Chapter 5

Before my wives and I left on our honeymoon, Sandy and I had hired two lawyers, Grant Baker and Kenny Natron, to help us start our new business. They set up an appointment with us for today to discuss their progress and to ask us questions. It was ten minutes to two in the afternoon when Cindy called to let me know our two lawyers had arrived. They and Sandy were waiting for me in our conference room.

We were starting to get really busy, so I definitely needed to find someone to be my secretary. I don’t know the proper job title, but I wanted her to sit at the desk just inside our portable’s front door and greet visitors. She would also answer telephone calls and route the caller to the proper person. When not taking care of those tasks, she would support the tasks Cindy and I were working on. I thought of the position as more than a receptionist and different from a secretary. Cindy was my Administrative Assistant, so that job title wouldn’t be right for the person who filled the position. Perhaps, Assistant to the Administrative Assistant would be a good title, but it just didn’t seem right to me.

I refreshed my coffee and joined everyone in the Conference Room.

Sandy said, “Grant and Kenny told me they are getting close to filing the paperwork for creating our holding company, Doug. They have a couple of questions about the company structure that need to be answered before they actually file the paperwork to create our Limited Liability Corporation.”

I said, “Afternoon, gentlemen. I’m glad you called for a meeting, because in addition to your questions, Sandy and I have a couple of items we need to discuss with you.”

Kenny said, “Well before we ask our questions, it might be best if we know what those items are.”

I glanced at Sandy and then said, “The first item is the company name. Sandy and I decided that the name we originally gave you could create problems for us in the Multiverse. So we decided to use the name: The Colorado Conglomerate, LLC.”

Grant said, “Since the incorporation papers haven’t been filed, Doug, that isn’t a problem. All we need to do is change the LLC’s name on the documents.” They both made a note of the new name.

“Good. I have been using a tax lawyer and an accountant for my personal business activities. Sandy and I have been talking about including those subsidiaries in our LLC. So, would it be advisable to add my existing businesses, now or later? If now, what is involved, and should my tax lawyer and accountant be added to the LLC’s staff or should they be considered as contractors or should I replace them?”

Grant said, “Doug, Kenny and I will need to know more about your businesses and how they are structured. You mentioned existing businesses. Do you plan to create and add additional businesses?”

“Yes, but I’m not sure how many. Why?”

Grant said, “I was thinking of the size of your business. Generally speaking corporations are set up to manage large businesses, while LLCs are usually used to manage smaller businesses. The usual reason for this is big companies typically need to raise investment capital and one of the ways to do that is to sell stock in the company. I recall you mentioning the LLC would be privately funded. Just to confirm you haven’t changed your mind due to the additional businesses, do you intend to sell stock in your company or will you be privately funded?

Sandy said, “Doug and I will fund the company’s financial needs from our personal funds.”

Grant said, “One of the main differences between an LLC and a corporation is ownership. From what I recall, you told us that your business would be a partnership between the two of you. Is that still your intent?”

“Yes, although we may want to include a couple of other people as minority owners. Is that a problem?”

“Not a problem. LLCs can be owned by multiple people.

“Let me explain a few things about the differences between LLCs and corporations. Corporations are required to have corporate officers, to define their business structure, to conduct quarterly and annual meetings, and to file reports with the state. Those things are not required by an LLC; although those items are good practices for LLCs to implement internally. There are also different terms used for LLCs and corporations. For example, a corporation is required to have Articles of Incorporation and some states require an LLC to have a comparable document. To differentiate between the two documents, an LLC’s document is called an Operating Agreement. Colorado does not require you to have an Operating Agreement, but such a document is a good idea and it is a very good idea to create one so all of the partners in your LLC will know how the LLC will function.

“The Operating Agreement will govern the internal operation of the business, which can be defined to meet the needs of your business and owners. All of your LLC’s owners must sign the Operating Agreement and it then becomes an official contract binding all of you to its terms. You can modify your Operating Agreement to adapt to the changes in the way you wish to do business.

“Now why do you need an Operating Agreement when the state doesn’t require one? If you operate your LLC without an Operating Agreement, you will be subject to Colorado’s default rules for operation of an LLC, which are contained in the relevant statutes and developed through the state’s court decisions. Kenny and I both believe you should create an Operating Agreement. It will give you greater control over how your business is run.”

Kenny said, “Grant and I will start work on creating an Operating Agreement for your LLC based on what we know of how you want to run your businesses. We will create a document that makes it easy to modify the structure of your LLC according to changes in your wishes and situation.

