Henry Root is a life-long, self-confessed “music junkie”.  He realized at a young age that his future ambition was to have a role in bringing music into other people’s lives.  Hard work, long hours, and his unending passion for the music and television industries have made Henry Root one of the best known entertainment attorneys. Henry has been continuously employed since undertaking his first paid job at the age of 15, managing a high school cover band named “Evil Seed”.  From that early start, he went on to produce concerts in arenas, stadiums and amphitheatres during his college and law school career. In doing so, Henry built up both practical hands-on and business experience in the industry he has always been passionate about.

eMinutes:  How did you get started in the music business?

Henry Root:  At the age of 15, Eric Bazilian, a classmate of mine (a member then of “Evil Seed”), became my best friend and remains my best friend today. Eric is best known for having written the song, “If God Were One of Us,” popularized by Joan Osborne. He also founded the group the “Hooters”. I “managed” his band as well as two others during my senior high school years.

eMinutes:  Did you continue managing bands in college?

Henry Root: No. But having been inspired by Abbie Hoffman’s “Steal This Book”, I wrote concert and record reviews for the school paper while I attended the University of Denver so I could get free records ahead of their scheduled release. I also was elected to chair the University’s “program’s board” booking and promoting concerts on campus.  In doing so, I met Bill Graham’s “mid-west partner”, Barry Fey, and was hired by Barry to produce concerts he promoted at the Denver Coliseum, Mile High Stadium, and to stage-manage his summer concert series at Red Rocks Amphitheatre.

eMinutes:  Did you continue in the music industry in law school?

Henry Root: I applied to law school because I didn’t know what to do having earned a degree with a double major in Political Science and Sociology. I was having fun producing concerts, and law school was almost a second thought. When I was admitted, I was actually planning a career as a concert producer. I requested that they defer my admission for a year, but when I was told “no”, and that I’d have to re-apply and start the process all over, I decided to attend.

I attended law school for two years, while first continuing to work for Barry Fey and then starting my own concert production company, Terra Firma Productions. My first client was Jay Marciano, who now runs Madison Square Garden Entertainment. After two years of law school, I decided I enjoyed concert production more so I took a leave of absence and went on the road for five years as a tour manager and lighting designer.

eMinutes:  So how did you come to decide to resume your legal studies?

Henry Root:  I ended up touring with the opening act on a Van Halen tour in 1979, and decided I didn’t want to sleep on a tour bus anymore. It came to mind that maybe I could become a music attorney. So I applied to be readmitted to the University of Denver, College of Law and was accepted.  I travelled regularly to Los Angeles, seeking summer internship opportunities and was fortunate to find one in business affairs at MCA Records.  At the end of that summer, MCA hired me as a law clerk and I finished my third year studies in Los Angeles at Loyola Law School’s evening school.

eMinutes:  You worked the whole time you went to law school?

Henry Root:  Yes. I worked full time in the business affairs department at MCA Records during the days and headed off to night classes after the work day ended. Just before graduation, I was hired by MCA to replace a departing attorney.  So luckily for me, I had a job in the business and legal affairs department before I even took the bar exam.  Thankfully I passed the California bar exam on my first attempt.  I remained at MCA for about five years.

eMinutes:  And after you left?

Henry Root: I worked for a couple other attorneys for a brief period and then settled down here at the beach in Santa Monica with my own practice, where I have been for over 20 years. However, I have just started a new firm up the street with three other friends as partners and we’re about to move offices.

The new offices will be three blocks North of here, at 1299 Ocean Avenue. The new firm name is Lapidus, Root, Franklin and Sacharow, LLP.

My senior associate of 13 years, Lynn Quarterman, will come with me.  Lynn was first exposed to the entertainment industry through her position as a broadcast journalist at Detroit area talk radio station, WQBH-AM wherein she served as an “on air” news reporter and eventually News Director and Public Service Announcement Director. As a young attorney she worked in the litigation department of the entertainment law firm of Slaff, Mosk & Rudman in Los Angeles, CA where she worked on the credit attribution case relating to the motion picture “Sex, Lies & Videotapes”. She has spent time in Washington, DC working for the Media Access Project (“MAP”), a public interest law firm dedicated to protecting the first amendment rights of the public in the telecommunication, cable and broadcast television industries where she worked on issues such as the effect of indecency laws on cable television programming and the scope of  the “equal time” access rule in federal elections for presentation before the Federal Communications Commission in the course of its rulemaking procedures.

All four of the partners have backgrounds in the music industry, but have developed sub-specialties in various related practice areas within that industry (mine being in television production and talent in television series).

I first met Greg Lapidus when he was Executive Vice President and General Counsel and head of Geffen’s Business & Legal Affairs Department. Greg advises clients with respect to intellectual property matters related to the entertainment industry with a focus on music industry issues and has represented numerous divisions of the Universal Music Group, Disney’s Buena Vista Music Group, Apple iTunes, MTV/VH-1, NBC, Univision and Starbucks.  He has also represented, among other public service organizations, The Special Olympics, and the (RED) organization, co-founded by Bobby Shriver and Bono.

I initially met Darryl Franklin when he was a senior business and legal affairs executive for the Interscope, Geffen and A&M Records label group of Universal Music.  Darryl has twenty years of experience working in areas of media, technology and sports.  Prior to coming to the United States, Mr. Franklin was based in London where he served as Head of Business Affairs at EastWest Records (part of the Warner Music Group), then at Polydor Records and following that at Mercury Records. When Universal purchased Polygram in 1999 Darryl relocated to the U.S. to work at Universal.

