Partnership/Merger Advice.

What is the name of your state? NY


Hello,

I am incorporated in NY. My business is web services, includes webhosting, web design, domain names, etc. At the moment, the webhosting business is a little slow and one of my friends, who is also doing webhosting has offered to merge his business with mine. Given that merging will minimize our costs and let us both work on one company, instead of two, I have been giving it serious thought.

Can anyone offer an advice as to what are my options if I want to go ahead.

A few things to keep in mind:

1. my friend is not incorporated, or registered (DBA, etc) with his state/city.
2. He is in PA.
3. out of 3 aspects of my company, most likely I want to bring him under 'hosting' only.

Thank you for you time.

Business 101:
"I am incorporated in NY."
*** No your not. A person cannot be incorporated.

"My business is web services, includes webhosting, web design, domain names, etc."
*** No it isn't. If the business is a corporation as you claim, it is NOT your business. You may be a majority shareholder and/or Director and/or Officer, but this is not YOUR business.

These are very common mistakes made by people who are not familiar with Corporate law.

So, with that out of the way, now to Business 201.
Lets look at this accurately and realistically.... you are an officer for a corporation. The corporation is considering some type of merger that, based on your post, is likely going to be VERY messy and filled with problems. So, what would a professional, responsible corporation do??? Yep, get a competent attorney!! You have some potential MAJOR issues in this situation, "merging" with a person who is not a corporation or even a registered business. Why not just hire the person and make it simple?? What financial resources is he proposing to bring to the relationship that would warrant part ownership of the corporation?? Is he willing to assume partial liability for the obligations of the corporation?? What about any tax ramifications from this 'merger'?? What about legal liabilities, insurance, creditors, etc?? LOTS of problems!! Also, are you aware that YOU can't make any legal decisions on the actions of the corporation without having meetings of the board and/or officers with minutes and records??

Sounds to me like you should be talking with a competent corporate attorney to clear up some very basic, and legal, requirements of a corporation.

Thank you for a straightforward answer JETX.

I admit that was a poor choice of words on my behalf. Since I own the 100% share of the corporation, I some time interchange the references. Bad practice and I'm sorry about that.

I'll now be looking for a decent attorney.

Though I am not familiar with NY Corporate laws, due to the possibility of fraud and mismanagement, states often require a corporation to have more than one individual shareholder.
See: http://usa-corporate.com/states/ny.html

There are other requirements in NY corporate standings that would also seem to preclude an 'individually held' corporation. The following is from the NY state business guide:
"The records of the corporation, including minutes of all meetings
should be recorded and retained.
The assets and liabilities of the corporation should be kept and
maintained separately from those of the officers, directors and shareholders of the corporation. The corporation cannot be operated as an extension of the individual(s) involved. For example, the
corporation must have a meeting of the shareholders annually for the election of directors and transacting other business. The corporation must maintain records of these meetings in its corporate minutes. The corporation should maintain a checking account in its
own name."
Source: http://www.dos.state.ny.us/corp/pdfs/busguide_00.pdf