This attorney is licensed in Massachusetts and 3 other states.
Posted about 1 month ago.
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It sounds to me like you may be thinking about going into a partnership with the this new person, and, in that case, you would want to form a limited partnership so as to avoid personal liability. There would need to be a corporate general partner, and you and the new person would be limited partners. The partnership would be governed by a limited partnership agreement, and the corporate general partner would manage the business on a day to day basis, wheras the limited partners would hold the partnership interest and be limited in liability to the extent of their capital contributions only. This structure would address all your concerns as to protection against creative accounting and bad decisions. The limited partnership agreement itself would address performance expectations and allow for the dissolution of the partnership if performance is not as expected. This is a somewhat complicated structure, and would be useful only if the business revenue and the specific issues justified it. Moreover, as there are facts that are not, and cannot be disclosed in the question, you should be seeking professional legal advice on this matter, so that you can fully disclose the relevant facts, and be offered advice that is particularly tailored to your situation. In any event, presumably, the business is now being run in an unincorporated manner, and is, therefore, a sole proprietorship somewhat indistinguishable from your person. You really should have incorporated the business previously. Nevertheless, unless you are in fact entering a partnership with this new person, all you can transfer now are the business assets, which you will do pursuant to an agreement. Usually, this is an asset purchase agreement. In most cases, even if you had formed a corporation, you may have ended up transferring the business interests pursuant to an asset purchase agreement, but those are fact specific determinations that incorporate an analysis of tax considerations, liability consequences, and a need to consider goodwill issues. The tax consequences of the transfer of assets inside or outside of a corporate entity will be widely different, and once again will be fact specific to your particular situation. In the agreement to transfer the business interests/assets, you would insert provisions that would attend to many of the details of the transaction, and address the concerns that you raise in this question, such as protection from accounting positions and/or bad decisions taken by the new owner, as well as receiving the site back in the case of inadequate performance. Feasibly, you could form an entity now, and transfer the site and any other business interests/assets to the new entity, and then transfer the assets by agreement to the the new owner, either as a stock purchase or an asset purchase, but whether or not this make sense from a tax and/or corporate sense can only be determined based upon the facts of your situation, and require you to consult with an attorney, accountant or tax professional. As stated above, if you end up in a partnership the situation is different, and would be governed by a limited partnership agreement.
I hope this is helpful, but you should consult an attorney, and not rely on this response as legal advice. The above is only a general response which may not be pertinent to the specifics of your situation.
