Looking to chat about new business model and insulation from parent company
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  1. #1
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    Default Looking to chat about new business model and insulation from parent company

    Looking to chat via PM or email with someone sharp on business strategy and organization for ideas on insulating a new company from a parent company. I am sure a few here will try to contort this to mean "shady" business and I'm not interested in debating that. I also realize the ultimate end to this is sitting down with out attorney but I want to ensure we have a firm idea of what needs done and all options are considered.

    Really would like to network with someone that has experience, not just ideas or thoughts.

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    Huleo, I'm afraid I'm in that latter category that you are not interested in ... so feel free to disregard!

    But I wonder if it would help if you could give just a little bit more clarity. When you talk about a new company and a parent company - will the new company be 100% owned by the parent company? Spun off from the parent company? Started by former employees of the parent company? Any clarification you can offer would probably be very helpful in starting the conversation.

  3. #3
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    Story here:
    There used to be a steel supply company in Erie, ran well, made money
    (owner died, and it has since closed down)

    The owner "bill" used to be a salesman for an industrial supply house.
    A very good one at that, and he suggested to his boss "Mr. Blank"
    that they should add steel sales to the company.

    Mr Blank could see the market was ripe for steel sales, but did not want to jeopardize
    his main company.

    So "bill" quit and started out on his own, the steel supply company.

    BUT...as a partnership with "Mr. Blank" as a "silent partner".

    Just because Mr. Blank didn't think his company should get into steel sales,
    didn't mean he didn't believe in it, hence his private funding of "bill's" new
    venture.

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    Digger, that is about the gist of it, except "bill" does not exist but Mr. Blank still cannot let the new venture hurt the parent business. I use the word parent, but really, the goal is to make the new business a totally different business.

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    I can share a little bit of my experience. That isn’t worth much! I have two companies. Both are me, both are my equipment, all from the same address and building. For me I needed different companies “front facing” for customers. It was as simple as a phone call to my accountant, and some paperwork for the state.

    On one level, that simple of a solution may work. 99% of my customers never see me or my facilities, so it location/proximity really do not matter.

    On a more complicated level, the company I used to work for every department was its own company. Stamping, tool room, etc. this was for liability and insurance reasons. Must have taken a whole department of lawyers and accountants to keep it all straight.

    If wanting to completely spin off as a separate company I would sit down with my accountant first, then my lawyer.

    If current company assets and people are moving to new company that will have to be sorted.

    In reality though, it is not that complicated. KEEP IT SIMPLE

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    Here things like this are done to minimize state and local authority taxes.........they know it ,and often ignore the separation,and claim its "not arms length" contrived scheme.

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    what does "insulate from a parent company" mean?

    You're going into business and want to protect yourself? Lets assume you mean financially (vs litigation/negligence liability)

    A basic structure is fairly simple.

    1) Set up a holding company. You own shares in, you invest in it.
    2) set up Opco. All shares owned by holdco.
    3) set up Equipco. Owns all equipment.
    4) Holdco loans capital (shareholder loan) to Opco and secures with a GSA
    5) same idea with Equipco
    6) Equipco leases equipment to Opco and secures the leases by registering against equipment

    If you have bank they'll for sure have something to say about this, you can still do it, but they'll get in first place on all three entities

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    It goes back to 'For What Reason?'

    Liability?

    If you have two corporations with the same ownership, as long as you maintain separation with a straight face, it can provide liability protection.

    If one owner owns a corporation that is a greenhouse and a corporation that is a machine shop, as long as they have separate bank accounts, corporate structures phones etc, then if one gets sued it is difficult to get into the other one. So if the machine shop gets sued, they will have a hard time getting assets out of the greenhouse. Now if the greenhouse workers work at the machine shop or the machine shop workers get paid by the greenhouse, buh bye.

    If the owner gets sued it is pretty easy to get into the corporation, or if the corporation gets sued it is pretty easy to get to the owner. Not automatic, but good lawyering[or bad lawyering] gets that done.


    This is why you put your house in a trust and your business in a corporation. Someone trips and falls on your walk they cannot take your machines. One of your products blows up and they cannot take your house. You run the corporation it is your decision making that caused the part to blow up, they take your stuff. But the trust did not make the decisions, so the trust is not responsible, so they cannot take the trusts stuff. Even though it is your stuff.


    Usually

    Mostly

    In theory

    So the point here is that you cannot protect the company from ownership or the ownership from the company[in any absolute fashion] but you can more often protect the corporation from another corporation

    So if you are worried about such things because the owner is sketchy, there is no hope.

    But if you are worried about such things because the company is sketchy, there is a better chance of it being fixable.

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    Quote Originally Posted by gustafson View Post
    This is why you put your house in a trust and your business in a corporation. Someone trips and falls on your walk they cannot take your machines. One of your products blows up and they cannot take your house. You run the corporation it is your decision making that caused the part to blow up, they take your stuff. But the trust did not make the decisions, so the trust is not responsible, so they cannot take the trusts stuff. Even though it is your stuff.
    Its my understanding that if your company gets sued, and they pierce the corporate structure and go after you personally, a revocable trust won't protect your house if you have to file bankruptcy, only protected if its an irrevocable trust. (but I am no lawyer, just my understanding)

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    Quote Originally Posted by Insert View Post
    Its my understanding that if your company gets sued, and they pierce the corporate structure and go after you personally, a revocable trust won't protect your house if you have to file bankruptcy, only protected if its an irrevocable trust. (but I am no lawyer, just my understanding)
    Probably true, just using it as an example, not trying to give accurate legal advice.


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