I’ve known Jeff Sacharow since before he was Vice President of Legal & Business Affairs for Windswept-Pacific Music Publishing. Jeff has been practicing law since 1985, and specializing in the music business since 1987.  Jeff has developed a specialty in the area of music publishing, specifically in the area of the purchase and sale of music publishing assets.  He has represented both buyers and sellers in a number of the largest and most sophisticated music publishing transactions over the past several years, including most recently representation of FS Media Holding Co. (Jersey) Limited in its August 2009 acquisition of the Sheryl Crow catalogue.

eMinutes:  What are you going to do with this fabulous memorabilia? [Note: Henry’ office is covered with music memorabilia he has collected over the years]

Henry Root:  I don’t know yet. We call the décor here “everything my wife won’t let in the house.” “Yes dear, I love your autographed guitars, the Fillmore posters and platinum record awards, but they look better on the walls of your office”, she says. [He laughs out loud].

eMinutes:  At a young age, do you remember feeling inspired by anyone in particular?

Henry Root:  My father, whose work ethic always appealed to me. He’s an attorney. Both of my grandfathers were attorneys. My father met my mother while both were attending the University of Pennsylvania law school.  I’m a third generation lawyer on both sides of my family. As far as I’m aware of, to this day, my mother’s father was the youngest person in the state of Pennsylvania ever to pass the bar exam. I think the practice of law was in my blood and having the wonderful opportunities I have had in the music business allowed me to pursue both interests.

eMinutes:  Were either of your parents in the music business?

Henry Root:  [Laughs] No.  None of us can play a note or even sing on key. I think having always been passionate about music, finding a career in music law was a way to balance my personal interests with family expectations.  I don’t believe I would be practicing law if it weren’t for the music business.

eMinutes:   What is it that you love about the music business?

Henry Root:  Music speaks to me. I relate to the messages of the great lyricists and respond from the heart and soul to great songwriting.  And I love that it does the same for others.

As an example, in 1975 I was fortunate to produce the Rolling Stones stadium concert in Fort Collins, Colorado with Barry Fey’s other producer, Rick Wurple.  Months of work climaxed for me when Rick and I stood together next to the speaker stacks behind the Stones while they were performing  and looked out over a sea of heads of tens of thousands of people who, at that one moment in time and space didn’t have a care, trouble, or worry in the world.  Any of their wife problems, spouse problems, job problems, children problems, money problems – were all gone from their conscience as they were immersed in the music.  Rick and I looked at each other, hugged and our eyes teared up.

I then knew for certain that if I could be some very small part of creating moments in time like that where people can focus on the music and have no worries about anything but the music that was what I want to do for the rest of my life.  I like being a very minor part of creating those moments for other people.

eMinutes:  What would you say are the common misconceptions about your job?

Henry Root: (laughs) That it’s sexy, glamorous, and exciting.  After 25 years on the law side, I’m not in the clubs watching musical acts on the Sunset Strip anymore. I’m still passionate about music and love what I do, but it’s much more of an occupation now than an avocation.

eMinutes:  Do you have any advice for a young lawyers starting out? Possibly someone who is of counsel for a firm but wants to go on his or her own?

Henry Root:  Just keep the overhead low and plan carefully. Someone said to me if you watch the pennies, the dollars will take care of themselves.

eMinutes:   What was the best advice you ever got about starting your own business?

Henry Root: (laughs) Don’t.

eMinutes:  What’s the most difficult part of running your own business?

Henry Root:  Cash flow management.

eMinutes:  You can’t count on people paying you on time?

Henry Root:  Certainly being part of a firm now should help level out peaks and valleys. But people don’t always pay on time, and some clients come and go. Some go and come back years later. A significant client of several consecutive years who produced a television series sponsored by a Detroit automobile manufacturer is not a client now because of the economy. On the other hand, I just consummated a large transaction involving the sale of a prestigious music publishing catalog and earned a significant fee. Sometimes it can be feast or famine.  The hardest part is making that a continuum, maintaining a balance, and having a staff that depends on me to keep it running. It’s a big responsibility.

eMinutes:  When you are hiring someone, aside from a great resume, what’s something you look for in a candidate?

Henry Root:  The single most important thing I look for is self-starting capability. Somebody that doesn’t need my constant oversight. I was very fortunate in how I was trained. My original boss at MCA records, then general counsel Bill Straw, said to me one day, “I hired you because I trust you and your skills.  If something looks wrong, it probably is and you should come to me discuss it. Otherwise, have fun.”  So I was given an immense amount of responsibility while I was only a 3^rd year law student. They weren’t used to having people working at 6:30 in the morning.  They’d have to kick me out of the building at 10 PM.

eMinutes:  You chose to go in at 6:30 am?

Henry Root:  Yeah!  I was a kid in a candy store! I mean all the files were there and I could read them all.  So when I look for people [to hire], I look for those who have the same motivation, drive and ambition.  I look for people who are passionate, committed, have a “damn the torpedoes – full speed ahead” attitude, good judgment and great self-starting skills.

