Getting Started In An Import/Export Business
By Cliff Ennico
www.creators.com
"I'm 27 years old, Mexican-American, born and raised in Mexico City and have lived in the U.S. for the past 10 years. I've always worked for a company and have never been self-employed. I recently lost my job and I am looking; however, in the meantime, I want to sell some things on eBay to pay off some of my expenses and also find a way to sell gourmet foods for people I became friends with from my former job and make commissions. This would mean I would be working as a broker. However, I do not have experience working on my own.
I met a person at a trade show back in July that is president of a small company in New York that imports gourmet foods and high-end nonedible items from Mexico. He said he can't offer me a full-time position until perhaps the beginning of next year. For now, he said he can offer me $500 a month to pay my travel expenses and a 5% sales commission on the 2 gourmet food items he wants me to sell, but these items were recently introduced to the U.S. food industry and I think it would take at least six months to be able to sell them legally here. He already wants me to work on some things for him, but I don't want to do anything and spend time and money until I have something in writing (contract, agreement, etc). What do you suggest?"
I'm assuming, first of all, that you are either a U.S. citizen or "green card" holder. If you are neither, you should talk to a good immigration attorney before getting involved in any U.S.-based business.
You should enter into a sales representative agreement with the New York company with the following important provisions:
you should be entitled to commissions whenever the New York company accepts an order from a customer you have introduced to them;
commissions should continue to be payable on all sales to customers you have introduced to the New York company, whether or not you generated those specific sales, as long as the agreement is in effect and for a period of one year thereafter; and
a statement that the New York company is solely responsible for ensuring that all food products "comply with applicable U.S. laws and regulations", including U.S. Department of Agriculture (USDA) and U.S. Food, Drug and Cosmetic Administration (FDA) rules.
If you are sued because one of their products violates U.S. laws and regulations, they should "indemnify" you (pay your defenses and protect you against loss) for that.
"An acquaintance of mine has a restaurant and started a couple of years ago with an import/distribution business with gourmet foods from Argentina. He said he wants me to be his partner so he can focus more on the restaurant business. I've never been offered a partnership before. He wants my sales/distribution knowledge in return and assures me that I wouldn't spend any money to own part of his business, because he knows I don't have money. I told him to write me a proposal and he said he had no idea what to write in it. I'd like to know what to expect in a contract/proposal, so that I make sure he's not going to cheat on me."
First of all, I wouldn't enter into an informal partnership with this person. Instead, I would insist on forming a limited liability company (LLC). That way, if he does something bad, your personal assets are protected from liability, and vice versa.
You should have a lawyer draft a formal Operating Agreement for the LLC with the following important provisions:
that the LLC will engage only in the import and distribution business;
that the restaurant owner "assigns" to the LLC all contacts, information, data, knowledge and know-how relating to the Argentine food import business;
that the restaurant owner will not engage in any import or distribution business other than through the LLC;
that you will not engage in any import or distribution business that "directly competes" with the LLC's business, but are otherwise free to engage in import and distribution activities (for example, as an employee of a large company);
that the two of you will share all profits and losses 50/50 (or however else you agree);
that the two of you will take monthly distributions after paying all LLC operating expenses; and
that the LLC will dissolve upon one of you "withdrawing" from the LLC (for example, to take a full-time job).
For more information on getting started in an import/export business, check out international trade consultant Laurel Delaney's free e-newsletter at
www.globetrade.com
.
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest books are 'Small Business Survival Guide' (Adams Media, $12.95) and 'The eBay Seller's Tax and Legal Answer Book' (AMACOM, $19.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2007 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.
