How do I deal with out-of-state and overseas partners?

by Geraldine Zaroukian, Managing Director of Zarig.com

QUESTION:

1.  Should I do a partnership or LLC with my partner in Florida and give shares to my partner in Portugal?  Or can I give them both ownership in the company?

2.  Do I need to have a Florida State Business License along with a Kansas License too — especially if my Florida partner picks up some business?

ANSWER:

1.  With an LLC, all three of you can be founders.  Once you create the LLC, make sure that it is treated as a partnership for tax purposes (if that’s what you want) instead of a C corp.  An LLC is good for liability purposes.  It is a “new hybrid” that combines the liability advantages of a corporation and the tax advantages of an partnership.

2.  You mentioned that your Florida partner may pick up some business in Florida.  Does he work from home?  Do you have an office there?  What exactly does he do there?  The answer will help you determine whether you need a license there.  If he occasionally works as business development from his home, then there is no need for a license.  If you actually have an office there, then you need to register in the state of Florida.

Good luck.

Comments & Advice:
  1. Ethan Stone Ethan Stone says:

    Bear in mind that issuing equity in either an LLC or a corporation raises U.S. (federal and state) securities law issues. You might take a look at my answer to this question (http://www.foundersspace.com/company-formation/are-there-any-laws-i-need-to-follow-when-issuing-stock-to-founders-in-different-states/) for the domestic founder. I don't know anything about Portuguese or EU securities laws, but you should make sure you do before you start issuing equity to someone over there. You should almost certainly not form a general partnership. Whether you should form an LLC, a corporation or, perhaps, a limited partnership, and what tax status you should elect depends on lots of factors. There is not enough information in your question to start discussing that, but you might look at the answer and my comment on this question for some preliminary information (http://www.foundersspace.com/company-formation/i-heard-that-an-llc-can-be-treated-as-an-s-corporation-but-what-does-that-really-mean/). Again, bear in mind that if one of your co-founders is in Portugal, you need to think about Portuguese and EU tax law and the corresponding U.S. tax treaties.

    The takeaway is that you should not proceed blindly. You need a lawyer who is well-grounded in U.S., EU and Portuguese law to advise you (if your Portuguese co-founder has a Portuguese lawyer, make sure s/he understands U.S. law). That's not me, but if you're unsure how to find someone, get in touch and I'll steer you to someone who can help.

  2. Naomi Kokubo says:

    Yes, you definitely need a good lawyer when dealing with how to set up a company with an overseas partner.

    As for the question, should you form a partnership or LLC? The answer is simple. In your case, an LLC is preferable since it gives you liability protection. This is critical when dealing with partners. If they run up a debt or make obligations on behalf of the company, you will be personally liable, unless you have the protection of an LLC or similar entity.

    As for someone in Portugal, the same applies in regards to liability protection. That said, I’m not a lawyer and don’t know the intricacies of international law, so I’ll leave it up to another adviser to answer that part of your question.

    Naomi

  3. Allison says:

    Hi, I am looking into creating a partnership with my boss whom is in Singapore. He already sells a thru Amazon and wants to extend to other distribution channels, most of which require a Federal Tax Id and Company name. We would like to proceed with this but I am not so sure how we go on from this point. I work from home in Louisiana and as I mentioned before he is in Singapore. Besides an partnership agreement what else do I need? For us will it be best for an LLC or partnership? I know I have to report taxes out of my profit share, how is it in his case? Thanks for all you help.

  4. AJIT DAS says:

    Hi

    We are a software development firm based in north east India. We are looking for opportunities outside India
    by partnering with firms/individuals. We develop customized applications specially for small business and governments.Importantly currently we are working on products like Paper less office, document digitization, file flow management.
    So I’d like to know whether you see any potential market for products or can create one.

    Feel free contact us on this.

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