My background is in production. Approximately, fifty percent of my practice is in internet, television, and variety music special production work – often with performances by multiple artists. So you’ve got to get ten people on stage performing with all the rights cleared at the same point in time. That’s a massive amount of legal rights assemblage and risk management. That’s not, from a legal perspective, a lot different than me getting 175 people on five tour buses and three semis daily on an across the country tour as I used to do. I’m just juggling a different set of things to make sure the train leaves and arrives on time.

eMinutes:  How do you budget your time?

Henry Root:  With great difficulty.  I try and balance work with family, volunteerism and personal health.

eMinutes:  What’s a typical day in your life?

Henry Root:  I roll in here about eight-thirty AM after dropping my son off at the bus and hitting the gym. Coffee, check emails and faxes. Then look at my to-do list and start crossing stuff off.  I usually get out around seven PM.

eMinutes:  That’s a long day.

Henry Root:  Yes, it is.

The chairman is the highest ranking officer in the board of directors, and is often selected for this leadership role by the board either by election or appointment.  The chairman presides over the board meetings, but may or may not have actual executive authority.

In California and in most other states, corporate seals no longer have any legal significance.  California Civil Code Section 1629 does not require companies to use seals in corporate contracts:  “All distinctions between sealed and unsealed instruments are abolished”.  Today, the signature of an individual authorized to bind the company in legal obligations is viewed as an official corporate act.  Therefore, if the president or secretary of a company signs a contract, the validity of the contract would be legally enforceable.

Cumulative Voting: The Basics

The number of votes available to a shareholder in a given election is equal to the number of shares owned by the shareholder multiplied by the number of positions up for vote.  Cumulative voting is a process of voting that allows a shareholder to cast all her votes toward a single nominee, or split her votes among several nominees in any proportion she chooses.  By contrast, under conventional voting, shareholders may not cast more than one vote per share to any single nominee. 

First, we will look at the results of an election under a conventional voting scheme.   Let us assume that two shareholders, Susan and Tom, are voting in an election for a three director board.   Susan, as the majority shareholder, holds 500 shares.  While she would have 1,500 votes total (3 X 500 shares), Susan would be limited to 500 votes per nominee.  Tom, as the minority shareholder, holds 300 shares.  While he would have 900 votes total (3 x 300 shares), Tom would be limited to 300 votes per nominee.   

Thus, the election would proceed as follows, with the director nominees listed across the top and the shareholder voters listed down the left-hand side:

Figure 1:  Results in a Conventional Voting Scheme

The result is that Susan as the majority shareholder is able to elect Jane, Jessica and Janis on the Board of Directors, thereby controlling all positions on the Board.   Tom is completely shut out of the election because at most, he could only apply 300 votes toward each of his nominees, which will always be defeated by Susan’s 500 votes per nominee.  The majority, as represented by Susan, always wins in this scenario.

 Under a cumulative voting scheme, however, the minority shareholder position is strengthened.  Tom could “cumulate” all 900 of his votes toward one nominee, 450 each to two nominees, or allocate his votes in any combination of his preference.  The result is that Tom has a stronger chance of being able to elect at least one out of the three directors through cumulative voting:

 Figure 2:  Results in a Cumulative Voting Scheme

In addition to providing Tom a better chance of obtaining representation on the board of directors, cumulative voting creates incentives for Susan and Tom to negotiate their votes for the most optimal outcome according to their strongest preferences.  For example, let us assume that while Susan does not prefer Jim to be on the board of directors over her slate of nominees, she is dead set against John’s candidacy.  Likewise, while Tom does not prefer Janis to be on the board of directors over his top three choices, he is absolutely against Jessica’s candidacy.  Susan and Tom can negotiate to vote their strong preferences (or negative preferences).  Thus, Susan and Tom’s most disliked nominees, John and Jessica respectively, do not make it onto the board as a result of a strategic allocation of votes:

 Figure 3:  Results of Negotiated Voting in a Cumulative Voting Scheme

Cumulative Voting:  It’s the law!

In California, cumulative voting is a statutory right for shareholders of non-publicly traded corporations.  By default, cumulative voting is available to shareholder elections of directors and it need not be specified in the articles or bylaws.  Further, cumulative voting cannot be denied in the articles or bylaws as a matter of public policy (Corp. Code §708(a)).   Only publicly traded corporations may opt out of the requirement (Corp. Code §301.5(a)).

The rationale behind cumulative voting is that the process translates into more proportional representation of the shareholders on the board of directors, giving minority shareholders the opportunity to exert influence on management  through the election of directors who support their interests and priorities. 

No Opt-Out Provision

You might think about incorporating in a different state to avoid the cumulative voting requreiment altogether.  Think again.  California law prohibits an out of state corporation from opting out of cumulative voting by amending its articles or bylaws.  (Corp. Code §708(a)).   Cumulative voting even applies to certain foreign corporations if more than half of their shareholders live in California and they do most of their business here.  (see Wilson v. Louisiana-Pacific Resources, Inc. 138 CA3d 216 (1982); Corp. Code Section 2115).  For an explanation of what constitutes a “pseudo-foreign” corporation, see http://www.eminutesonline.com/what-is-a-pseudo-foreign-corporation/.

eMinutes: Would you say the write-up on Daily Candy changed everything for you?

Erica Tucker: Absolutely! That was my very first piece of big press!

eMinutes: That’s a really good first piece of press.

