Wanting to do a deal or project for profit with help from friends. Need business advice.
For example: I want to collaborate with two other people who have different skills than mine to produce a product. We all will work for free but if the product is a success we will split the profits based on each persons input.
I want to put it all in writing before we start. I get 50% and the two others have agreed on 25% each. This is a one-time project. How do I handle the "business" of this deal. Do I create a partnership? Do I need a business created?
I like the ideal of people working for "shares" in the deal, but do I need to create an incorporated business?
My general advice is to lock down a project plan, contingency plans, and a contract before you start. That way, if the business fails, you can keep the friendship.
Division of proceeds is totally separate from percentage of ownership. Your percentages are fine for a division of proceeds, but would be a disastrous ownership arrangement - there would be no good way out for anyone if things did not work out. Options of creating a partnership or a business depend on location, type of business, and duration of the venture.
Beyond that, you are requesting a business consulting service, not a quick, free answer. I don't mean this as a solicitation, but, since you asked, this type of work is a core service of my business consulting, and I'd be happy to discuss it with you if you contact me via email (not fan mail) offline through the email link under fanmail under my profile.
If this is a virtual collaboration project and your partners are located in other countries, then putting up a partnership in your base country will be more complicated than normal. If you have extra cash, then hiring a lawyer to finalize the details could make good business sense.
Splitting the income is another thing. For taxation purposes, you will need to create the business so you will not have any problems with the IRS (if you're in the US) later on when you split the profits.
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