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Branching out with a parnter: side agreement or new entity?

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sabr


Arresto Menor
We have a sole proprietorship and we currently have 5 branches already. We are now putting up another branch (bigger and requires a lot more Capex) and we are looking at accommodating a potential partner to invest. Business is food related, with a commissary that supplies the branches.

Points we are considering:

1. We have invested in the brand name already and current brand has a good following. The potential partner is willing (or prefers) to use the same brand.

2. We are willing to partner but only for this particular branch. Branches built before this will be under the sole proprietorship.

3. Branch is already under construction and has obtained the necessary permits and documents under the sole proprietorship.

4. We are really keen on bringing in the partner because their funds will enable us to construct a better, more marketable branch.

Do we create a Partnership? What are the complexities of partnering only for a particular branch?

Would a side agreement be enough and keep the sole proprietorship?

Thanks!

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tsi ming choi


Reclusion Perpetua
sabr wrote:
Do we create a Partnership?

Yes. definitely. It is your intent that would suffice, regardless whether express or implied or registered or unregistered, still there is partnership.

sabr wrote:
What are the complexities of partnering only for a particular branch?

Conflict of interest on a NON-PARTNERED/no partnership branch. Conflict of interest would arise because of same:

1. Business name, your partner may treat your other branch as a competitor.

2. Nature of Business.

3. Business liablities/assumption of risk.

4. Public knowledge.

sabr wrote:
Would a side agreement be enough and keep the sole proprietorship?

If we based it on books and laws, that cannot be done. There are only 3 types of businesses in the Philippines:

1. Sole proprietorship
2. Partnership
3. Corporation.

They have different characteristics and implications that cannot be commingle with one another.

Lastly, there is no such thing as Half-sole proprietorship, Half-partnerhip kind of business here.

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