Erica Tucker: It put me on the map, 100 percent. The day that went up I just sat on the floor next to the window in my apartment where I got the best reception on my phone taking orders. Citysearch and Yelp called.

eMinutes: Citysearch and Yelp called you?

Erica Tucker: Yes! I took a meeting with them and figured out the best kind of profile for me to have and now I’m on their web sites.

eMinutes: And they found you because of Daily Candy?

Erica Tucker: Yeah.

eMinutes: How did Daily Candy find you?

Erica Tucker: Daily Candy found me because of me. I absolutely stalked them until they would let me drop off samples.

eMinutes: So you called, “Hi, I’m Erica, you have to try my cupcakes”?

Erica Tucker: I had two friends that sort of worked in conjunction with Daily Candy, and they tried for me but I never heard a thing. It wasn’t until I wrote the emails myself to the Los Angeles editor every two weeks until she emailed me back and finally said, “Sure, drop off samples.”

I dropped off samples and I never heard back. I made a cake that had the Daily Candy logo on it and everything. And then a week later I got an email on a Thursday saying, “Hey, we’re posting about you tomorrow.” The post went up less than 24 hours later.

eMinutes: And how many orders did you take the day the post went up?

Erica Tucker: Oh, I think I took around between 30 and 40. Usually we take between 3 and 8 a day.

eMinutes: And you got all the orders out?

Erica Tucker: Yeah. They weren’t all same day orders. Most of them were for over the weekend, the next week, or questions about future parties. There were a lot of other things I got from Daily Candy that created continued success. For instance, I now work with KISS FM. And I did the Teen Choice Awards gift room. I did the Sunset Strip Music Festival gift room. I’m doing Jingle Balls.

eMinutes: What’s involved with that?

Erica Tucker: I’m doing their gifting suite and backstage. So I cater with cupcakes or cookies and give them out to the celebrities and take pictures with them, which generates a lot of business. I’ve gotten some things on air with Ryan Seacrest because of them, all because of this one amazing woman — Amy from KISS FM.

eMinutes: Wow. And do you find yourself giving a lot of freebies in hopes of getting more work?

Erica Tucker: That’s been a learning process for me.

eMinutes: Can you talk about that?

Erica Tucker: At first I was just excited by the names of things, Teen Choice Awards and Hollywood Weekly Magazine and all these great things that I provided anywhere from 100 to 500 cupcakes with a tower. I would personally go, so my time was involved. But a lot of times I would get nothing in return. Maybe a few emails back, and I’d meet a few people while I was there.

eMinutes: That costs a lot of money. You thought of it as an investment?

Erica Tucker: Absolutely.

eMinutes: Sometimes the freebie investment is worth it, sometimes it’s not.

Erica Tucker: Right. I wasn’t saying no to anything at first. I was just yes, yes, yes. I will do whatever I need to do to get my cupcakes in front of people.

eMinutes: And now are you a little bit more conservative with that?

Erica Tucker: Yes. I will have 500 cupcakes somewhere if I think it’s gonna be worthwhile for me. If I’ll be hitting the right kind of people. If it’s gonna be a bunch of men over the age of 30, that’s not gonna help me out so much. If it’s an event with moms or young women and children, that’s worth it.

eMinutes: So the pictures with the celebrities like Jennie Garth helped you?

Erica Tucker: Absolutely. Right now I’m my own PR. I don’t have PR taking that picture and putting my name attached to it and getting recognition.

eMinutes: So the problem is Jennie Garth could be eating that cupcake and nobody ever credits your cupcakes.

Erica Tucker: I’ve learned a lesson there. At first when I was taking these pictures, but there was no logo anywhere. Now if you look at that picture, Jennie is holding a bag that says Sweet E’s on it. I was there when that picture was taken.

eMinutes: Who took it?

Erica Tucker: A press photographer. I literally stepped in and said, “I’m sorry, can you turn that bag around?” She turned it around and now the Sweet E’s logo is in the picture.

eMinutes: Was she cool about it?

Erica Tucker: She was sweet and adorable and very, very cool about it.

eMinutes: So no PR because you can’t bring that on your team just yet?

Erica Tucker: It’s something that will happen very, very soon — probably in the next month or two. It’s just a huge expense. And I’m getting so much on my own that I think I can handle it for another month or two. I did cupcakes for Extra TV for Puff Daddy’s birthday and got that on my own.

eMinutes: And what about the social media aspect? The Facebook and Twittering – let’s discuss what you’ve decided to put your energy into and why.

Erica Tucker: That’s a huge thing, Twitter and Facebook and all these things.

I’ve just been learning that. I’m not a Twitter kind of person so I’ve had to become one. I have a Post-Its that remind me to Twitter every week or so. And I post a lot of pictures.

eMinutes: Do you take them yourself?

Erica Tucker: I do and I don’t. If we have one cool order, I’ll take it myself. If we happen to have three really fun custom orders, then I’ll have a photographer come in. And it’ll be worth it to me. If you look at the gallery on my website, a lot of work and money went into that. But I think it’s worth it.

eMinutes: What else are you doing? Are you doing Facebook?

Erica Tucker: I am. I update that a little less than I do Twitter.

eMinutes: Do you have a fan page?

Erica Tucker: It’s all connected now. I have a fan page and my personal page.

eMinutes: Any others?

