What should be written in a partnership agreement, and how should a general partnership be run? How can an agreement exist concluded remotely using the blockchain? Four business models to manage cryptocurrency and cash flows are outlined below.

Relations between partners

To draft a partnership understanding, partners should identify themselves, their shares and membership interests. They demand to define the project and its goals too as key tasks. Furthermore, attaching the business plan, presentations, and technical requirements or specifications for the projection are also a necessary office of this step.

An important decision is determining whether all or several partners are going to human activity on behalf of the full general partnership, or if a managing partner volition be assigned. Whether alternatively or additionally, partners may wish to hire a CEO. A legal entity can also be the managing representative.

If the agreement does not specify such, all partners may act on behalf of the full general partnership independently, thus being able to acquire new rights and duties for the full general partnership. The managing partner(s) may be restricted to certain rules and conditions, such as which transaction amounts require a collective decision, the size of a deal that the managing partner can enter on behalf of the general partnership at his or her sole discretion, and so on. For instance, the managing partner may not close supply contracts for over $ten,000 without the consent of the other partners.

Every bit mentioned in the first commodity of this series, a general partnership tin can deed as a business organization entity. However, many people are unaware of them, which can cause some issues when dealing with external counterparties.

Therefore, I recommend finding a friendly legal entity in guild to present your projection to other business organization entities and individuals. In the commencement, partners may choose a trustworthy company that serves as an authorized representative of the general partnership with the right to enter into agreements with 3rd parties for the convenience of the general partnership. Such relations are governed by an agency agreement between the general partnership (the appointor) and the legal entity (the authorized representative).

In my instance, my partners and I decided the post-obit: I was chosen to exist a managing partner and had the right to conduct business concern relations with other entities in the market.

All deals of more than than $thirty,000 had to be approved by a remote simple majority voting of partners. In guild for partners to communicate with each other, we created a channel on Telegram messenger and agreed that all word within that chat is legally binding on the partners — 1 of whom is a legal entity.

This entity represents our business project in deals with external counterparties, and has a written amanuensis agreement and ability of chaser for situations in which the legal entity must confirm its authorization. The agent acts on behalf of our general partnership (the appointor), and all acquired avails belong to the general partnership, including money, intellectual rights and other properties. By doing and so, we were able to solve banking company-related issues. The authorized representative equally a legal entity had a banking concern account, so the partnership could send or receive money through this agent.

At the aforementioned time, this is not the only possible model. The following nautical chart represents other types of interactions between partners, clients and agents.

Business models with fiat and crypto

General partnership business models

In reality, all types of relations tin exist developed based on specific fiscal flows. The diagram in a higher place consists of four figures which may be applied solely or in combination with each other:

Model 1. An individual as the managing partner

An individual can manage the project, but there is most no possibility that the individual will exist able to open a depository financial institution account for entrepreneurial activities. From a financial betoken of view, such a partner will only be able to work with cryptocurrency. This method can exist used as a single financial tool only in the case when all revenue is generated in cryptocurrency. Otherwise, one needs to combine information technology with other solutions and methods.

The managing partner distributes cryptocurrency profits betwixt the partners, while they have to declare information technology and pay taxes in accordance with the legislation of their residency.

Model two. An amanuensis company owned by partners

Partners incorporate a legal entity — for case, a express liability company, or LLC — that volition human activity every bit an agent of the general partnership.

In this instance, a full general partnership is non needed. All the same, one could testify useful as an boosted element of the model, when a full general partnership works with cryptocurrencies and its partners do not want to show information technology in the accounts of the legal entity.

Furthermore, partners of a visitor dealing with crypto will face problems in many countries, as banks are likely to refuse dealing with tokens and cryptocurrencies. Hence why combining this model with Model 1 is inevitable in such cases.

Model 3. An agent company co-endemic with a local partner

Partners incorporate their company, which includes all members of the general partnership plus their local partner, in 1 called jurisdiction. Let'southward telephone call it a regional representative model. Such a legal entity will work with the full general partnership on the ground of an agent agreement. This is a corking option if partners need to create a local presence for their business organization. The local partner will be the head of the company and develop the business concern in the designated area. It also solves all financial bug, equally the company can now open up bank accounts and distribute profit among its partners.

