A bricks-and-mortar manufacturer may need to stay close to its suppliers, its key managers and its work force, but an Internet-based business can operate virtually anywhere – its leaders no longer have to live in the same cities or even the same country.
“It doesn't matter because the whole enterprise is on the Net and the Net has no location,” said Joseph C. Paradi, executive director of the Centre for Management of Technology and Entrepreneurship at the University of Toronto.
Business owners still require face-to-face conversations, but they can now do so in a cost-effective manner through video conferencing. Christine Apold and Marc Weiner, the Toronto- and Philadelphia-based co-founders of Evisors, are seeking to test the notion that owners should be in the same office, or even the same country, to effectively manage a startup.
The two friends envisioned developing an “eBay of online advice” by creating a web of international experts, and the opportunity to bring in partners from abroad was an operational necessity. The new online service caters to people who want help on everything from getting a raise to baking muffins.
“The business that we were starting is very much a network business and the business community in Canada is relatively close-knit – we thought they would bring this different footprint to the table,” Ms. Apold, chief marketing officer of Evisors, said of her partners.
Despite its Canadian roots, the founders chose to incorporate Evisors as an LLC in the state of Delaware because it has simpler corporate tax laws. The company is based in New York and other officers include a Norwegian CEO and an American chief financial officer. Mr. Weiner serves as the chief technology officer.
CEO Fredrik Maro lives in New York, and the three other partners are based in Toronto, Philadelphia and San Francisco.
Evisors launched less than two months ago. The service is receiving about a dozen calls a week, but new contracts are expected to come online in the next few months. The company has signed up 400 online experts in various sectors, including career advice, college and grad school admissions and entrepreneurship.
Evisors enables users to hunt for the area of expertise they require based on expert profiles and consulting rates. The experts set the rates, but e-mail advice starts at $20 a message, while phone advice starts at roughly $50 an hour.
The four owners usually hold teleconferenced meetings a few times a week and attend quarterly in-person board meetings. Managing the business as four equal partners living in four cities and two countries has its challenges, Ms. Apold admitted. For example, task-oriented discussions work well over the phone, but brainstorming is difficult.
“If you're on the phone for more than two hours, you tend to get a bit crazy,” she said. “Last night we were on the phone talking about big strategic plans when Dan accidentally dropped the phone in the toilet.”
While Mr. Maro is the CEO and head of the company on paper, Ms. Apold said the founders make decisions by consensus.
But Prof. Paradi warned that giving everyone an equal vote could be problematic. “There's no way you can drive a car with four drivers,” he said. The CEO has to be given the power to make the final decision, and with four voters on the board, impasses could easily occur.
Probably the most important element is that the partners trust one another. “If they all went to Harvard together, they already have that trust going,” Prof. Paradi said.
Professor Arthur Cockfield, a tax law expert at Queen's University, warned that the Canadian co-owners must be careful about locations from which they manage their end of the business. If it appears Evisors is being majority directed from Canada, they could end up paying global taxes on their Evisors income.
“If they were to have their directors' meetings by teleconference and two of them were in Ottawa, there's a chance a court might say this is in fact a Canadian tax resident and all the income should be subject to Canadian taxes,” Prof. Cockfield said.
There's currently less risk of this happening because only Mr. Weiner lives in Canada. Ms. Apold is living in Philadelphia where she is pursuing her MBA at the University of Pennsylvania's Wharton School of Business.
While becoming a limited liability company was a wise move because it allows the partners to write off Evisors' losses against another taxable income, Prof. Cockfield said Evisors “blew it” when it incorporated in Delaware. State income taxes don't apply to out-of-state incomes, but any business incorporated anywhere in the U.S. becomes a U.S. tax resident, which means it is taxed by the U.S. government on income it earns anywhere in the world.
If Evisors had incorporated in a tax haven such as the Cayman Islands, which collects no income tax, revenues earned outside the United States generally wouldn't be taxed by the U.S. government. “The normal tax advice, if you are in a business like this that's online, is that the best tax choice is to incorporate offshore in a tax haven,” Prof. Cockfield said.
The partners are convinced there's a market for a broad spectrum of advice.
“The technology and people's comfort with providing and receiving information over the Internet is so much higher than it used to be that I really think it's going to happen, so Evisors is trying to win a piece of that pie and we'd also like to think of trying to grow that pie,” Ms. Apold said.
Special to The Globe and Mail