Erica Tucker: I’m trying to do LinkedIn. It seems to be something people talk about. But Twitter and Facebook are pretty much the biggest ones.

eMinutes: I saw that your blog is coming soon.

Erica Tucker: I’m not a blogger-type person. I’m going to learn to become one. So it’s really just me finally writing something down and getting it up at this point.

eMinutes: Do you advertise at all?

Erica Tucker: I advertise on Google, Yelp, and City Search. I’ve done some other advertising, but I’m just learning what works and what doesn’t. I did a Val-Pack, but that did nothing for me.

eMinutes: Val-Pack gets mailed to homes. It’s not a click on the computer. But paying on Google and other online advertising helped you?

Erica Tucker: Absolutely. When you Google, “Los Angeles Cupcakes”, I come right up.

eMinutes: And that’s because you pay for that advertising?

Erica Tucker: Yeah. It makes the phone ring, so it’s worth it.

eMinutes: Sounds like you paid close attention to Google analytics. How did you make sure you would come up in a Google search for “Hollywood Cupcakes”?

Erica Tucker: It’s a huge process. My web designer coded my entire web site. So when people type in “Mardi Gras Cupcake”, even as specific as that, it’s coded somewhere, and it’s gonna come up in a Google search. Google and Yahoo, but mainly Google. We have all these keywords that I advertise with.

eMinutes: So DailyCandy.com brought you a lot of traffic because it’s online and people can go to your web site right away. Did you find it brought you more traffic than, say, being on Extra?

Erica Tucker: Absolutely. You know, the plugs are great every once in a while, but they really don’t do as wonderfully as you think they are going to. People are much more visually inclined to click.

eMinutes: Rather than hearing or seeing something on TV and then going to the computer to look it up?

Erica Tucker: Right. Most of my customers are people searching for what I do.

eMinutes: Do you have family out here with you?

Erica Tucker: I don’t. My parents are in Houston. My sister is in Chicago, and she’ll be moving to New York next year. She is getting her MBA at Kellogg right now, and she’s been handling my Google ad words for me.

eMinutes: She works with your web programmer?

Erica Tucker: Yes. She also works with Citysearch and Yelp. She does all the Google optimizing. So if I wanted to add “Holiday Cupcakes” to a keyword, she’ll add that for me. She’s really helpful and we’re working so well together, I’m hoping she joins the team. I didn’t want a partner in all this unless it was a family member to run the business part and I’ll do the creative part. I’d love to make it a family business.

eMinutes: It sounds like your family offers you a lot of support.

Erica Tucker: My parents are extremely supportive. They helped me financially. And they wouldn’t have done it unless they saw that this is something that has amazing potential.

eMinutes: Did you move to Los Angeles with the baking business in mind?

Erica Tucker: Well, opening a bakeshop has always been in the back of my mind. But I moved out to L.A. originally to be an actress. After two years of fighting the acting word, I loved acting and I really disliked auditioning. It’s not a fun process.

eMinutes: Do you think you’d ever want to go back to acting?

Erica Tucker: Well I’m gonna be on the Food Network (www.foodnetwork.com) in December. It’s either December 14 or 15, it’s a new show called “Cupcake Wars.”

eMinutes: You shot it already?

Erica Tucker: I shot it about two months ago. I had the greatest time. The Food Network is definitely somewhere I could see myself going. I want to keep my name and my face out there. So when you think of Sweet E’s, you attach my name along with it. And I would love to be able to go the hosting route with the whole food concept.

eMinutes: Have you thought about getting representation for hosting?

Erica Tucker: I’m working on that right now. I think an agent or manager would probably be a really good next step for me. Probably even before PR happens.

eMinutes: You want to tell me about your employees and your selection process?

Erica Tucker: I really value my employees. I have a really nice rapport with everyone. I want them to be happy. I treat them as if they’re family, which is kind of the Jewish way.

I chose them based on whether I think they can do the job how I would do it myself. I am such a perfectionist and I like things done my way. When customers have specific custom decorations, I do all the designing, mainly because I like to. I still want to be very involved.

eMinutes: When you started the business, did anything come up where you were like, oh, my god, I did not expect this?

Erica Tucker: Everything. It has all been a learning process for me. I don’t understand where all the money goes. I look at the monthly statements and payrolls and I’m like, oh, my goodness. And I get down on it for a second and then I pick myself up again.

eMinutes: What would you say is the most important lesson you’ve learned running this business? Did you get any fabulous advice?

Erica Tucker: I have my parents’ support emotionally, and they’re helping me finance the whole business. Many of my friends order from me for their businesses. They’ll take my stuff to parties. It’s so gratifying that my friends and family are excited about this whole business that I’ve created. It keeps me going.

eMinutes: Did you read any business books that really helped you out when you were starting?

Erica Tucker: Oh, god. Well, there was a stack of business books given to me by my father. I don’t know that I touched them. You know, there’s all these things that you can and should do, but when I’m already in the process of doing it… The orders are coming in, and I don’t have a chance to read a book. I’m figuring things out as I’m going.

eMinutes: What would you say are some of the misconceptions about your job? People think it’s glamorous, you’re so pretty, you have these adorable cupcakes.

Erica Tucker: People always say, “How fun, you’re baking cupcakes all day!” Yeah, I mean, it ‘s fun. But sometimes I’m sitting there making little ducks out of fondant. And if I have 500 cupcakes to get out the door, the fun kind of goes out the door also. It’s hard work.

