My bodyguard: partnerships offer small companies capital, protection

Article Abstract:

Small companies faced with financing needs they cannot meet should consider forming partnerships with large, well-established corporations to improve their credit ratings and minimize the possibility of hostile takeovers. Selecting the larger partner is a difficult task, since many partners can become too interested in the smaller company and take it over, as Wang Labs did to Intercom, a company with which it initially formed a partnership. To avoid such partner takeover, the partnership agreement should be structured as a "standstill" that precludes further investment by the larger partner. Other guidelines for establishing such a large corporation - small business partnership include: ensuring the larger firm purchases less than a majority partnership interest, agreeing to performance criteria for the smaller partner (which if not met allow the larger partner the option of buying more partnership interests), encouraging the larger partner's management team to help the smaller company manage the partnership, giving the senior partner primary board of director representation, and allowing the junior partner to take advantage of the senior partner's standing in the business community when marketing and financing.

Interpretation and construction, Small business, Corporation law

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Funding R & D through limited partnerships

Article Abstract:

A research-and-development (R&D) limited partnership is a possible alternative for the corporation which finds it difficult to set aside adequate funds or justify a debt or the equity needed to obtain funds for R&D. Investment Partnership Assn pres Christopher Davis reports that a partnership's neutrality is a real advantage, it has no corporate taxes, it requires less structural work than corporate stock, and that no SEC paperwork or approval processes are required. Companies seeking general partners may offer equity positions, royalty from new products which the funding creates, or a percent of sales. The general partner may provide technical assistance and advice. Tax breaks once available for losses resulting from partnerships have been eliminated, making it more critical that investors receive early income.

Usage, Industrial research

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Mastering the financing possibilities of limited partnerships

Article Abstract:

Master limited partnerships (MLPs) allow firms to sell a property's tax advantages to others, thereby providing income to both the MLP's partners and its purchasers. The partner-corporation uses the property and receives cash for such usage, since it does not pay taxes on the property. The investor-corporation obtains the profit from operating the MLP and receives the tax advantages related thereto. An example of an MLP deal transacted between Dean Witter Reynolds Inc. and International Paper Co., with the formation of the I.P. Timberlands Master Limited Partnership, is discussed from the perspectives of cash flow benefits and taxation.

Management, Taxation, Real property Taxation

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