Offer to buy a Open Sourced Project

[leagalities]

What is the name of your state (only U.S. law)? Texas


Hello,

Let me give a little backstory to this unique situation. For the past 3 years I have been involved in a Open Source Project, involving Android. If any of you run custom firmware on your devices, chances are you have used something we have created. As a team we have a website, and as a team we need to pay for this, as well as build servers and devices to develop on. The way we did this was put ads on our website. Income was roughly $1300 euros a month, and "pots" were created. Emergency pot, device pot, and after bills were paid the left over was divided out amongst the "core" members (12 of us). Everything was fine until the person handling the accounting decided he was goig to leave. We were trying to create a e.V. to become somewhat of a legal entity, but if failed. This is where I come in, I offered to take control, until we can restructure and set up new accounting. Here is my question... The guy says the easiest way to transfer the project would be for him to "sell" it to me. He says I need to send him a offer to purchase for 11k euros (project has 10k euros) and he will then send me the 10k euro, and the contracts we currently have. The project will then be 100% under active member control. I am worried it I send him a offer to buy for 11k euro, he then can keep all the monies the project has (10k euros). Does this sound right, or should it be handled differently? Also, if he has gotten himself into some sort of tax troubles, would this be aquired with the project, or would these issues remain with him?

Thanks in advance.

 

[Zigner]

What is the name of your state (only U.S. law)? Texas


Hello,

Let me give a little backstory to this unique situation. For the past 3 years I have been involved in a Open Source Project, involving Android. If any of you run custom firmware on your devices, chances are you have used something we have created. As a team we have a website, and as a team we need to pay for this, as well as build servers and devices to develop on. The way we did this was put ads on our website. Income was roughly $1300 euros a month, and "pots" were created. Emergency pot, device pot, and after bills were paid the left over was divided out amongst the "core" members (12 of us). Everything was fine until the person handling the accounting decided he was goig to leave. We were trying to create a e.V. to become somewhat of a legal entity, but if failed. This is where I come in, I offered to take control, until we can restructure and set up new accounting. Here is my question... The guy says the easiest way to transfer the project would be for him to "sell" it to me. He says I need to send him a offer to purchase for 11k euros (project has 10k euros) and he will then send me the 10k euro, and the contracts we currently have. The project will then be 100% under active member control. I am worried it I send him a offer to buy for 11k euro, he then can keep all the monies the project has (10k euros). Does this sound right, or should it be handled differently? Also, if he has gotten himself into some sort of tax troubles, would this be aquired with the project, or would these issues remain with him?

Thanks in advance.

This forum is for US law only (even if you try to lie and say you are in Texas.)

 

[quincy]

This forum is for US law only (even if you try to lie and say you are in Texas.)

So what again makes you think leagalities might not be from Texas, Zigner?

 

[Zigner]

So what again makes you think leagalities might not be from Texas, Zigner?

It's a hunch...because as independent as Texas is, they don't deal in Euros

 

[leagalities]

I am in Texas, Dayton to be exact. The guy who previously handled the accounting is in Germany, so no not trying to lie.

 

[quincy]

What is the name of your state (only U.S. law)? Texas

... Income was roughly $1300 euros a month ... We were trying to create a e.V. to become somewhat of a legal entity, but if failed. ... The guy says the easiest way to transfer the project would be for him to "sell" it to me. He says I need to send him a offer to purchase for 11k euros (project has 10k euros) and he will then send me the 10k euro, and the contracts we currently have. The project will then be 100% under active member control. I am worried it I send him a offer to buy for 11k euro, he then can keep all the monies the project has (10k euros).

Does this sound right, or should it be handled differently? Also, if he has gotten himself into some sort of tax troubles, would this be aquired with the project, or would these issues remain with him? ...

No, what your German accountant has suggested does not sound right. I think it should be handled differently.

For this reason, I recommend that you either locate a solicitor in Europe to assist you or you find a US attorney experienced in international business law for a personal review of your business.

 

[Dave1952]

I do not follow much of this. You have a rather loose partnership. The member who handled accounting for this group wishes to leave. For some reason he asserts that he owns the partnership. Why is that? Doesn't he own some shares of the partnership? Where did the $10,000 figure come from?
Since you plan to take over the accounting functions, how much is the business worth? What are it's assets? What are it's debts.
I'd urge you to get legal,financial, and business advice. Sadly you believe that your business earns less than $16000/yr so your "pot" will be less than the money you need. Thus your business must become very business-like and find some investors, ASAP.

 

[quincy]

I do not follow much of this. You have a rather loose partnership. The member who handled accounting for this group wishes to leave. For some reason he asserts that he owns the partnership. Why is that? Doesn't he own some shares of the partnership? Where did the $10,000 figure come from?
Since you plan to take over the accounting functions, how much is the business worth? What are it's assets? What are it's debts.
I'd urge you to get legal,financial, and business advice. Sadly you believe that your business earns less than $16000/yr so your "pot" will be less than the money you need. Thus your business must become very business-like and find some investors, ASAP.

It is not dollars but euros being discussed here, Dave. The accountant for this "team" is in Germany.

The exchange rate along with many other aspects of the business will need to be considered before assets, client lists and control of the business change hands, and certainly before any thought of adding investors.

I suspect there has been no written contract drafted and signed that governs the business or the relationships between the parties. The German accountant might be the first to want to leave the business but it is likely he will not be the last. This group needs to sit down with an attorney/solicitor in whatever area of the world they wish to establish themselves, and have the facts of their business personally reviewed - and then get a business agreement in place that covers issues like those arising now with the accountant's planned departure.