People also think with all this press, I must be making bank right now. I wish I were.

I mean, I’m doing okay for having this business since May. But I’m spending extra to create the image. Every single box of mine has a pink bow on it. Someone sits there, cuts ribbon, turns them into bows and hot glue guns them to every box. So, that’s something that I could save money on but I don’t want to.

eMinutes: Where did you learn how to bake?

Erica Tucker: I grew up baking with my grandmother and my mother. I made everything from brownies and pies, to fudge and cheesecakes.

eMinutes: After you decided to start the business, what steps did you take?

Erica Tucker: For four to five months this past year, I was in the kitchen every single day refining recipes. I had hundreds of cupcakes. I’d give them to the two homeless guys across the street.

eMinutes: How did you take that and turn it into a business?

Erica Tucker: I basically just made everything my own. I realized until I have a storefront, my web site is my storefront. So I had to make it eye catching. I put a lot of money, heart, and thought into that site.

I have a college education from the University of Texas, and I consider myself a rather intelligent person. It’s so nice to be able to use my knowledge and the brain that I grew to have. I knew I had it in me to do this.

eMinutes: You must have needed a space because you couldn’t keep baking out of your apartment.

Erica Tucker: I was in a studio apartment, but I moved to a larger apartment.

eMinutes: And you were delivering the orders yourself?

Erica Tucker: At first it was just me baking, washing all the dishes, and delivering. That got really difficult.

eMinutes: So you got some help with deliveries?

Erica Tucker: Yes. I wanted them to be fun loving, happy people. They all have good working vehicles with reliable GPS. No Mapquesting.

eMinutes: I heard you start your day at 5:00 a.m. Why so early?

Erica Tucker: The baking world starts very early. When we have an order that needs to be out the door at 8:00 am, we have to start at 5:00 a.m.

eMinutes: What’s a typical day for you including business and baking? How much time do you devote to business and promotion?

Erica Tucker: It’s so difficult to foresee things. Often we get same-day orders. We’ve yet to say no – to turn down an order.

eMinutes: You’ve never turned down an order?

Erica Tucker: Never turned down an order. I will whip on the apron myself and figure it out and get those cupcakes made if need be. But on a typical day I am equally in the office, in the kitchen, and out in the world marketing and promoting. I personally go around to different stores and cafes bringing products for them to try so they might carry our items.

eMinutes: Is there anything that I didn’t ask you that you’d like to talk about?

Erica Tucker: Well, the next steps for the business. I’m hoping that we have a really busy holiday season. And I’m really hoping that being on the Food Network in December will make the phone ring off the hook.

Also today I will be sending in the paperwork for a truck — a cupcake mobile. I’m customizing the entire truck and it’s going to be a Sweet E’s Mobile that will drive around Los Angeles selling cupcakes and brownies and cookies and everything we do.

eMinutes: Do you need to have a permit for that?

Erica Tucker: Yeah. I’ll have permits in any city. We’re in Los Angeles County, Beverly Hills, Santa Monica — you need all the different permits. It’s quite a process, so I’m just hoping that I can have it up and ready before February.

eMinutes: It’s a process

Erica Tucker: It is definitely a process.

Straight forward, right?  Think again. 

If branded a “pseudo foreign” corporation, California will apply California law to the company, regardless of where the corporation is formed.

Two Tests Must be Satisfied

California applies two tests for foreign, non-public, corporations that if met, would subject a foreign corporation to California law as a pseudo foreign corporation (see Corp Code §2115(b)):

1)       The “Tax-Factor” Test: Is the proportion of the corporation’s property, payroll, and sales in California compared to the company’s total property, payroll, and sales more than 50 percent during its latest full income year?  (see Corp Code §2115(a)(1)). 

2)       The “Shareholder Residence” Test: Is the corporation’s outstanding voting securities held of record by persons having California addresses more than 50 percent?  (see Corp Code §2115(a)(2)).

If both tests are met (i.e., more than half of the shareholders live in California and most of the company’s business is conducted in California), California will consider the corporation a “pseudo foreign” corporation and will treat it, for certain purposes of fundamental importance to California, as if it had incorporated in California in the first place. 

This means that the corporation would be subject to a “menu” of key California laws that are rooted in public policy concerns, including among others (See Corp C §2115(b)):

• annual election of directors (Section 301)
• removal of directors without cause (Section 303)
• directors’ standard of care (Section 309)
• indemnification of directors, officers, and others (Section 317)
• shareholder’s right to cumulate votes at any election of directors (Section 708, subdivisions (a), (b), and (c))

Basically, California is trying to exert its public policies (most designed to protect minority shareholders) on corporations that are doing business in California even if the corporation has attempted to avoid California law by incorporating elsewhere.  If you want to shop around for the best corporate law and do business in California, beware that California law may trump the law of the home state of a corporation.  To learn more about the one reason that corporations are nonetheless well served to incorporate in Delaware – mobility, watch “What is the benefit of incorporating in Delaware”, http://www.eminutesonline.com/what-is-the-benefit-of-incorporating-in-delaware-watch-video/, or read “Delaware: Jurisdiction of Choice for a Mobile Generation”, http://www.eminutesonline.com/delaware-jurisdiction-of-choice-for-mobile-generation/.