“For now, Doug, I think you should continue to manage your current businesses separate from the LLC. Once all of the legal aspects of creating and setting up the LLC are complete, Grant and I will have the time to take a closer look at the businesses you want to add. Before you add employees to your LLC, Grant and I need to discuss a number of things with you and Sandy. Things like staffing, employee benefits, and the structure of both the LLC and the businesses you add or create. We think some of this will need to be part of the Operating Agreement.

Sandy asked, “How long do you think we will need to delay adding Doug’s companies?”

Kenny and Grant looked at each other, and then Grant said, “We can’t give you a decent estimate, Sandy. The primary factor is how long it will take to finish setting up the LLC, to define the management structure to be used in managing the businesses that will be the LLC’s subsidiaries, and to create your Operating Agreement. To do all of that, we will need to take into account what you plan to create in the near future, the existing businesses Doug plans to add, and what businesses the two of you think you will add during the next ten to twenty years.”

Sandy and I must have been looking depressed for Kenny said, “Don’t let what Grant and I have said overwhelm the two of you; it isn’t as bad as it sounds. A large part of the upfront effort is mostly complete. We were just concerned that what you were thinking of doing might require us to create a corporation. Once we understand your current plans, we should be able to get your LLC Organized. While we are working on that, we will finish setting up the LLC. Then we can work on the Operating Agreement.”

Sandy said, “I thought you said we would do all of the organization after the LLC is set up.”

Kenny said, “Sorry about that, Sandy. Organized is the legal term for creating the LLC. For a corporation, the term is incorporated. The two terms have to do with making the LLC and Corporation legal entities.

“The organization we were talking about has to do with the functionality of operating the LLC and businesses you add to the LLC; some of that may need to be part of your Operating Agreement. Once that is done, you can start staffing your LLC and adding companies as subsidiaries.”

Grant said, “Doug, you told us that your Ambassadorial duties wouldn’t allow you to be heavily involved in the business. From the way you were talking, I had the impression it would be just the two of you running the business. Today you mentioned partners. Will they be involved in the management of the LLC?”

“No, they have other things that they need to do. The day-to-day management will basically be Sandy and me. Why?”

“Well, that means most of the work will fall on Sandy. Kenny and I talked about management of the LLC and the subsidiaries that you described in our last meeting. We felt the company was small enough that with the right structure and person, it was just barely possible for one person to manage everything. Although, the person might need a few assistants, who would handle the details of the administrative activities. What you are now describing sounds like far more work than one person can manage.

“It seems to me that the LLC will need a very different management structure than we originally thought it would. The specifics of the businesses you create and add will have a major impact on your LLC’s management structure. We don’t have to go into that today, but it sounds to me as if the LLC will need one of two management structures.

The simplest structure would be each business having a manager, let’s call them Presidents, who will manage their respective business. They will report directly to Sandy for direction and guidance. However, that would require Sandy to be familiar with all aspects of the different businesses, and I doubt she is knowledgeable in all of the business areas you mentioned during our earlier meeting.

“I think you will need a more complex management structure. What I’m thinking of is, Sandy would be the President of the LLC. The LLC will have multiple divisions with each Division being managed by a Vice-President, who will report to Sandy for direction and guidance. The precise structure will depend on the types of businesses and how many companies you add to each Division as subsidiaries. By that I mean, are the businesses you want to add in different business areas or are they all related to trading?”

I responded, “Most of the subsidiaries will be related to trading in gems, bullion, pharmaceuticals, medical equipment, and a number of other products; a few will be service organizations.”

“Grant said, “In that case, I think the LLC needs a management structure that is divided into several Divisions with each Division managing similar types of businesses, and you can fit the subsidiaries under the appropriate Division with an LLC Vice-President in charge of each Division. Sandy can then manage the Vice-Presidents.”

I asked, “What do you think, Sandy?”

“That sounds like a good idea, Doug. You have your existing businesses and I think we will need a couple of businesses to market the different product lines the Archer Conglomerate produces. Harry and I talked about the Archer line of products that he thinks we can sell on Earth. The product lines are too diverse for me to handle by myself and I will need a dedicated company to market each line of the products effectively. We could group pharmaceuticals and medical equipment under one Division and gems and bullion under a second Division. Your security guard business doesn’t fit either Division so we will need a third Division. We can put the remaining subsidiaries under one of those three Divisions or create additional Divisions.

“Grant, Doug and I want you and Kenny to create the LLC management structure I just described.”

Grant said, “Kenny and I will need to evaluate all of the product lines and companies you are planning to add as subsidiaries, so we can recommend the Divisions you will need as part of the structure.”

