Some think they should stop manufacturing cars and just design them. Some think they should take all the stimulus money and give it venture capitalists. Some think the car companies should fix their PR. And some even think they should recruit Steve Jobs to be the car czar!

Everyone is missing the point: we don’t need to guess!

Some of those ideas have potential, some are really stupid. But it doesn’t matter. We shouldn’t have to pick one. There is already a time tested, guaranteed, method which has worked for hundreds of years which will determine the best way to fix the problem. It’s called the free market.

Individual people can sometimes get it wrong. We bring our personal biases, our own background, etc. If one person (or a small group of people) decides how to spend the money, they COULD get it wrong (and often do).

But if instead of a few people deciding, thousands or millions of individual people decided by “voting with their dollars”, all competing against one another, then we could try those solutions and thousands more simultaneously. The free market would name a winner based on who got the most “votes” (dollars) and came out profitable. The lure of financial gain would motivate these entrepreneurs to compete in this race to find the best solution.

But by having the government decide for us, we’ve nipped that race in the bud and placed our fate in the hands of a few people deciding for us (more on the qualifications of those people at the end).

Imagine if the government had to pick a winner for renewable energy and decide what to invest in? Would it be solar, wind, bio-diesel, nuclear, etc, etc, etc? The truth is that nobody knows what will ultimately end up on top. And if you give a handful of “expert bureaucrats”, especially with all the special interests and lobbing going on in Washington, the right to choose for you, you’re in trouble. Thousands of entrepreneurs trying their own solutions in a true merit based competition to see whose works best is the way America became great.

Some final thoughts…

Want to know more about the team of “experts” who will be deciding how to spend your money to “stimulate” the auto industry? Alexander Muse writes about how not a single one of them has auto-industry experience, and of the 18, only 2 drive American cars. Nice!

I’m reminded of something Milton Friedman would say: You always spend your own money more carefully than you spend someone else’s.

Finally, there a number of world organizations that rank countries by their economic freedoms. Historically, the U.S. has consistently been in the top three. It’s what differentiated America from everywhere else in the world and made our economy great. But in the last 10-20 years or so the U.S. has moved more toward socialism and fallen as low as 8th or 9th in the world. Personally, I find it rather annoying that the average business income tax rate in the U.S. is now around 45%, which means the government owns about 45% of the production of our economy. We are about 45% socialist by that measure.

What is the alternative?

If this keeps up, do you think entrepreneurs will continue to incorporate in the U.S.? For myself, I’m thinking that after Buenos Aires I might try moving to Hong Kong and seeing what it’s like there. As a citizen of the world, I’m more interested in going where I can prosper the most instead of trying to change the U.S. (a futile effort) or waiting for it to come to it’s senses.

Guess what the business tax rate is in Hong Kong? A flat 16%.

Here’s to discovering new ways to break free!
Brian Armstrong

• Marcus Kazmierczak, VP of Engineering, MayasMom.com
• Marcus Frind, Founder, PlentyofFish.com
• James Hong, Co-Founder, HotorNot.com
• Dave Lu, CEO, Fanpop.com
• Karen Northup, CEO and Founder, CoreFino

Check out a hilarious story around the 18:57 mark from James Hong about how he bootstrapped HotOrNot.com for literally zero dollars. By the way, if he were to do it today it would have been even easier by simply throwing some Google Adsense on the page.

I have always had a certain respect for people who understand the idea that starting a business today doesn’t require much money. You’ll notice that Marcus Kazmierczak in the next breath after James’ story talks about how MayasMom was funded with $100,000 and they just took on a $100 million round of financing.

I have to wonder what in the world they were thinking.

Correction: Marcus wrote in to say it was $1 million, not $100 million. Sorry for the error!

As we’ve seen before, taking on investors is almost always a bad idea. Why would they give away a huge percentage of their company and take on all that debt? If it is a good enough site, it should be bringing in income from almost day one, and there is absolutely nothing on that site which required $100k much less $100M.

It made sense later when I did some research on the site. Basically Marcus Kazmierczak had no business being on the panel. First of all he is an employee, not really a founder. Secondly, the other websites shown on the panel are true blue internet success stories, all among the top 5,000 most popular websites on the internet. MayasMom.com barely breaks into the top 100,000.

If you don’t see the video below you can click here.

By the way, here is Marcus Frind’s check from Google for $900,000 that he talks about in the video. It is from just two months of Adsense earnings.

To learn more about how to start your own business for little or no money, grab a copy of Breaking Free. Thanks to all who have enjoyed it and written in.

I’ll have some more guest posts coming out this week. Stay tuned!
Brian Armstrong

1. I moved the email newsletter service from Zookoda to FeedBlitz. There were a few reasons for this, namely that Zookoda is really buggy and appears to have no-one supporting or correcting it anymore. It’s a shame because they had the best service out there (and it was free), but a little neglect here and there and the whole thing became unusable. They must be focused on other activities. Feedblitz is quite good as well, but costs some money.