Delaware Wrinkle & its Consequences

California courts have upheld Corp. Code Section 2115.  See., e.g., Wilson v Louisiana-Pacific Resources, Inc. (1982) 138 CA3d 216.  (Court upheld constitutionality of Corp C §2115 and imposed cumulative voting for directors on pseudo foreign Utah corporation).   However, the Delaware Supreme Court has repudiated the statute provision in VantagePoint Venture Partners 1996 v. Examen, Inc.,  871 A.2d 1108 (Del. 2005) (“VantagePoint”).  The court in VantagePoint affirmed the Delaware Court of Chancery ruling, relying on conflicts of law principles and the Commerce Clause of the U.S. Constitution to dismiss Section 2115 of the California corporate code.  The issue of which state law applies to a pseudo foreign corporation in California may ultimately turn on who wins the race to the courthouse in forum shopping.  In the meantime, the opposing opinions regarding Section 2115 from the California and Delaware courts will continue to leave uncertainty for foreign corporations with meaningful business in California.

Step One.  First, a corporation must agree to abide by the terms of the Producers-Screen Actors Guild 2002 Codified Industrial and Educational Contract and the 2008-2009 Extension to the 2005 Memorandum of Agreement (collectively, the “SAG Agreement”).  In California, this can be accomplished by (1) the corporation entering into the Agreement, and (2) the shareholders and directors authorizing the corporation to do so.  SAG requires “incumbency” provisions in its resolutions (i.e., a specific corporate resolution that identifies the person who is authorized to sign the SAG Agreement on behalf of the corporation).  A copy of the SAG Agreement is contained in the following packet of materials, Full Ind Sig Forms (e-mail).  For a form of Joint Written Consent of the Shareholders and Board of Directors, see jtwrittenconsent. 

Step Two.  For corporations, the production company should complete the SAG Company Information Sheet.  Doing so will require a copy of the company’s Articles of Incorporation, as well as the names and addresses of the officers of the corporation (i.e., President, Secretary, Treasurer, and Vice Presidents, if any).  A California corporation must have a President, Secretary and Treasurer. For more information, watch this video “What Officers Are Required?” http://www.eminutesonline.com/what-officers-are-required-watch-video/

When a performer joins SAG, she is required to comply with Global Rule One, which states that “No member shall work as a performer or make an agreement to work as a performer for any producer who has not executed a basic minimum agreement with the Guild which is in full force and effect.” By becoming a SAG “signatory”, a production company is permitted to hire SAG members for its projects, and, in exchange, obligates itself to comply with SAG policies (e.g., nondiscrimination), pay certain taxes and make various contributions on behalf of SAG members participating in the company’s projects (e.g., Social Security, tax withholdings, unemployment insurance and disability insurance payments, and payments to the Screen Actors Guild-Producer Pension and Health Plans).

Similar authorization and documentation is required for limited liability companies (LLCs) and limited partnerships (LPs) that wish to become SAG Signatories.   For more information about the basic differences between LLCs and corporation, watch this video “Should I form a LLC?” http://www.eminutesonline.com/should-i-form-an-llc/

California law imposes personal liability on shareholders of dissolved corporations for four years following the corporate dissolution.  See, http://www.eminutesonline.com/zombie-corporations-in-california-personal-liability-lives-on-for-four-years-after-corporate-dissolution/.  But the liability of the shareholders is limited to the amount the shareholder actually received at the time of the dissolution.  

Unlike shareholders, even directors who receive nothing whatsoever at the time of dissolution are personally liable (jointly and severally with the corporation) if they approve the distribution of assets to shareholders without first satisfying the liabilities of the corporation that are known at the time of dissolution. See, California Corporations Code Section 316(a)(2).   California law provides that the director is personally liable up to the amount of the illegal distribution (or if the illegal distribution consists of property, the fair market value of that property at the time of the illegal distribution) plus any accrued interest  from the date of the distribution, together with all reasonably incurred costs of appraisal or other valuation, if any, of that property or loss suffered by the corporation as a result of the improper distribution. See, California Corporations Code Section 316(C). 

The moral of the story: be very careful if you are a director of a corporation considering dissolution, especially when the corporation intends to dissolve without providing for all of its debts.

• We coordinate about 15,000 filings and deadlines annually
• We prepare about 20,000 sets of documents annually
• Because of advances in technology, we went from having 5 people prepare the documents associated with those 15,000 annual filings and deadlines to one full time person
• Our website tracks all those deadlines without human interaction
• Approximately 95% of what we send to clients is delivered electronically, resulting in an annual savings of about $60,000 for our firm in paper and postage
• More than 50% of our clients have a credit card on file, enabling for a more efficient AR process related to our services

Recently, I was asked to speak on how we keep our plans on track.  We came up with a feeling, a book, and four tools that we use in our firm to accomplish our goals, to relentlessly increase the quality of our service, to grow our practice, and to transform our organization.

The Feeling

The key to accomplishing our goals is passion.  An entrepreneur needs a passionate, do or die vision of what he or she is trying to accomplish. The founder of Zappos says “Chase the Vision.  Not the money”. 

In my case, my vision is to be the leader in entity management. 

To be able to execute a business plan, you first need a powerful, passionate,  and spectacularly concise description of what you are trying to accomplish.

