Domain Development Partnership - Legal Contract

[asg11us]

I have a valuable two word domain name that I've held for about 10 years. The name has been appraised in the low six figure range.

My friend and I are interested in developing the domain name. I have developed an excellent strategy for developing/marketing the name. He brings into play a good deal of business development experience and contacts.

We're interested in doing a 50/50 partnership and he's suggested we form an equal partnership. However, I'm concerned about a number of legal issues including:

- How will I be able to realize the value of the domain name that I've held for about 10 years? He's suggested the partnership would grant me a loan for the fair market value of the name, but how will/should this loan be paid to me?
- Should I fight for control of the venture since the name belongs to me and I thought of the main strategy we're going to use for the site?
- What happens if we form a 50/50 partnership with equal voting rights but have a major disagreement on something? What happens then? Will I ever be able to regain control of the domain?
- Should my friend decide he's no longer interested in taking part in this venture, do I have a way out so that I can regain control of the domain and continue to develop it?

Ideally I'm looking for a good legal contract/template that would address some of these major issues. I wonder if it would pay to hire a lawyer for advice in this area.

I'd appreciate any advice you may have.

Thanks!


Andy

 

[Domagon]

You own the asset ... seems to me you should keep it that way.

Unless[/u] your friend truly has something vital to bring to the table, such as lots of hard cash to fund the venture.

You speak of your friend having "business development experience and contacts" ... what does that really mean? ... a rhetorical question to ponder before going any further.

Assuming you choose to proceed with a partnership, typically the way to do go about it is forming a corporation that owns the asset with each of you owning a percentage of the stock (ie. 50/50; 70/30; etc)...

Simply forming a corporation with stock, etc can be done relatively easily yourself ...

However, in this instance (as is true in many partnerships), you also want to protect your business in the event he departs - that, in my view, is where professional assistance from an experienced business attorney is essential.

Ron

p.s. I've seen similar domain owner / developer partnerships go bad, but have also seen some go well - key is that your friend is truly bringing something valauble to the table that you can't and/or don't want to do yourself.

 

[flamewalker]

IMO, I wouldn't give up an equal share since you own the domain...If you go 50/50, there is a chance you will run into some of the things you are afraid of.

IMO you would want to have a 'backout' stipulation that either of you can amicably back out by doing 'xyz' - ie paying the other partner $xxx amount (can be a portion of the estimated value of the site/domain, or a % of revenue at the time... etc). On the flip side, say he wants to buy your portion but you don't want to sell...

Honestly there is a lot of ground that would need to be covered in any contract of this nature, and IMO would be worth hiring a lawyer to write up so that it is fair to both parties.

 

[steveatvillas]

Andy:

I'd have to agree with the above. If you're not experienced in contracts for Partnerships and/or Joint Ventures you really should seek legal advice, preferably one who specializes in Intellectual Property. Your domain can be interpreted to be in more than one asset class, and you want to be careful how it's structured.

You also want to be wary of tax implications when you throw the domain into the pot. Will you capitalize it at par value (what you paid for it) or at some mutually agreed value? Do you have to consider Capital Gains (you bought the name for 7 bucks, and you're valuing it for xxx,xxx) going into the deal? Does your contribution equal that of your partner? It goes on and on.

As unspeakable as it seems, you also need to contemplate the dissolution of the partnership in the contract, exit strategies, buyouts, etc. Believe me, partnerships with friends can be beautiful as long as they work, and devastating if they don't. Have it all worked out ahead of time, if possible.

Good luck, go slowly and deliberately and get a good lawman.

Steve

 

[asg11us]

Ron, Flamewalker and Steve: Thanks for the help! It's much appreciated.

Does anyone know of any good lawyers experienced in intellectual property/contracts in the Southern California area?

Thanks!


Andy

 

[steveatvillas]

Hey Andy:

No sweat, always glad to help.

If you know absolutely no one in the field, go to Martindale-Hubble...NOT the Yellow Pages. This organization and service is to Lawyers what the PDR is to Doctors. It's a nationwide directory of lawyers, law firms complete with their specialties etc. I would never think of using any lawyer who isn't listed therein. Here's the link:

http://martindale.com

They have a "Find a lawyer" tool that is easy to use.

Then cross reference your candidates with the California State Bar to make sure your lawman hasn't had his/her fingers slapped for infractions. Here:

http://calbar.org

I'm from California, but all my contacts are in the Bay Area/Silicon Valley. With all the high tech industry, not too mention UCSD, in San Diego, there will be plenty of lawyers abounding.

Also, give my good buddy Steve Lieberman a shout. He's top in class, but his practice is in D.C.. Surely he'll know someone in SD. I'll PM his contact details.

Good luck, spend the money for good counsel.

Steve

Oh, yeah, I left out the most important element. Despite what we all think, lawyers are people too. Choose someone with whom you get along, and have a good rapport. If this is your first time in this situation (IP is not like getting out of a DUI!) you definitely want to have a comfort level.

 

[Nodnarb]

Why not try developing it yourself? That would be far cheaper, even if you make mistakes, than giving 50% to someone else who didn't have your vision 10 years ago?