First business and partnership agreement in foreign country

Discussion in 'Growing and Managing a Business' started by enchickpreneur, Jun 27, 2011.

  1. enchickpreneur

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    Jun 27, 2011
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    Hi everyone. I’m starting my first business and I have no idea what I’m doing. Basically, I came up with an idea for a website and told my friend, the owner of another business in a country we both live in as expats, about it. He said that to pull it off, I would need a partnership with someone like him, since he already has relationships with a few places that are my potential clients.

    He has mentored me somewhat as to what to do (write a business plan, make a mockup etc). In the most recent meeting, he asked how much his cut would be. I said I hadn’t thought about it. I assumed that the partnership would be that I would have the benefit of using his business’s name, and he would have free advertising on my website – as was outlined in our first meeting.

    Because I’m not in my home country, I would probably need him to put the business under his name, or find someone else. If I end up working full time for my website I will also need him to organize a visa for me, since the visa I am on doesn’t allow me to do anything outside of my current occupation. I would have to give him more percentage for him to organize a visa for me. He has mentioned these things and said he would look into whether they are possible after signing the agreement. Without him, I may not have these options.

    He recently asked if I had done anything yet, and I told him I was waiting for the partnership agreement to be signed, since I thought that was the point of having it. He changed the topic. This made me suspicious as to whether I need him at all.

    He has a wife who is native to this country and that is why this is potentially possible. I’m also worried that I might be forced to put the business under her name as well. This is a concern for me because I know their marriage isn’t stable, and that it is a business marriage. How can I safe-guard myself? Will I be able to work these things out with an attorney?

    How much of a cut, if any, would I give to him? What should I look out for when creating the partnership agreement? What length of time do partnerships go for?

    He has competitors which have some agreement with existing websites (my competitors) already. I know that he doesn’t have what they have, and I’m a potential asset to him. Should I attempt to discuss my options with his competitors as well?

    I am in the process of consulting with an attorney via email a business partnership agreement template, which I have just pulled off a Google search.

    Even though I am friends with this person, I’m not expecting him to do me any favors. Please help!
  2. Casey

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    Feb 6, 2011
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    Hi enchickpreneur.
    I am no expert, but maybe you should discuss all the issues with your friend. Talk about your confusion or concerns regarding your business idea. After all, this is just business. In the other hand, if you are not happy partnering with him at all, just say it now, until the partnership agreement is not signed.

    Good Luck!
  3. Stality

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    Jun 21, 2011
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    In my experience, it all comes down to "who is putting what and who is doing what".

    Putting as in, what assets is the person bringing to the table: initial funds, very specific knowledge on a useful topic, valuable contacts, etc.

    Doing as in, what tasks is the person responsible for. Not just general areas, but specifics of what each partner is going to do, with what frequency, as what is going to be accomplished by what deadlines.

    In my experience, everything else is immaterial. How much self-entitlement someone may feel, or who had the original idea, simply dont matter when it comes to share the cake.

    Who is doing what and who is bringing what assets into the new venture, that determines each persons cut.

    Two final things: not reaching the mark and the exit strategy.

    Not reaching the mark: if a partner doesnt reach the agreed level of effort / results for X month in a row, what happens?
    (think: his cut goes down by x% for each extra under-performing month, or similar penalty)

    Exist strategy: if it all goes sour, how can a partner dissolve his commitment to the venture? Final entitlements and procedures.
    (your new venture will be the next big thing, but just in case always have an exit strategy. A business may go under, but there is no need to also loose a friendship or valuable contacts or suppliers)

    I hope all that helps,

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  4. Fergal

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    Nov 18, 2007
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    Welcome to Business Advice Forum enchickpreneur, thanks for joining and posting your business questions.

    I'd suggest that your first priority should be to get legal clarification on all issues relating to your visa. Speak to your attorney and ask about the legal implications of you owning the website business and ask him or her if you can do it on your own or if you do in fact need a partner.

    Based on the fact that you say your friend will not be doing you any favours I would feel that yes this is something you should do. Speaking to them would give you a good indication of what you could expect from a partner and you can compare what they are offering and the cut they require in return, with that being offered by your friend.

    In general a business partnership agreement should include terms that cover the following;

    • Ownership of the business - percentage shares etc
    • Decision making - how are decisions made in the business, e.g. by majority vote or other method
    • Duties & responsibilities - who is responsible for what
    • Job titles
    • Profit - how are any profits to be distributed
    • Losses - how will you deal with losses, should there be any
    • Calculation of profit and losses - clarification as to how profits and losses are measured
    • Departure - how to handle a situation where one partner wants to leave the business
    • Salaries and pay, if applicable

    Good luck with it all, please do post back with your thoughts and to tell us how it works out.

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