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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

Posted

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.

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Posted

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.

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Asker

Posted

Thanks. What is a contractual joint venture? We don't have time to get one as the job is being done this weekend but might be able to get one for future jobs involving both of them.

Richard W Beck

Richard W Beck

Posted

you can do it by then--just sit down and write down what each party is to do and how the money will be divided. In the long run, if you do these a lot, get a joint venture agreement drafter by your attorney to reuse (or if you do it enough, consider an actual llc/partnership/or something).

Asker

Posted

OK - so we don't need any type of fancy joint venture agreement document (yet) - just a written agreement stating what each party will do and how the money will be divided, sounds simple enough for now. We don't want to put a separate name on it or anything - just make sure each party agrees on their fair share and gets their accounting done properly. Thanks.

Richard W Beck

Richard W Beck

Posted

given the time frame, a detailed writing is better than nothing and b/c of the way things will be paid your books need to reflect the reality of the split (so as not to show one party with a higher income--even with the corresponding expense as it could affect certain numbers related to obscure (but important) balance sheet/p&l numbers. Make sure to get a good agreement if this is to be a common thing

Posted

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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Asker

Posted

Ah, that is something I'd also thought of. Sounds even simpler. Thanks.

Asker

Posted

P.S. the friend's LLC is providing the equipment & doing the bulk of the work, so I was thinking he would subcontract my husband but either way that should work.

Kenneth Allyn Sprang

Kenneth Allyn Sprang

Posted

I agree. Just try to be as specific as possible. One hopes that with friends there will be no disputes, but sometimes things in business go awry. An agreement that clearly states what both parties intend is in everyone's best interest.

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