry and Sergey opened a bank account in the newly established company’s name and deposited Andy Bechtolsheim’s check. Google became real.

By simply incorporating, you may be lifting your mentality into that 4% of successful companies. At the risk of trying to crack a peanut with a sledgehammer, let’s look at the many practical advantages of incorporation.

1) Protect Your Assets:
With a sole proprietor or partnership, there is unlimited personal liability for business debts or lawsuits, which means that if you went out of business, creditors could target your personal assets such as your home or vehicle. Perhaps most people do not realize that, but when America is such a litigious society, why risk the possibility when you can protect against it? When you incorporate, you are only responsible for what you have invested in the corporation. Clearly that advantage alone is worth the few dollars it costs for protection through incorporation.

2) Essential for Exit Strategy:
That asset protection is important if you ever decided to sell your company. The purchaser will not be personally liable if the seller did something unlawful, whereas if someone buys a sole proprietorship they can be held liable for what happened in the past at the company. Many successful small businesses are purchased by larger businesses, so the investment in the paperwork is essential to make that a smooth transaction. I have clear exit strategies in all my companies, so incorporating early is essential.

3) Tax Savings:
There are several tax advantages to incorporation. Your company becomes a distinct legal entity, even if it just remains no more than a file on your desk, like mine did for years. Then some home office costs, when you are working on the business, are a deductible tax expense.

4) Credibility:
Having the letters INC. or LLC. after your company’s name, adds a touch of professionalism and credibility especially with customers and lenders. Image is important and customer confidence is tied to their perception of your company.

‍

In this teaching module for startup entrepreneurs, I add some color to the rather boring topic of incorporation.