Business Startup Advice

[rholloway]

I am starting a business for myself and I think I want to form as an S Corp. That sounds best from what I have read so far...

I have a couple of colleges who are thinking strongly of doing the same thing. We’d like to work together, at least to some degree, but don’t feel becoming partners (or equal shareholders) in a just one single business or corp. is the safest thing to do in the interest of longstanding friendships, etc. We've heard too many horror stories about what has come out of failed partnerships, etc.

Let us say for example that I form “A Corp.” and these two colleges form “B Corp.” and “C Corp.” Okay, great...

There is a good bit of overlap in what we do, and we’d like to collaborate on projects. We’d also like to have a cohesive marketing structure for such collaborations. It would seem a much stronger marketing position to show ourselves as several companies that are structured to work as one group or operation for certain projects.

The dilemma is this: How should we form a Group or Corp. or whatever is best for these collaborative efforts while still remaining distinct entities?

What is the best way to set up such a structure such that when each of us gets independent work it is ours alone and when our collaborative group gets work, it is divided among the parties that do the project work. i.e. if “A Corp.” and “B Corp.” each do half of a project, The Group pays them a 50/50 split of that money, if all 3 do it, we split 3 ways, etc.

Am I making this too hard? I’ve tried and tried to find a model to follow and have yet to see anything setup quite like this.

Any advice, or direction for possible advice would be greatly appreciated!

rholloway

 

[Tracey]

You want to avoid partnerships, but you want A B & C corps to work together and split fees? All you've done is make A, B & C corps partners.

I see 2 solutions and I'm sure there are many more.
1) draft a joint venture agreemeent between A B & C. Set forth how you determine which deals are private and which are joint (and between whom).

2) Form your corps and create a limited liability corp/p'ship. Draft the articles/bylaws/agreement to cover the situations above. This protects the corps from partnership liability. Be very careful you make it clear to third parties that you are not a p'ship.

Talk to a corporate atty for more info.


Tracey

------------------
This is not legal advice and you are not my client. Double check everything with your own attorney and your state's laws.

 

[rholloway]

These suggestions do make some sense to me. Can anyone tell me a way with either of the suggestions listed (or any other ideas someone may have) to allow a,b,and c corps to market and bill under “Group X” while still operating as Corps a b & c too?

We really do want to avoid a partnership-- at least a traditional partnership (as I understand such a thing)...

I know it is a bit confusing. Perhaps my plan just is not practical. We all have different investments in equipment for instance, and will have different amounts of time to put into projects. Furthermore, I will be operating out of a commercial location while the others will (at first) operate out of their homes. We’re all located on the order of 30 miles from each other, so a common business location for all of us to use every day would not be practical...

We will all offer web design and electronic publishing services. These services will require some collaboration, especially on larger projects. Each individual company may also provide the same services for some smaller projects as individual companies, as well as some other services that we generally won’t share at all.

I do photography for instance, but will probably not be splitting any photo work with the others at this time, since I own all the photo equipment, and the others don’t really have background in that area.

The only other option I see at this point is to simply keep the companies separate and then sub-out jobs (or parts of jobs) to each other.

The draw-back there is that many of our potential customers have known more than one of us for a number of years with other companies around town, we don’t want to appear to as competitors-- we really do want to collaborate in such cases; we all feel that a group specializing in the work we do will be more attractive to many of our prospects than our single companies might be.

The nature of this work is such that we will all need help from time-to-time, and we are all very good at what we do, so it is best for all if we find a good way to keep working together.

I guess one more thing I could do is file a "dba" company name and use it as the group name, then just sub-contract the work (as contract labor) to the other companies, I could use one company name for my private ventures and the other for group efforts I guess... but the others might not be so keen on that, as they’d have less control over things that way.

The more I try to work through this, the less sense it all makes...

Gee... this stuff gets complex quickly, doesn’t it?