Model 4. Independent amanuensis

A legal entity or an private entrepreneur appointed as an agent of the general partnership. This option is also useful, because both the legal entity and individual entrepreneur can open up a business account in a banking company to receive payments from clients. According to the agent understanding, agents in such cases receive company revenue that they are authorized to use to pay off electric current expenses and debts on behalf of the general partnership. Agents accept a fee from this money for their services, and eventually distribute the residual among partners.

How to sign a partnership understanding using blockchain engineering

This is an alternative manner of establishing a business partnership, as there are many different ways to enter into such an agreement. In our case, all partners were located in different countries and information technology was difficult to meet each other in ane location.

Nosotros decided to apply mod technology. In fact, we drafted the text of the agreement on an electronic class. We wrote the cryptocurrency addresses of each partner, indicating that the understanding will become effective when each partner publishes the hash sum (checksum) of the agreement file in the blockchain from the mentioned addresses.

We decided to use the Emercoin blockchain and the "carousel" method for contract signing: The offset signatory creates an NVS record (curt for Name-Value storage, a kind of token in Emercoin) with the hash sum of the contract, and sends information technology to the next signatory. The record needs to exist sent one-by-1 to all the partners in the circle, and the contract becomes constructive when the NVS returns to the wallet of the first signatory. Partners (and all viewers of the file) are able to verify addresses in the carousel. If they represent with the announced addresses, the contract is considered duly signed by all parties. In our case, we use the same addresses to distribute profit.

Conclusions

  • Relationships between partners and managing partners are regulated past the partnership agreement (general partnership) in the called jurisdiction.
  • English language common police force is a improve solution if partners are located in different countries.
  • The company's CEO can be a tertiary party. Partners may wish to authorize one among themselves to sign a contract with a CEO — otherwise, all partners must sign it.
  • The managing partner or a hired CEO is allowed to make decisions related to the projection with a clearly defined maximum amount of the bargain. However, all other decisions must be made collectively. Mutual consensus is likewise needed in the following cases: irresolute the listing of partners, changing the number of investments, goals and key tasks of the project, and the share of each partner in investments, profit, voting ability, and others.
  • Relations with an agent are governed past the agent agreement. When the amanuensis is a legal entity or an individual entrepreneur, they may control the general partnership's fiat money.
  • A general partnership may be useful when partners work with cryptocurrencies and tokens merely local banks refuse to do and so.
  • If partners make their decisions remotely, they should legitimize this status in their agreement, for instance, past agreeing that all decisions made in their chat are legally binding. The projection tin can exist transformed into a legal entity at any given moment, eastward.one thousand., when information technology becomes profitable.

The business model of a general partnership has both advantages and disadvantages — some people may think that it will not protect their interests, and it may not suit everyone's needs. However, based on my own long-term experience in legal practice, I can say that there are no 100% safe legal instruments.

In conducting their business concern, partners may face a huge number of legal actions and courts, which require a significant amount of time and resources. And even then, one could come up away with zilch afterwards winning the case, because the debtor but has no avails (they could sell them, re-register them in their grandmother's name or only disappear). Mutual sense dictates that the master effect is non the legal model, but trustworthiness of partners. One needs to call back the post-obit: Reputation is the most important asset.

Nowadays, when data is distributed at the speed of light, a scammer can confront serious consequences such equally nobody wanting to deal with them after a couple of bad cases. And that's why nosotros need an agreement — not for court (although information technology can be used there), but as a guarantee of expert beliefs lest partners go bad actors and are not held answerable.

This is part two of a two-function series on general partnerships, read part one here.

The views, thoughts and opinions expressed hither are the author's alone and do not necessarily reflect or stand for the views and opinions of Cointelegraph.

Oleksii Konashevych is the author of the Cross-Blockchain Protocol for Government Databases and a protocol of smart laws for property rights. Oleksii is a Ph.D. young man in the international program funded by the EU government — Joint International Doctoral (Ph.D.) Degree in Constabulary, Science and Engineering science (Final-JD). Oleksii is visiting RMIT University in Melbourne, Australia, and collaborates with the RMIT Blockchain Innovation Hub researching the use of blockchain technology for e-governance and eastward-democracy. He works on tokenization of real manor titles, digital IDs, public registries and e-voting. Oleksii is the co-writer of the law on e-petitions in Ukraine, collaborating with the Presidential Administration of Ukraine as managing director of e-Democracy Group, NGO (2014–2016). In 2022, Oleksii participated in drafting the bill on Anti-Money Laundering and revenue enhancement issues for crypto assets in Ukraine.