> Alain: We cannot collectively do anything commercial,
>but partners can form commercial ventures on their
>own. That's is what you are suggesting, right?
Eric: Yes
Forking/Splitting/Spin Offs
I used these terms to indicate the development of businesses, later, using
different forms of organization, based upon whatever openKard develops or
does.
There are essentially three business activites we are looking at
Writing Software
Writing guides to software
Other end user support
The partnership agreement I suggest would allow all three activities to be
undertaken, but would require a different entity to do so.
My first draft would notinclude anything that makes founding other
partnerships that sell copies of OC impossible.
Alain: How about my suggestion that resale by our
group could help finance our activities?
Resale of what? Software? Support? The business entity in its entirety? (yes
there are ways to sell a partnership or part of a partnership)
I really would recommend using two different 'vehicles' - one with no business
purpose to develop the ware and get things rolling, and then later another
which can do whatever you want.
Alain: Why a partnership in the first place? Who are
the signatories at this time? Partnerships are only
necessary when money is involved, aren't they? I have
always been told that partnerships are the most risky
type of business association to enter into to. Why not
incorporation instead? (e.g. very limited liability)
Eric:
Why a partnership:
1) 'coz ya can't screw yer partner - you owe each other a duty of loyalty.
2) 'coz the law _can imply a partnership - and in law you are always better to
have things in writing and express rather than implied
3) so that metaCard can enter into a contract with us for use of their engine
4) money (business purpose) is not the only reason for entering into a
partnership, i.e. charitable partnerships exist.
5) the risk of liability - in _any business venture is:
a) torts: (literally 'wrongs') your partner or your employee driving a truck
in the service of your business manages to turn granny into a pancake along
with three nuns and two boyscouts...and now you have no home.
b) contracts: your partner decides that investing in land in florida is a
really good business opportunity - so good that he acts without your knowledge
and offers the business as collateral for the loan, plus he sinks
(literally...) all the business capital into what turns out to be a lousy
investment.
Fortunately these types of liability can be limited and are limited to Acts
Pursued In The Scope Of The Business.
So we limit the business scope. As long as any reasonable inquiry (i.e. the
facts must be reasonably available - i.e. we must put 'notice' of the facts)
reveals that in fact _all we're doing is writing a soft, no one can touch us
because the contract or accident would not have been in pursuit of the
business.
Why partnerships are risky:
Because your partner cannot screw you but can be, well, wrong. With your
money. Oh well, you picked him.
Because you are personally liable - i.e. you can be sued for your personal
posessions and are not limited in liability to the partnership and its
property.
Why corporations can limit liability:
In a corporation, the corporation is only liable to the extent of the property
held by the corporation (though the individuals still could be sued in fact if
they were personally negligent - so it would only protect you from a stupid
associate and not your own misjudgment).
So, why not use a corporation?
Expense - they cost around 300$ filing fee and about $1000 for lawyers fee.
Sure you can write it up and file it yourself. Good luck. The book you need is
called a form book. You will find a copy of it in the courthouse law library.
Where a suit. Pretend to be a law clerk (aka paralegal). Ask the librarian
_nicely : he / she / it _might help you. Use the form book for the state you
are in (probably the state of confusion). Find the relevant form, verify the
relevant form, fill in the relevant form, and pay the incorporation fee.
When I say 'fill in' you would have to photocopy, type, print, sign, and
notarize.
It is not impossible for a lay person (non lawyer) to set up their own
corporation. After all, all lawyers start out as lay persons. But it is _not
easy.
As you can see, drafting a corporation is a hassle. Especially once you
consider things like, later sale, ownership, control, change of direction
annual meeting, minutes, stock certificates. When I say $1000 I mean
_minimum.
I am unable to go to the nearby courthouse as I am far from the madding crowd.
SO, that is why i think a corporation, for practical purposes is definitely
not the way to go. It is less expensive, less hassle, and actually a greater
amount of protection as to your partners (corporate members owe each other no
duty of loyalty). I think that by limiting the business purpose to creating
the soft we limit any potential liability because we can say
1) to third party - hey, we told you all along this was not for profit, so why
you think we want to buy/sell you _anything?!?
2) to grandma's still living relatives: Look, joe's taxi business has
absolutely _nothing to do with his hobby as software developer, which after
all is a hobby i.e. has not one penny and is not involved
3) What partnership property could a potential litigant sieze? Nothing cause
there is non, and what there is will be open source (public domain) [depending
on the license we _later elaborate]
To a layperson the quick answer is: corporations offer better protection for a
business operation. This answer is especially nice if I want to justify your
payment of $5000. If you simply do not have the cash I then suggest a Limited
Liability Partnership for _at _least $1000 (really should not cost more than
$2500, plus filing fee for DBA). And, if you -still can't pay me, i recommend
a partnership, and again, at _least $500, depending on the complexity of the
agreement.
The long answer is above. Show it to a lawyer friend, take it to your law
school, verify what I say. Given your goals (creating an open source ware) and
your monetary resources (sorry, i assume zilch) i must recommend a partnership
with a very limited objective.
Ok, so how do we make money? Well, later as sole proprietors or in
partnerships or in corporations you and your associates establish a second
business entity. Such an entity could do, well, whatever you want. But that is
later down the road.
Uli: The liability is prevented by 'nipping' any
commercial object in the bud.
Alain: Is the following a tautology ?
****** no commercial interest = no liability ******
the correct syllogism is
Major premise: A partnership is liable for the acts undertaken pursuant to the
partnership agreement
Minor premise: This partnership agreement does not forsee any profit making
activity
Conclusion: you cannot impute liability to the partnership because the
activity which you are suing us for was not undertaken in pursuit of the
partnerships objectives.
Alain: How will we finance ourselves? Even non-profit
organizations need some kind of revenue to maintain
their activities (cost-recovery).
We would finance ourselves by volunteering at first, and later setting up a
for profit enterprise - if people desire/are cool with that.
hope this helps clarify the legal aspects - please ask further questions if
you wish!
cordially
eric engle
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