Question

Topic: Strategy

Alternatives To Formal Business Formation

Posted by Anonymous on 3/20/2008 at 8:50 AM ET 125 Points
I currently work as a sole proprietor, but am part owner of a trade name from a previous limited partnership venture. Former partners are interested in resurrecting the name to do project work. I would prefer not to go through the effort/expense of re-establishing an LLC or corporation, particularly since this would be primarily a part-time effort on their part. Is there a way to form a "cooperative," in which we can use the name jointly and separately (e.g., individuals DBA the name)? Alternatively, any advice on how to structure an agreement to license use of the name is appreciated.
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RESPONSES

  • Posted by Inbox_Interactive on 3/20/2008 at 9:32 AM Accepted
    You can form a general partnership. This is perhaps the only legal entity that involves more than one person yet requires no formal filings. (Disclaimer: I am not a lawyer.)

    A general partnership can exist merely by the partners saying, "It is so."

    You may need to file a DBA to use the business name, and you will probably want something on paper to show how the partnership will operate, but that's about it.

    The negative of the general partnership is that any one partner can bind the partnership, and the liabilities of the partnership extend fully to each individual partner. It's much like a group of sole proprietors in this respect.

    Forming a corporation does not have to be expensive or time-consuming. When you consider all factors, I do not think a general partnership is a viable option.
  • Posted on 3/20/2008 at 9:48 AM Author
    Thank you, Inbox_Interactive

    I agree with your analysis about the general partnership. There are definitely liability issues involved with that.

    This is very helpful.
  • Posted by CarolBlaha on 3/20/2008 at 10:32 AM Accepted
    You have to file doing business under a fictious name. Its really not very expensive to set up a LLC. But its a myth that setting up any structure will prevent you from being personally sued. Do something stupid enough and they will come after you personally.
  • Posted on 3/20/2008 at 10:41 AM Author
    Thank you, CarolBlaha

    Can you clarify the point about doing business under a fictitious name?

    I've always had other liability protections in place, including prof liability insurance.

  • Posted by Peter (henna gaijin) on 3/20/2008 at 1:18 PM Accepted
    There isn't a specific business form that sounds like it does everything you are after.

    The "in which we can use the name jointly and separately (e.g., individuals DBA the name)" raises flags also. If do some sort of partnership or corporation, you really aren't doing business separately. It would probably be advisable to have some pretty strong wording on what business each of you does that that person only benefits from.

    A DBA sets a name that a single entity (whether a person or a business) can use. You would have to tie that name in to a partnership or a corporation (which you are all part of) in order for all members to be able to use that name.

    The only alternate that would allow you both to use the names separately that I can think of would be to register as DBAs very slightly different version of the name.
  • Posted on 3/21/2008 at 4:02 AM Accepted
    In India, where I live, we have an entity defined as an "Association of Persons" which could serve your purpose.

    Else you could all operate as individuals with a message on your letterhead saying you are members of the XYZ Group thus bringing in a common name and yet clarifying your identity.

    Sure hope this helps.
  • Posted on 3/21/2008 at 9:39 AM Author
    Thank you, NuCoPro, Peter and Rajiv,

    These answers have been a tremendous help in clarifying my thinking.

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