A Korean-based technology company has asked me to find it a U.S. partner and establish it as a U.S. limited-liability company. I have no idea what to ask for as far as monetary compensation for my efforts, or what risks I'm taking on. Do you have any guidance?
Unless you become a shareholder of the company, you do not take on any personal risk by securing a partner for this Korean business or helping set it up as a business entity in the U.S.
"If you're just the facilitator, you have no liability -- even if the papers are fraudulent or if the company goes into default," says Bruce Berton, director of international business consulting for CPA firm Stonefield Josephson in Santa Monica, Calif.
FEE FIRST. Of course, such a negative outcome wouldn't help your reputation, so you should feel confident that the Korean company is legitimate and has a reasonable shot at success in the U.S. before you agree to represent it.
Your compensation will depend on how much work you put into the deal. For instance, does the Korean company have an adequate business plan? If not, you'll have to do extensive work to put one together. Has the business prepared its financials and other due-diligence materials for inspection by potential U.S. partners? Again, you may need to assist with such work. The company would expect to pay you up front as a consultant for any projects it gives you, Berton says.
Before you establish the company in the U.S., you must secure the U.S. partners. This allows the U.S. partners to give input on which kind of business entity should be established.
PERCENTAGE OF DEAL. Berton says he typically asks for a minimum retainer of $25,000 to put together a merger like the one you've described, which would probably take six months to arrange. The up-front fee will pay for your time searching for partners, setting up appointments with them, and presenting the Korean company's business plan.
Once you've put together the deal and secured lawyers to approve it and establish the new company, you should be paid 3% to 8% of the value of the new corporation or the value of the sales volume it is expected to attain during its first two or three years. Fees such as this tend to be highly negotiable, Berton says, but the average is about 5%.
Berton says a deal that goes smoothly for him might bring in a total of $75,000, depending on the size of the new entity, he adds.
WHAT IF IT TANKS? A couple of things you need to know: If the new company turns into a success and sends substantial money transfers overseas, it will be "watched like a hawk" by the CIA or another government agency operating under the U.S. Patriot Act, Berton cautions.
"That doesn't stop you from opening and operating the LLC, but you should know it and make sure the [Korean company] realizes it," he says.
Also, you should have a "nonsuccess fee" established in case you cannot find a U.S. partner for the company, or the deal falls through for any other reason. Make sure you have a written, signed contract spelling out what you will do for the company and how you'll be paid -- whether your efforts are successful or not.
Given the volatility of the international tech marketplace, the outcome of even your best efforts could add up to zilch unless you protect your interests from the start.
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