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Two LLC's working together

Tacoma, WA |

My husband and I have an LLC that mainly does video production. We have a friend who also has an LLC in the same line of work. My husband will be working on a video project with his friend - hubby will shoot the video and our friend will edit it. The plan is for the client to pay one of them and then they will figure out how to split the proceeds. What would be the best way to do this, without going into an elaborate partnership agreement?

Attorney Answers 3


  1. You could do this through a contractual joint venture. Do yourself a favor and get an attorney (the fee can be split between the two LLCs) to draft a good agreement. It is money well-spent as the agreement may not be complex as an operating agreement, you do have intellectual property and other issues that require complete understanding.

    This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.


  2. contractual joint venture (just make sure each parties responsibilities are clear and unequivocal and there is an easy, self-help remedy if one fails and the other has to do the work)--nothing special required just keep good records so your respective accountants can treat the income correctly.

    Legal Disclaimer: Richard W. Beck is licensed to practice law in Colorado. His answers are for general information and no Answer or Comment shall be deemed to create an attorney-client relationship or create any right of confidentiality. The reader should never assume that this information applies to his or her specific situation or constitutes legal advice. Therefore, please consult an appropriate attorney in your jurisdiction and who is familiar with your specific facts and all of the circumstances as there is likely a time limit related to the question that could expire at any time and you would lose any rights you had.IRS CIRCULAR 230 DISCLOSURE: As required by U.S. Treasury Regulations governing tax practice, you are hereby advised that written advice contained herein (if any) was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.


  3. I believe the simplest model would be (1) the client enters into an agreement with on LLC; (2) the first LLC subcontracts for services of the second LLC. I would suggest that your LLC have the contract with the client since absent good shooting the video is worthless. Create a simple subcontract between the two LLC's in which the friend agrees to edit, but the friend's client is your LLC. You really are best served by determining compensation, at least minimum compensation in advance. For example, if you quote the client $5,000 you could agree to pay the other LLC $2,000, or whatever a fair number is. You could include a proviso that if there are undue complications or other factors that the two parties can review the compensation. You should definitely, however, not leave it open ended. That could be a disaster waiting to happen, even if your husband and the other fellow are good friends.

    Ken

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