There are several other conditions including authority to bind partnership into contracts remains with him, equal distribution of profits/losses as per ownership interest (accounting done by his firm), etc.
(to be continued in comment)
Before you discuss partnerships with anyone, how much do you really know about this person ? What makes him an experienced US Sales executive ? Do they actually have a track record ? Has he sold anything similar before in similar domain ? Does he have any contacts who could be prospects already ? I would first worry about all of this and make sure you are not talking to someone who is just talking big or thinks he can sell the product.
If you want to sell in the US, setup your own subsidiary in the US and at best, make him a Director there without majority ownership AND pay him handsomely for deals won. Forget 51%. I wouldn't even give him 5% without track record and history. You can work out an equity deal with vesting with a 1 year cliff. Talk to a lawyer if you are serious.
No. Run away.
Even if everything else he says is true, the USA is just one market. Don't give away everything you have, for zero money, just so one guy has a chance to see if he can make it work in one market. One crowded, pre-existing market, where there is no guarantee of success.
WWWHHHAATT???!!!
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Some parts of an old comment I made:
Did you verify that the previous business are real? Are the previous partners happy? Are the previous partners real?
Imagine the happy path: He is very good, and in 10 years your business is huge and everyone is happy.
Imagine the unhappy path: He is a scammer or a moron, or he has an incompatible vision of the future of the business or whatever. Can you fire him in 3 months? 6 months? Can he fire you? Does he get a fair compensation? Does he get most of your business?
Be sure to understand both scenarios, and perhaps a few intermediate versions.
As a warning, take a look at "A $5000 chair" http://battlehardened.wordpress.com/2012/02/07/a-5000-chair/ HN discussion https://news.ycombinator.com/item?id=3564569 (217 points | Feb 8, 2012 | 60 comments)
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More parts of an old comment I made, but in your case I'd just run away:
Make YOUR lawyer review all the paperwork, and get everything in written.
Repeat after me at least three times: "4 years vesting with 1 year cliff"
I would not sign it.
I've sold software to medium-sized US corporates without being a US-based company. It was not a problem -- the only thing they cared about was making sure the dispute clauses used US law and a US jurisdiction.
As per my reading of these two acts, I understand that only the structure (51% ownership) isn't going to satisfy the requirements of these acts, as they require manufacturing (BA) or substantial transformation (TA) to have been done in USA. He says that we'll get 49% of the revenue and R&D/technical support will remain with us. but based on my reading of these provision, if we retain the development of the product, it won't pass BA/TA. We suspect that for such contracts, he can end up removing us from those activities consequently paying very little (if at all) percentage of the revenue from government contracts and we'll not be able to object it because of limited rights. "No Partner may do any act that would make it impossible to carry on the ordinary business of the Partnership." is one of such conditions in the agreement that can easily invoke expulsion of a partner in such a case IMO.
Please share your expert thoughts. Is our understanding of BA/TA correct? Are there ways for us to remain independent, and we retain the rights of the product and he can still sell to government/Fortune1000 (though for latter I don't think it should be an issue)? (We’ve even proposed to have a separate contract for government agencies).
Fuck that shit, and I'm really, really, drunk right now. I stopped reading at that point. Pass. Good night.