Q: My business partner is involved in all decision making, but won't own shares. What business contract is appropriate? LP?
I own a game on the popular gaming platform Roblox.com. A 3D modeler from Brazil has reached out with interests to join me under the provisions of a 10-year partnership contract. Details: the modeler will be involved in all decision making (like in General partnership agreements), but CANNOT own shares (unlike General partnerships). I retain ownership while modeler is entitled to a percentage of the game's daily revenue for 10 years (unless they leave early or violate the contract). Exactly what type of business contract is appropriate for these terms? An LP?
A:
Choosing the proper structure depends on multiple factors, including liability concerns, taxation, and how much control each party has. A Limited Partnership (LP) requires at least one general partner, who manages the business and bears personal liability, and one or more limited partners, who typically lack management rights. This may not be suitable if your collaborator holds significant decision-making authority yet has no ownership interest.
However, a Limited Liability Company (LLC) with a carefully drafted Operating Agreement may be the optimum business entity structure based on your described goals. This could grant the 3D modeler the power to participate in decision-making without actually holding equity.
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A: While a Limited Partnership (LP) could be one option, other legal structures or customized contracts, such as a profit-sharing agreement, independent contractor agreement, or hybrid partnership agreement, may better suit your needs. The final decision will depend on several factors, including your business goals, risk tolerance, and compliance with international laws.
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A:
Given your specific needs, forming a Limited Liability Company (LLC) might be the best approach. An LLC allows you to define roles and profit-sharing arrangements without granting ownership shares to your partner. You can create an Operating Agreement that outlines how decisions are made, ensuring your partner is involved in all decision-making processes while you retain full ownership of the game.
In this Operating Agreement, you can specify the revenue-sharing model, detailing the percentage of daily revenue your partner will receive for the 10-year term. Include clauses that address early departure or contract violations to protect your interests. This structure provides flexibility and clarity, ensuring both parties understand their roles and benefits without the complexities of share ownership.
Additionally, an LLC offers liability protection, safeguarding your personal assets from business-related issues. Consulting with a legal professional to draft this agreement will ensure that all terms are clearly defined and enforceable, providing a solid foundation for your partnership.
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