Questions about a Partnership Opportunity....

[Tyler]

Hi all –

I have an opportunity to partner with someone on an established internet property (mostly passive income with good revenue history). The partner in this case is the broker who was listing it….he put in an offer to the owner and they accepted. He is now looking for a partner. I am interested in this opportunity, but I do not know this person and he is some distance away from me (both of us are in the US).

If we were to proceed, this would go through an escrow service so I wouldn’t be writing a check to him directly. And, of course, we would have a partnership agreement in place that is approved by my attorney. Beyond that, though, I am not clear on how I would ensure, for example, how the corporate bank account could be set up so that one person wouldn’t have complete control over the funds, etc. Overall, I am just not clear on how you set up a partnership that has checks and balances in place to make sure people “play fair”.

Any insight or suggestions you could provide would be appreciated. Thanks.

[Paul]

Not easy especially at a distance and with someone you don't know. BUT FIRST THINGS FIRST! DO NOT EVER EVER EVER LET THE OTHER PARTY HAVE ACCESS TO THE BANK ACCOUNT! Also, DO NOT be a minority partner under any circumstances with someone you don't know. ALSO---verify yourself the legitimacy of the business being purchased....bank statements, tax returns, the whole bit, check trademarks, the BBB...full due diligence.Check out the broker and the current owner(s) if you can.

I don't mean to be negative in any way but it sounds like it just might not be all it seems. But, of course I don't know anything about it, including how much money is involved, other than what you shared. Might be a great opportunity. The broker/partner combo thing just seems a bit odd to me.

[Tyler]

Thanks Paul. As for the broker, he deals exclusively in internet properties and owns several himself. He saw an opportunity when the owner of the site contacted him to list it. He put in an offer and tied it up. (This is what he's told me).

As for the banking, I was speaking to him just a bit ago and he brought this part up without any prodding from me. He said he would want a CPA/accounting firm to hold control over the account. Revenue comes in each month, they pay the bills out of that and then disperse the remaining funds into our separate accounts respectively. Essentially they would hold power of attorney. That *sounded* reasonable to me, so I have an email in to my CPA about it to see if that sounds legit/practical/etc.

As for the legitimacy of the business, I am doing everything I can now on that, but this is a website. It's registered through a company in Seattle but it's based in Panama (this is not uncommon). The broker is going through the due diligence now with the seller and it is clear he is talking to the person in charge of the website as I am seeing changes to it that he told me they are working on.

I have also spoken to a private investigator in the city the broker lives and intend to do a full criminal and civil background check on him if it looks like this is going to move forward.

So I am trying to cover all of the basis here, but it's unfamiliar territory so I am fumbling my way around a bit. Thanks again for the feedback.

[huggytree]

you want to start a partnership with someone you dont know....hmmmmmm

cant see 1 reason to do it

[Tyler]

I don't see how this is all that different from an investor. Many times they don't have a prior relationship.

[Paul]

So I am trying to cover all of the basis here, but it's unfamiliar territory so I am fumbling my way around a bit. Thanks again for the feedback.

Sorry to be cynical but I’ve seen every scheme, scam, trick and con in the book. I’m glad you are doing your due diligence. One note, don’t accept the brokers due diligence on the website. You must do your own. The changes you are seeing may be his own. How did you come to know of this broker? Does he offer references?

What is the reason to be registered in Panama? Is this a gambling site of some sort?

Do you care to share HOW MUCH you are paying; the expected return and maybe the website address itself? What does the site sell?
I know there are a few experts on here (I’m not one of them) who could tell you a lot about the site just by knowing its address; quality of structure, hosting, age, ranking etc etc.

Apologies again for my suspicions. I HOPE I’m WRONG! But, it sounds like the broker may be setting up bogus sites, pitching for partners with the line he thinks it’s so good he is also investing. You may even see his check or other "proof" of his portion of the investment. In reality wherever you send your money it ends up in his pocket. It’s been done before many times under many different scenarios.

If this is a sizable amount of money be very CAREFUL!

[Freelancier]

Color me also skeptical. Why would he buy this site in order to partner with someone he didn't know? When I commit money to a project, I already have everything mapped out, including who I'm partnering with, how we're going to proceed, all the details about the target property, etc. I never commit money until I'm sure that most of the bases are covered... but this broker is going into it wanting a partner and not knowing one already?

Something smells funny about that.

[Tyler]

Sorry to be cynical but I’ve seen every scheme, scam, trick and con in the book. I’m glad you are doing your due diligence. One note, don’t accept the brokers due diligence on the website. You must do your own. The changes you are seeing may be his own. How did you come to know of this broker? Does he offer references?

What is the reason to be registered in Panama? Is this a gambling site of some sort?

Do you care to share HOW MUCH you are paying; the expected return and maybe the website address itself? What does the site sell?
I know there are a few experts on here (I’m not one of them) who could tell you a lot about the site just by knowing its address; quality of structure, hosting, age, ranking etc etc.

Apologies again for my suspicions. I HOPE I’m WRONG! But, it sounds like the broker may be setting up bogus sites, pitching for partners with the line he thinks it’s so good he is also investing. You may even see his check or other "proof" of his portion of the investment. In reality wherever you send your money it ends up in his pocket. It’s been done before many times under many different scenarios.

If this is a sizable amount of money be very CAREFUL!


Paul, the reason I am here is to get feedback, so your suspicions are appreciated.

I cannot divulge the website, but I can say its Alexa rankings are in the top 4000 and it has substantial traffic. It's been established for over two years. It is a video hosting site that is popular in the EU. The site makes the majority of its revenue via ads. We intend to do our own due diligence with the seller directly. The broker has been listed on BBS since 2012 (I know that doesn't mean anything per se) and he is getting me references.

The site nets $250k per year and the broker's offered the seller only slightly more than that, which they accepted. So, yes, this is a very substantial amount of money for me. A bit more info below in my forthcoming response to Freelancier.

[Tyler]

Color me also skeptical. Why would he buy this site in order to partner with someone he didn't know? When I commit money to a project, I already have everything mapped out, including who I'm partnering with, how we're going to proceed, all the details about the target property, etc. I never commit money until I'm sure that most of the bases are covered... but this broker is going into it wanting a partner and not knowing one already?

Something smells funny about that.

The way it was positioned to me was that the seller reached out to him to list the property. He reviewed the site and financials and thought it had a great history and put in a Letter of Intent. The seller accepted and they are in the DD phase now. I believe he figured he could find someone to go into this with him and since he has an out throughout the DD phase he could walk if he didn't find one.

I'm going to be having a call with my CPA firm later today and I have an attorney who specializes in internet properties and IP to contact as well.

Thanks again for the feedback from everyone. I am taking this very seriously and will not go into anything blindly.

[Paul]

I'm going to be having a call with my CPA firm later today and I have an attorney who specializes in internet properties and IP to contact as well.

Thanks again for the feedback from everyone. I am taking this very seriously and will not go into anything blindly.

Again, forgive my paranoia; it’s the result of many years of involvement with “deals”. I think Freelancier has had similar experiences. However, I have no experience at all with Internet properties so I probably shouldn’t have been so negative.

Clearly you are doing your proper due diligence and know what you are doing. I hope it works out well. Let us know how it goes.