Legal Question in Technology Law in Virginia

Re: Business Partnership on the internet?

Delighted to see the Internet breaking down national frontiers and encouraging such collaborative efforts. Unfortunately, the complexities on the tax side are going to create problems for you that quite dwarf the partnership agreement issue.

As correctly observed in another reply, you already have a partnership. Thus, the Canadian participant is engaged (for US income tax purposes) in a "US trade or business." You need to consult a competent accountant who is familiar with the provisions of the US-Canada income tax treaty to sort out the appropriate filings for the partnership and the Canadian partner.

Next, rather than doing a simple partnership (where both partners have unlimited personal liability for the obligations of the partnership), I would recommend forming a Limited Liability Company, which would continue to be taxed as a partnership but would protect the members from personal liability. The cost of doing this is not much greater than drafting a full-blown partnership agreement.

Re: Business Partnership on the internet?

Arguably, you already have a partnership based on your oral agreement to work together for mutual profit. To the extent that you worked out issues by email, you may even have a written contract.

Still, this type of arrangement is not as good as what an attorney can put together for you. You might spend $500 on a written agreement. If you are lucky, you will never need it. But if, as is most likely, you decide to go separate ways, it would be better to have a written understanding about how the relationship will end.

I would say that paying an attorney to formalize your relationship is worth the money, even though you are only making $200/month right now.