I asked, “Can we change this structure? What I mean is, is the creation of the LLC dependent on the management structure or is the structure separate and subject to change at our discretion?”

“The management structure is separate and you can modify it at any time and in any way you wish.”

Kenny interrupted with, “Getting back to the definition of the Divisions, Grant and I talked about the administrative activities of the LLC and its subsidiaries. To the extent feasible, we think you should consolidate all of the LLC and subsidiaries’ administrative functions as part of an LLC Division. It doesn’t seem efficient to have separate Payroll Departments, Human Relations Departments, or Contracts Departments. However, a single Marketing Department and Purchasing Department doesn’t make sense to us; perhaps one for each Division.

Sandy and I nodded to each other, and Kenny continued by asking, “Doug, who is currently managing your current companies and do they have administrative departments?”

I said, “So far, I’ve been doing the management. I may have given you the wrong impression. Both companies are essentially one-man operations and the companies have no employees to support me other than my accountant. Due to the future situation, that needs to be changed.”

Grant asked, “Do you have a list of the existing companies and what you plan to create available so we can discuss them?”

“Not at the moment, Grant. Cindy has my list of businesses on her computer and she is not available right now. However, the list only has two existing businesses; the rest of the list is businesses I plan to create.”

Grant said, “Tell us about how you created the two businesses and how you have operated them, Doug.”

“When I first arrived in Boston, I met Slim and we became friends. He helped me set up my first business, Smith’s Bullion Buyers, which is what we used to sell the bullion I brought to Earth. When I returned from one of my trading trips about two years later, he was gone. I continued to use the business for a while, but I haven’t done anything with it since I came to Colorado.”

Kenny asked, “What type of business structure did you create and was Slim a partner in the business?”

“Well, Slim created the business and I don’t know the details of what he set up. Slim and I worked together in the business and we shared the profits, but the business is in my name.”

“Do you have the paperwork Slim used to set up the business?”

“I don’t think so. I was learning to speak, read, and write English while we were running the business, so Slim kept all of the records and handled all of the accounting using an accountant. We sold bullion for several years; but once he left, I only ran the business for two or three months, and we gave the paperwork we got from our bullion buyer to the accountant.”

Grant said, “Okay let me summarize the important parts of what I think you told us.

“You arrived in Boston and set up a bullion trading company, and you are the sole owner; but you don’t know the details of the business’s legal structure. Slim helped you run the business and he used an accountant to keep the company’s books. You sold bullion for over two years before you came here to Colorado, and the information regarding those purchases and sales was given to your accountant. Do you have the accountant’s name and contact information, or any statements that may have been given to Slim?”

“Slim had papers on many things. I was leaving Boston, and didn’t think I would need the papers, so I threw them away. I don’t know the address, but Slim used Thomas King, CPA for all of our financial affairs.” Grant and Kenny noted the accountant’s name.

Kenny asked, “Did that include income taxes?”

“Slim didn’t talk to me about everything he had the accountant do, but I think so.”

“All right, Doug. Grant and I will follow up on that business. What about your second business.”

“I called that one Smith’s Security Service. My State Department liaison, Miss Abby White, was instrumental in my creating that business and she can explain the business to you better than I can.

“The way I remember it, my bodyguards were carrying stunners, but they didn’t have concealed weapons permits. There was an interim agreement between the President and me to establish my Embassy here in Colorado. The State Department’s Diplomatic Security Service is responsible for security at Foreign Embassies, but they usually contract with private security companies to provide the Embassies with security. Abby suggested that I form a Security Guard business using my bodyguards, and have the Diplomatic Security Service hire my company to provide security at my Embassy. Since my bodyguards and the other members of my party only spoke Trade Speak, everyone thought that was a good idea. We agreed that the Diplomatic Security Service would pay me one dollar a year for my company’s services. So I signed the agreement that they drew up.”

Kenny asked, “Did you set up the company legally or did you just start doing business as Smith’s Security Service, and do you still have your copy of the agreement?”

“I never submitted any papers to anyone to create my business if that is what you are asking, and yes, Cindy has my copy of the agreement in her files.”

Grant and Kenny exchanged glances, and then Grant said, “You need to formalize that business, Doug, and if necessary, the bullion buying business as well. Kenny and I will take care of the paperwork, and all you will need to do is sign the papers.”

Kenny said, “During our last meeting, you told us that you were selling bullion and gems here on Earth. I got the impression, from what you just said, that you haven’t done business as Smith’s Bullion Buyers recently. Did you make your recent sales through Smith’s Bullion Buyers?”

