Legal Question in Business Law in New York

Joint Venture/Starting a new Corporation with another company

Thanks in advance for your advice. Recently I contacted a company about having an alliance. They agree it will be beneficial and so far we just discussed me basically reselling their product. Eventually we want to take it further with me possibly acquring them or merging once I grow a little more. However I just had an idea.

Would it be a good idea to start a new corporation with them owning 50% and me owning 50% with the company selling only their products? They are in a business in which products are only made once ordered and I should be able to cover half the cost of the equipment as well as provide other services to the corporation that normally would cost a lot. Would this work or do you not recommend it?


Asked on 1/19/05, 8:44 am

3 Answers from Attorneys
William Frenkel Frenkel Sukhman LLP

Re: Joint Venture/Starting a new Corporation with another company

Just like any other business venture, your proposed jv with a supplier/manufacturer is subject to the usual business risks. Some of them may be addressed in a shareholders' agreement but other risks cannot be completely eliminated. Generally, from the legal and management perspective, running such joint venture companies is considerably more expensive than acting as a sales representative, agent or distributor. On the other hand, if you get special rights and privileges (exclusivity in certain markets, for example) or capital infusion from the supplier in exchange for entering into this jv relationship, it might be worthwhile. Shareholders agreements in this context can be particularly tricky on the questions of management control and exit options, so legal representation is highly recommended.

This reply is in the nature of general information, is not legal advice and should not be relied on as such.

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Answered on 1/19/05, 9:39 am
richard feldman richard d. feldman

Re: Joint Venture/Starting a new Corporation with another company

By the way that you describe the potential future of this venture it would be wise to formalize it now to avoid and prevent other suitors in the future. you can call me for a free telephone consultation at 516 466 5297

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Answered on 1/19/05, 10:00 am
Gary Adelman Adelman Matz, P.C.

Re: Joint Venture/Starting a new Corporation with another company

I would not jump into a JV with anyone until you know them a while and have worked with them. There may be pitfalls and other unknowns that once you are tied to them it may be difficult to unravel.

You might try entering into an exclusive sales agreement with an option to form a JV if certain criteria/sales goals etc are met.

also, once you start selling the product, if you are successful, you may be in a better position to negotiate terms, if it is not successful, you can bail without having put in alot of time effort and money ramping up a new Company.

Either way, we can help you and advise throughout the whole process.

Feel free to check out our web-site and call or email with any questions you may have. The first consultation is always free.

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Answered on 1/19/05, 5:19 pm


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