Checklist for Success
Josh Margolis, ’73, offered a number of issues to consider when forming a virtual corporation.
How do participants become part of the virtual company? A set of criteria should be established for individuals interested in joining the corporation.
How will partners or officers be removed? It is important to determine an exit strategy for partners leaving the corporation and a succession strategy to make a smooth transition both inside and outside of the organization.
What is the legal structure of the organization? Is it an L.L.P., L.L.C., or some other construction?
What is the legal liability? This is an important question both in relation to individual partners and the corporation as an entity.
How will revenue and equity be distributed? Many companies, including Margolis’s firm, use a specific scale that dictates what percentage of profit is allocated to what players, e.g., the person that generated the lead, the person who made the sale, the project manager.
Who owns the clients and for how long? This is a sticky issue, particularly when partners enter the corporation with existing clients.
How is billing handled? Paperwork and administrative duties can be burdensome, particularly in the early stages. Having a clear policy of responsibility from the outset can help.
When new issues arise, how are they decided? What is the corporate structure? Is it vertical or horizontal? Determining a structure and a process for handling conflict or major issues is another task that should be done early on.
What is the group goal? It may sound simple, but having a clearly articulated and agreed upon goal can be the key to success–or failure. –M.M.B.