My friend Sandra Ries emailed the other day:

"I’m in the midst of my first collaboration and I’m in a bit of a quandary. We’re putting together a 1/2 day workshop with the idea that someone will hire us to deliver the same program for them in house and then do followup coaching with both of us. If not, they can hire one or the other of us for followup coaching.

"How do we do this? ‘We’ don’t have a business. Should I be his contractor? Should he be mine? Who do we tell people to write the check to? And how do we brand the marketing?"

I’m in several collaborative ventures like the ones Sandra describes. While I can’t give accounting or legal advice, I can share how we’ve handled it it laymen’s terms:

• Designate one person in the collaboration to handle and track the money, both incoming and outgoing.
• Ask clients to write the check to the "money" person (or their company), and put "Workshop ______" on the notes line.
• The "money" person creates a tracking system to account for the collaboration transactions. )I’ve found the "class" feature in QuickBooks very handy for this; it’s easy to tag the transactions and then create P&L reports just for that class.)
• At the end of the workshop/month/quarter (whatever you agree to), the "money" person creates a profit and loss statement for the collaboration.
• The "money" person calculates the portion of the profit due to the other collaborator(s) and writes a check for that amount.

Technically, that would make the collaborator(s) the subcontractor(s) of the "money person". This becomes important (at least in the US) if the total of the check written to any one person is $600 and that person is a sole proprietor  — see your accountant for 1099 rules at the end of the year.

As for branding, give the collaboration a name just as you would any other service that you offer. If you want to make that into a more permanent form, you could file a DBA (doing-business-as) form (aka Assumed Name in some states). Since the money and the legal name would mesh, the form would look something like:

Money-person-name/company DBA collaboration-name.

My final piece of advice: Don’t let anyone besides the "money" person handle the money, in or out. It’s not a matter of trust (if you don’t have that you shouldn’t be collaborating at all!) but a matter of simplicity — the accounting gets a lot messier when there is more than one money flow going on!

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This entry was posted on Wednesday, July 26th, 2006 at 2:19 pm and is filed under Alliances/Collaboration, Self Employment Law, Accounting/Bookkeeping. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.