And you are going to seriously need it.  You’ll need passion for your vision to explain what you’re doing to your partners, to justify your actions, to measure your decisions, to rally your troops, and to remind yourself of your mission.

So, before you start trying to execute even the most exceptionally well thought out plan, make sure you’re passionate and you have vision.    

The Book

Read The E-Myth (www.e-myth.com, http://en.wikipedia.org/wiki/E-Myth).  It changed the way we do things.  Period. 

Four Tools

Now, I am going to share with you four tools that we use in our firm to keep our business plans on track:

1. Allocate overwhelming resources to ensure the success of your plan;
2. Micromanage;
3. Have a “fix it “ list; and
4. Be flexible.

Tool Number One: Allocate Overwhelming Resources

Once you have a clear vision, the first step is to audit what resources you need to accomplish your mission.  I have always liked the way Collin Powell referred to the need for overwhelming force in warfare.  It’s the same thing when it comes to executing a plan.   

In order to have any chance at successfully executing a plan, the first step is to analyze what resources are necessary to achieve your mission.  Far too often, extraordinarily well thought out business plans are developed, bound, distributed, launched with fanfare, and then fail.

They fail because insufficient staff, resources, funds or whatever are allocated to the mission.  In my firm, we only have eleven employees, but we have a full time member of our staff whose sole job function is to keep our business plan on track.  I also spend about 1/3 of my time executing our plan – all for one simple reason – we’re extremely serious about our plans being successful.

We’re serious about the process, because we know that to be a great organization we can’t focus only on the needs of a single client.  We want to consistently deliver exceptional results to hundreds of clients all the time.  That’s only possible because we’ve made a decision as an organization to free up a key person to focus only on the big picture. In other words, we have a fundamental commitment to investing the resources so that multiple people in the office are dedicated full time to working “on” – not in – the business.

Tool Number Two: Micromanage Tasks

I used to think that educated, dedicated staff shouldn’t need to be micromanaged.  In fact, it’s sort of a bad word in business – to be “micromanaged” – but to make sure that a plan is executed that’s exactly what you need to be.  A micromanager is someone who intensely focuses on the little nits and nats.

You now have passion, a vision, and you’ve allocated overwhelming force to your business plan.  The next step is to micromanage the details.

Business plans are not self executing. A brilliant, inspiring presentation of a business plan to your entire firm  will accomplish nothing without constantly taking the temperature of every single member of the staff, from the mail clerks to the managing partner, to make sure that the plan is on track.  To do that, you need to create an infrastructure to ensure your success.  You can set up a weekly meeting schedule, reports, or whatever works best for you.

To keep our plan on track, we created what we refer to as the Master Task List – a constantly updated list of what each person is supposed to be doing each day.  We constantly, regularly, unrelentingly meet with every single member of our team to ensure that their task lists make sense, that they are being done, and that our plan is on track. Make no mistake about it — If you don’t properly allocate tasks, the task will not get done. And your main job as the person who is responsible for executing a plan is to make sure that all of the little tasks get done.

Tool Number Three: Have a “Fix It” List

Evan Cole, the founder and owner of the wildly successful ABC Carpet in New York City.  ABC Carpet is more of a cultural experience than it is a home furnishing store, but the best thing I ever got from ABC Carpet is a great saying from its founder “Stay constantly irritated.  When you walk through your business, focus on what’s wrong.  What’s right is what you pay your staff for”.

You need to constantly ask yourself what’s wrong? What works? What doesn’t? Where is your plan falling off track? You have to be a restless, persnickety pain in the ass to create an engine of constant improvement.

People who work with me would say that I’m extremely restless. In my firm, I have a constantly updated list of what’s not working right.  I keep it to one page.  My “list” includes all of the things that aren’t working particularly well, and I literally take each task and work it, one at a time, until the problem is fixed.

And then I find a new problem.

Once I read it put this way:

1. See everything;
2. Tolerate a lot; and
3. Fix one thing at a time.

Tool Number Four: Be Prepared to Forget the Plan

Finally, the last suggestion I have for you is to keep focused on your vision, but be FLEXIBLE.  Be prepared to constantly tinker with your plan.

By and large, nearly nothing that you planned when drafting your business plan will working out in the brilliant precise way that you conceived it.  To achieve your objectives, be prepared to reconsider parts of your plan that did not live up to expectations.

Whether it is due to an unpredictable economic climate, or massive advances in technology, a key element of successfully executing a plan is being prepared to not “stick with the plan.”  At our firm, we’re focused on a few concise goals, but our way to get there is in constant motion. 

When something doesn’t work, we invest the time to meet with the necessary people in the office, meet with clients that have important feedback regarding our process, or draw in the required outside vendor resources to make the necessary change happen.

A Very Unglamorous Role

I think most business plans tend to fail for one simple reason – the development of the business plan is seen as the end of the process when it is really just the beginning.  It requires constant, unrelenting, effort to execute on a business plan.  It requires you to be the guy in your organization who refuses to permit the comfortable status quo.

To be the person in your organization who is responsible for explosive change, you’re taking on an sometimes unglamorous, unpopular role.  People will resist change, some staff might grumble, complain, or quit, and that’s why it’s important to keep passionate about your vision.

But if you are prepared to be sometimes unpopular, anal, micromanager, and you have overwhelming resolve, passion, and resources, you can transform your organization.