“No. I sold the gems to local jewelers, and I sold the bullion to the Precious Metals Exchange, Ltd. Why?”

Grant said, “We are just checking to ensure that you didn’t inadvertently do something that might cause you legal troubles in the future. Did you report the sales to your accountant?”

“Yes, and I paid my income taxes to the IRS and to Colorado’s Department of Revenue. The only problem I had was, I didn’t know that I had to have permission from the US Customs and Border Protection agency to import and export merchandise. Abby took care of that matter for me.”

Grant asked, “What was the resolution of that problem?”

“Well, the State Department worked out an agreement with the agency. No criminal charges would be filed and I paid customs duty on all of the merchandise I had imported and exported since my arrival on Earth. It was a mess for me to recall all of the merchandise I imported and exported since arriving on Earth.”

Kenny said, “Have you imported or exported merchandise since that agreement was reached, and if so, how are you handling the import and export of the merchandise?”

“I’ve done very little trading since Abby negotiated that agreement. Most of my exports were a few inexpensive gems, and small amounts of sugar and black peppercorns. The Customs agency wasn’t interested in that merchandise. I did declare the bullion and other merchandise that I brought back for sale.

“They also wanted to levy duties on a lot of the things that I brought back to the ranch for my personal use and for building my Embassy. The State Department had to get involved again and they told the Customs’ people that the agreement for establishing my Embassy allowed me to import items for my personal use and for my Embassy without being charged import duties.”

Kenny asked, “What is your Port of Entry for your merchandise?”

“I’m not sure what you mean, Kenny.”

“Doug, your hopping ability, Embassy, and your privileges as an Ambassador create a very unusual situation. Grant and I need to know when customs’ duty needs to be paid. Are the duties paid when the merchandise arrives at the ranch or when you move the merchandise off of the ranch?”

I said, “That issue is a bit more complex than what you stated, Kenny. The ranch is part of the Multiverse, so the Customs’ duties don’t apply until the merchandise is moved off of the ranch. But, if I were to hop the merchandise from the ranch to another country, then technically the merchandise was never in the US and no duty would be owed to the US Government. However I haven’t done that yet and the Customs’ agent I spoke to said that bringing the merchandise within the continental borders of the US qualified as importing the merchandise, if the merchandise was to be sold to someone here on Earth.

“Sandy and I are planning on avoiding a confrontation with the Customs agency by establishing import/export businesses in other countries. We will hop our merchandise to those countries and distribute it from there.”

Kenny said, “You may want to seek legal advice to clarify what ‘the continental borders of the US means’. I would argue that the ranch’s borders form part of the continental borders, and exclude that part of the country from being part of the US.”

I said, “We will take that under consideration, Kenny. Personally, I think our solution will be better for us, but we will consider what you recommended.”

Grant asked, “Doug, will these foreign businesses that you plan to create be part of your LLC?”

“That is what Sandy and I were planning on. Why?”

“Nothing important right now, Doug. It’s just that when we first talked, Kenny and I got the impression your LLC would be limited to doing business within the US. We have no experience dealing with international commerce. It seems to me that the company structure we create will need to consider the impact of your creating businesses in other countries. Your LLC will probably need separate divisions for managing your foreign companies, and you will need a legal representative who specializes in doing business overseas.”

Sandy asked, “Okay, what did you have to ask us?”

“Our discussion so far has covered most of what we wanted to know. The main thing was, did we need to create Divisions for managing similar business interests. You answered that question, but we need to know the specific businesses you plan to create and the details of each business’s structure.”

“Why is that important?”

Kenny said, “The US and State Governments have a number of laws that the LLC will have to comply with. Some of those laws are related to the number of employees the LLC and its subsidiaries employ. There are also laws that regulate certain types of companies to include any hazardous chemicals and materials the businesses may use or have on their premises.”

For the next two hours, Sandy and I described each of the businesses we were planning on creating as part of our LLC. Our importing Kastler and our idea of growing it on Earth both excited and dismayed Grant and Kenny. They said the US and Colorado’s Departments of Agriculture would have to be heavily involved if we planned to grow a new species of plant in the US. They also said we would need the permission of the Food and Drug Administration in order to sell Kastler as a sugar substitute. However, they were also excited about the sale of a natural sugar substitute that tasted like real sugar and didn’t have the bad after-taste that was typical of most of the current sugar substitutes. Grant said such a product would have an immense positive impact on people who suffered from diabetes or were overweight, and would make us a lot of money in the process.

