Ask an outside consultant

  • Updated: June 1, 2008 - 9:57 PM

Q I am planning to structure a relocation company as a professional service with partners who, along with me, work directly with transferring employees and our corporate clients. At some point, I want to share ownership of my company with my partners. How can this be structured to be mutually beneficial to all parties, and what potential problems should I be aware of?

STEVE VNOUCEK, INSIGHT RELOCATION SOLUTIONS

A Relocation of employees has become more prevalent as companies use international assignments for training and developing managers.

As with any new business venture, organizing a relocation services business presents a host of management, legal and tax considerations. Competent legal and tax advice is essential.

Initially, you need to consider whether the affiliates working with your clients will be owners of the firm or simply employees. It is often preferable to build a business before sharing ownership.

If you decide to share ownership, the law provides a range of possible structures suited for your business.

Keep in mind that a partnership should be viewed as a "financial marriage," with the selection of partners based on trust and business compatibility. Partnerships sometimes fail not because the business is unprofitable but as a result of disagreements among the partners.

Minnesota entrepreneurs often choose to form their business as a limited liability company (LLC) or limited liability partnership (LLP).

Many professional firms opt for an LLP, a traditional partnership that registers with the state and that provides partners with limited liability for its debts.

The LLC is a noncorporate entity with limited liability for owners (called "members"). Management is shared and profits are split among members as detailed in an operating agreement.

Regardless of legal form, you need to consider the following:

• Ownership and management -- what are the rules for making decisions?

• Profits and compensation -- how are they determined and divided?

• Capital contributions -- what will partners contribute now and in the future?

• Dissociation -- what happens if one person wants to leave or is expelled or dies, and what are the rules for buying out such a partner?

MICHAEL GARRISON, PROFESSOR OF ETHICS AND BUSINESS LAW, UNIVERSITY OF ST. THOMAS OPUS COLLEGE OF BUSINESS

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