 

[leagalities]

Yes, you are all correct, the team is run very loosely. Everything is verbal, we get money from Ads due to visitors to our website, they come to download the firmware (this is all open source code we have written). So there is no real list of clients, though we do recieve donations at times, nothing compared to the ad revenue though. The accounting guy claims to have paid taxes on the monies, and Im pretty sure he did. Reason I say this, when I created the new account for the Ad company (Google AdSense), they required me to fill out forms for tax, they will either with-hold or not (not comes with a comes with 1099). None of us are out to make any huge amount of cash here. This is more of a hobby with expenses that are covered with Ads from the website. My main concern is having to write this purchase for something that isnt really owned by anyone person. I would think when the guy chose to leave, he wouldve just passed things over, nothing attached.

edit...the 10k figure comes from what we have in cash. he says we make a "purchase" for 11k, he gives me 10k and the contracts with our providers (servers we rent). could it be wrote in this purchase agreement that I give 11k for contracts and 10k in funds/assets?

 

[quincy]

Yes, you are all correct, the team is run very loosely. Everything is verbal, we get money from Ads due to visitors to our website, they come to download the firmware (this is all open source code we have written). So there is no real list of clients, though we do recieve donations at times, nothing compared to the ad revenue though. The accounting guy claims to have paid taxes on the monies, and Im pretty sure he did. Reason I say this, when I created the new account for the Ad company (Google AdSense), they required me to fill out forms for tax, they will either with-hold or not (not comes with a comes with 1099). None of us are out to make any huge amount of cash here. This is more of a hobby with expenses that are covered with Ads from the website. My main concern is having to write this purchase for something that isnt really owned by anyone person. I would think when the guy chose to leave, he wouldve just passed things over, nothing attached.

edit...the 10k figure comes from what we have in cash. he says we make a "purchase" for 11k, he gives me 10k and the contracts with our providers (servers we rent). could it be wrote in this purchase agreement that I give 11k for contracts and 10k in funds/assets?

Disputes often arise when loosely-formed businesses start making money (whether it be thousands of dollars or thousands of euros).

Written contracts are important because oral agreements tend to be remembered differently by everyone. It can often be left to a court to decide whose memory of the terms of an agreement makes the most sense. You want to avoid court if at all possible.

I can tell you that your German accountant's suggestion on how to transfer the project to you is flawed. However you will need to seek out legal help from an attorney/solicitor in your area (or the area of the world where your business has been established) because the attorney/solicitor can personally review all of the aspects of your business and advise you accordingly.

This type of personal review falls outside the scope of the FreeAdvice forum.

Good luck, leagalities.

 

[leagalities]

Disputes often arise when loosely-formed businesses start making money (whether it be thousands of dollars or thousands of euros).

Written contracts are important because oral agreements tend to be remembered differently by everyone. It can often be left to a court to decide whose memory of the terms of an agreement makes the most sense. You want to avoid court if at all possible.

I can tell you that your German accountant's suggestion on how to transfer the project to you is flawed. However you will need to seek out legal help from an attorney/solicitor in your area (or the area of the world where your business has been established) because the attorney/solicitor can personally review all of the aspects of your business and advise you accordingly.

This type of personal review falls outside the scope of the FreeAdvice forum.

Good luck, leagalities.

Would like to add, though things are loose, most everything is done within a Google Group email. So there is record of agreements and what-not, just no contracts between us. Only contracts we have are those with providers we use (servers). To offer my theory, I'm willing to bet his reasoning for wanting to "sell" the project is some sort of profit/loss that will be claimed on his taxes. After all, if he wanted to keep the assets, he wouldve just vanished.

Anyway, thanks for the advice here, I figured we are getting out of the scope of FreeAdvice forum. I'll drop back by once its all sorted and let you guys know how it turns out.

Thanks again.

 

[Dave1952]

The old accountant must have a reason to believe that should be paid this sum of money. What is that reason? In the future don't have the partnership's money under the control of one person.

 

[quincy]

Would like to add, though things are loose, most everything is done within a Google Group email. So there is record of agreements and what-not, just no contracts between us. Only contracts we have are those with providers we use (servers). To offer my theory, I'm willing to bet his reasoning for wanting to "sell" the project is some sort of profit/loss that will be claimed on his taxes. After all, if he wanted to keep the assets, he wouldve just vanished.

Anyway, thanks for the advice here, I figured we are getting out of the scope of FreeAdvice forum. I'll drop back by once its all sorted and let you guys know how it turns out.

Thanks again.

The emails will be of help to you, especially when structuring a written agreement. The agreement can encompass the prior agreed-upon arrangements made between the team members. But I do think you will need to have a professional review your accountant's contributions to see what he is entitled to and what he isn't. Again, his proposed suggestion is not one I would recommend you consider seriously.

It would be nice if you could drop by and let us know how it all turns out. Good luck, leagalities.

 

[leagalities]

Thanks again, And can I clarify he is not asking for any money from me/us.

Ill try to explain it better. We currently have 10k (euro) in cash, so I write a proposal to purchase the project for 11k. he takes the added (non-existing) 1k, and sends me the 10k. it will appear he has made 1k from the deal, but on paper im guessing it looks like a loss of 10k. This is why I think he is trying to do some sort of tax thing.

And I will definitely drop by with the outcome.