If you see an email from FeedBlitz, don’t be alarmed. Hopefully this change will allow the email newsletter to operate smoothly and draw people to the website with excerpts that grab their attention, and entice them to click “Read More”.

2. I did some SEO. Namely installing the MetaTagz and SEO Title Tag plugins. And I finished going through some old posts to update the description, keyword, and title meta tags.

This will hopefully help the pages rank higher in Google over time to bring in more traffic. SEO is an important part of building any business website. It can get complicated and boring, so in most cases I suggest outsourcing to have a pro do it. Your time is better spent elsewhere.

3. I installed the post series plugin, which you can see at the end of this page. It helps generate more links for a series of posts so people keep reading longer.

It makes sense for a couple of reasons. First, because it protects you from personal liability, and second, because it offers you some great tax advantages.

For today, let’s just focus on the personal liability part.

Incorporating your business protects you from personal liability, because it essentially separates you from the business. When you incorporate, your business becomes like another person. This other person has it’s own bank account, it can own things like property, and it can take risks. Even if that “other person” (your business) goes completely bankrupt or gets sued, YOU (and your personal assets like your house, car, savings) are safe.

This is important because many new businesses fail, but you as the entrepreneur don’t want to fail. You want to pick yourself back up and start your NEXT business which will be even more successful. Failure is a necessary way to learn, so we want it to be as painless as possible.

Of course, I have to admit that what I wrote above is a a “best case scenario”. When everything works like it should, then yes, you PERSONALLY are protected. But there are certain situations where your corporate status doesn’t help you out, and every business owner should be aware of them!

You see, setting up a company gives you so much protection from liability, that unethical people in the past have tried to take advantage of it. They have created a “shell corporation”, in other words a business just for the purpose of liability protection, to help them get away with a crime.

Of course, the law had to be modified to weed out these people and make sure they were appropriately prosecuted. But in the process, the requirements for honest small business owners became TOUGHER. Some extra steps are now required to make sure your corporate status stays intact.

By the way, whenever a court decides to waive the corporate protection and actually prosecute the owners behind the company PERSONALLY, they call it “piercing the corporate veil”. (Lawyers always like to come up with fancy names for things.)

Following are the top five ways to protect you personal assets then starting a business. Make sure you do these correctly, and you can be sure that even if your business experiences a colossal failure, or gets sued out of existence, at least your personal assets are safe and you can start over.

1. Never Engage in Fraud or any Criminal Act

   If you commit a crime, the corporate veil isn’t going to protect you one bit! Never sell a product you know is defective or doesn’t work, misrepresent something in your advertising, forge any signatures, or pull a bait and switch (offer a great deal to get people in the door only to tell them it is out of stock so you can sell a substitute.) Run your business HONESTLY and with INTEGRITY every day, and it will pay off in the long run.

2. Never Misrepresent Your Corporate Officers or Members

   Don’t ever lie about who is involved in your company. When it comes time to ask for investors, or get people to support you, you may be templed to exaggerate about who is actually working with you. If they haven’t actually SIGNED your operating agreement, then they aren’t your partner.

3. Make Sure Your Follow All Corporate Formalities

   If you are going to claim you are a company, then you’d better act like a company. That means you have to file all important documents and keep them on file (your operating agreement, articles of incorporation, and DBA for example). You also have to keep detailed financial records. In Breaking Free, I provide samples of these documents and show you exactly how to create them yourself. This will literally save you thousands of dollars in legal expense because you won’t have to pay a lawyer to create them for you.

4. Keep Your Business and Personal Assets Separate

   The business has to have it’s own bank account. The money in that bank account is not YOUR money. It belongs to the business. In fact, if you decide one day come along and take some money out to buy yourself a Hawaiian vacation, that is called embezzlement (a crime)! Many first time business owners (especially if they are the sole owner) don’t understand this concept. The money in the company is not theirs. The company is like a separate person, and all assets must be kept separate.

5. Never Treat the Business’ Assets as if They Were Your Own

   Don’t deposit your personal checks into the corporate account. Don’t use company money to finance your personal life and hobbies. Don’t lend the company car to your buddy for a weekend excursion. Don’t set up a cot in the back of the office and start living there! Again, the business and yourself are two separate people. Treat them accordingly.

With these five basic steps, you will be well on your way to protecting your personal assets in the event your business goes under.

Many successful business people, from Donald Trump to John D. Rockefeller, went through periods of ups and downs in their life. Not every company they bet on was a success. But they managed to survive and lived to fight another day because they where smart enough to INCORPORATE correctly. They followed the above five steps to make sure they wouldn’t lose their corporate status in the event of a lawsuit. They made sure that their PERSONAL assets were safe, even if the COMPANY went bankrupt.

To learn how to incorporate the easy way (no legal fees or confusing paperwork!) and to discover the tax benefits of incorporating, check out Breaking Free (the book).