We try to focus on the positives during our blog posts because no one likes to read doom-and-gloom posts day in and day out. One big misconception that we want changed is the vision of an attorney as simply a roadblock to getting business done as opposed to an attorney as an advisor and business partner – someone that can help the entrepreneurs out there make deals happen.
This post is not about making deals happen. It is about how sometimes it’s good to have a speed bump so you’re not flying down the street blind to the dangers.
Example 1: Person 1 (P1), a small business owner, is approached by an international corporation. They would like to joint venture. In exchange, they need a business visa so that they can come to the U.S. and help out with said joint venture.
So, P1 does some research. Speaks to an immigration attorney. Figures out all of the things that need to be done to make this joint venture happen. All of this is without any money or signed contract(s). It’s simply the research before starting a new corporation to formalize this joint venture.
Example 2: Person 2 (P2), a small business owner, is approached by an international person through a friend-of-a-friend. They want to hire American subcontractors to perform work in China. They give some information about what they hope to accomplish but not many specifics. They ask for information on subcontractors and ask for research to get done and reported back to them. No money is exchanged and no contract is signed.
Example 3: Person 3 (P3), a budding entrepreneur, is looking for investment for his new project. He approaches some people and they suggest going the route of an EB5 visa. Get a foreign entity to invest $500,000-$1,000,000 in exchange for this visa (this is an extremely oversimplified version of the law) reserved for job creators.
Okay, so…in all these situations, we stopped the deals from happening once we got involved. In the first scenario, we asked for 6 months of costs up front to fund the creation of a corporation, including our legal fees, and no more work done towards that goal without consenting to that. This may seem harsh, but a foreign corporation wanting to start a business in the U.S. shouldn’t have an issue coming up with $50,000. The entity disappeared.
In the second scenario, we asked for a signed consulting agreement prior to any research being done/information exchanged. The foreign entity just kept trying to get free information. In the end, our client decided not to pursue anything else or decided not to pursue the venture because he decided that it was not the right joint venture for him.
In the third scenario, well, let’s be honest, the opportunity to receive that sum of money to pursue your dreams is tempting. However, after really talking through the client’s vision, I realized that this was not necessarily what he wanted. Furthermore, he would have to give up a lot of equity (the law requires that the business be majority owned by the foreign investor to qualify for the visa) and he did not actually know much – or anything – about the would-be foreign investor(s). Lots of red flags there.
So, we stopped these deals from happening. However, we would still consider these profitable situations for our clients. Why? We saved our clients from getting into risky situations and we saved them from wasting TIME on dead ends so that they could pursue other, more lucrative opportunities.
Should you NOT get into international business ventures? Are we trying to SCARE you?
NO! Of course not. Our reach as business owners is getting more and more expansive and it is good to take advantage of partnerships whether down the street or across the globe. However, you should know who you are getting into business with and you should both be clear about what you want and expect…from the beginning. An attorney can help you to put together communications that clearly express your desires and goals and can help you do your homework on potential business partners so you don’t have to worry about it.