Our meeting ended with Grant and Kenny saying they had a much better understanding of the LLC’s future structure and of the legal issues that Sandy and I would face in setting up the LLC and its subsidiaries. I will have to talk with Matt about hiring legal representation for the Embassy, before my ignorance gets me into trouble on that front.

Cindy, Misty, Sto, my bodyguards, and I hopped to the office Bashira had us use previously for our arrivals and departures. We wanted to arrive in Maputo in the early afternoon, so we could finish our meeting with the President before the media learned of our presence. That meant we had to leave the ranch very early in the morning; we arrived at the UN at six in the morning. After a short meeting with Amir, Bashira, and Mpho, I hopped Bashira, Mpho, and my party to Mozambique’s Maputo International Airport. We arrived at two-thirty in the afternoon and were met by seven limousines, which transported us to the Presidential Palace.

We were formally introduced to President Tinqua Abou at three in the afternoon. Then we and his advisors adjourned to a nearby meeting room. At first President Abou and I were uncomfortable with each other.

Then Sto said, “Man afraid cost too much. Not know what say.”

Now that I understood the problem, I said, “President Abou, the Multiverse wants to trade with Earth. A couple of the trade goods that can be sold here on Earth at this time are medical equipment and prescription drugs.

“In the US, there will be a strong resistance from various government and commercial entities to the Multiverse selling medical equipment and drugs in the US. Part of my job is to overcome that resistance, which means I need to find an initial source to which I can sell my merchandise.

“It was suggested to me that I aid three African countries with the medical problems they are having as a humanitarian effort. As the Multiverse’s Ambassador to Earth, that is a very good idea from a diplomatic point of view. However, I am also a businessman. My family and I own the majority of the stock in a corporation that is referred to as the Archer Conglomerate. The conglomerate makes and sells a wide variety of merchandise including medical equipment and prescription drugs.

“It occurred to me that since I will have problems introducing my merchandise in the US, it might be easier for me to sell my merchandise in other countries.

“Mozambique has a medical problem and the Multiverse equipment and drugs I have for sale can fix your country’s medical problems. My Embassy’s doctor, Misty Carr, will assist and train your medical personnel in how to use the equipment and drugs you purchase from us. I am ready to offer you the equipment and drugs at a very low introductory price.

“The Multiverse has a portable diagnostic tool that can be used in your villages to diagnose medical problems. I will provide your medical people with the first diagnostic tool and training at no cost to you, and I will sell our medicines to you ‘at cost plus three percent.’ To put the cost of our medicine in perspective, you will pay much less, only around a quarter of what you currently pay for your drugs. I will also sell you additional diagnostic equipment ‘at cost plus five percent.’ That includes any equipment you may wish to purchase for use in your hospitals.

“Doctor Carr has brought her portable diagnostic tool with her on this trip, and a limited supply of the medicines that she thinks will fix your people’s health problems. She will use the diagnostic tool and medicines tomorrow during a trip to one of your villages to treat the villagers. Your medical personnel can travel with us and evaluate the quality of Misty’s equipment. They can provide you with a recommendation as to whether you should purchase additional equipment and medicine from me.”

As I spoke, Mpho had translated my words into Portuguese. He also translated the President’s response into English. The President’s translator nodded to the President to confirm the accuracy of Mpho’s translation.

“Mister Ambassador, your offer is very generous. If your equipment and medicines will do what I have been told they will do, my people will definitely be interested in doing business with you. Cost plus five percent sounds like a good deal. But what does cost plus five percent mean in Meticals, which is our unit of currency?”

“At the moment, I cannot answer that question. At this time, the medical equipment we will offer for sale is being modified. The Multiverse’s official language is Trade Speak and our units of measure are different from those used on Earth. One of my companies makes the equipment I will sell to you and we are in the process of translating the displays and units of measure to English and the units of measure used in the US. The cost of that conversion will affect the cost of the merchandise, but we will prorate that cost based on the number of units we anticipate selling in the next ten years.

“What I will say is, my people have done a comparison of the cost of medical equipment in the US versus the cost of medical equipment in the Multiverse that performs the same purpose. However, the Multiverse equipment has additional capabilities and is generally of higher quality. The price of medical equipment sold in the US is close to forty percent higher than the price of the equipment that my company currently sells in the Multiverse. This price difference is predominately due to the significantly higher production run quantities that we make in the Multiverse combined with lower labor rates.”

President Abou relaxed and became a very wonderful host. Our subsequent conversation related to diplomatic relations between Mozambique and the Multiverse and they went well. There were no commitments, but the groundwork had been laid. We also had a gentleman’s agreement regarding the import of medical equipment and drugs into Mozambique; we still needed to formalize the agreement in writing.