Question:
Need advice on a potential partnership between two individuals.?
Lue R
2008-03-11 09:09:37 UTC
I have the expertise in a service. I also have good credit but low on immediate funds to get started. The other individual has the immediate funds to get started but also has potential leads with clients and will be involved in the administration duties. What would be the fair percentage in ownership? Any advice on how contract should be drawn up?
Three answers:
Dawn F
2008-03-11 09:37:39 UTC
Most reputable attorneys who deal with business entities (partnerships, S corps, C corps, LLC's, LLP's, etc.) will probably tell you that a partnership is the WORST way to go into business! At the VERY LEAST, you should have an LLP (limited liability partnership) drawn up by a competent attorney.



When you form a general partnership, each partner has equal right to the fund of your partnership, decision making, etc. If one of the partners signs a contract in the name of the partnership and "the partnership" can't fulfill the terms of the contract, the other partner can be held PERSONALLY responsible for anything that is due. This is true for each partner--both can be held personally responsible for debts and committments of the partnership. That means that your personal property can be siezed to pay the debts of the partnership.



I have a freind who recently formed a partnership with a person who had a lot of knowledge in certain areas. (My friend owns a substantial amount of personal property, plus owns a business that is incorporated.) From the beginning, I repeatedly and consistently advised her AGAINST forming a partnership with ANYONE--including me, and we've been friends for years! She went ahead with the partnership, including opening a joint checking account with a VISA check card, with the other person. Within 2 months, my friend's "partner" had overdrawn the partnership checking account by over $1000, changed all her phone numbers and all but disappeared, and my friend is now in the process of going through the court system to try to get some compensation, dealing with her really good credit being messed up, and trying to save her personal property.



Had she gone to an attorney and had an LLP drawn up, she would have had more protection under the law, and possibly wouldn't be having the problems she's got now!



My advice is to talk to a reputable attorney who deals with setting up business entities. At the very least, (s)he will probably suggest an LLP, or Limited Liability Partnership. That way, both you and your partner are protected to some extent. One person will be named as managing partner and will be responsible for all the decisions made in the partnership, while the other person (or people) will not have any decision making ability, but will only be liable for the amount of money they put into the partnership.



If you don't want to start by going to an attorney, at least do some research! There are a lot of books available on how to form partnerships, and the laws do sometimes vary from state to state. One book I recommend very highly is "Own Your Own Corporation" by Garret Sutton, Esq., Corporate Attorney. There are others out there, but this book gives you all the pros and cons of each business entity and is easy to understand.



Good luck in your buisness endeavors!!
Chrishaun B
2008-03-11 16:46:12 UTC
Depending on the service wether it be physical, advise, web-based or personal you should always maintain a 60-65% peice of the pie. If he can get you the clients and invest in the business he his deserves 40-45%, only because your giving the services. You should make sure he has only part ownership since he had the funds to get it started, he should own a slightly larger portion than you. This will keep him loyal. Make sure that you can change ownership in an agreement.
Sumit S
2008-03-11 16:38:36 UTC
Don't go for it


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