Q: What contract should I use for a group of individuals and LLC's together, investing in a 1 time Joint Venture project?
We have a 1 time high risk project in Oregon with multiple individuals investing. Should we I use a "contractual joint venture agreement" or a "partnership agreement" or something else? Their are 8 individual people, 2 LLC's & a "Family Trust". Of which, 7 of the individuals are contributing various amounts of funds but all parties will benefit different amounts of profits at the end of the 10-13 month project. Preferably, all participants will be responsible for their own capital gains or income taxes. Only the members of the LLC's will be physically participating in the project. Each LLC has 2 members. Both members in each LLC are included in the 8 individual people count.
What would be the best legal and/or simplest contract to protect all parties with both profits and loss possibilities?
A:
You absolutely need to involve an attorney in this process and get a custom contract together. There is no off-the-shelf solution to this kind of arrangement. The greater the risk and the more complicated the arrangement, the more you will need a custom solution for your legal infrastructure. Something else you need to consider is that raising money for a venture is full of pitfalls and potential gotchas.
The way to move forward is to create a business entity that makes sense for the venture and to create a well-defined operating agreement (a contract, essentially) that defines everyone's rights and duties.
Bruce Alexander Minnick agrees with this answer
A:
This is a very complicated plan. Hiring a very experienced business lawyer who could chart a safe path through all the factual minefields would probably cost the "group of individuals" at least $55,000, with no guarantees of success for the plan itself. If the "group of individuals" also hires the same (or any other) experienced business lawyer to come on board and stay on guard to protect the group during this initial "high risk" project--as the group's "salaried" corporate counsel--the annual fee would probably exceed $350,000.
Turning to your initial complex question: IMPO, the group should invest about $2,500 in legal fees to attract competent representation--on a single piecemeal basis-- to study all the issues and write an opinion letter informing the group as to which of several alternatives might best serve the group's goal.
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