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You've found someone who could help your business grow: a friend with a skill you don't have, a contact who can open doors, someone who can sell what you make. The instinct is to make them a partner, but it's almost always the wrong first thing to do. So, what alternatives do you have?

Ownership is the most expensive thing you can hand over, and it's close to permanent. Once someone holds a membership interest in your LLC, they have a claim on profits, often a vote, and a seat you can't easily reclaim. You've got six less permanent ways to get what you actually need, running from a basic hire to a licensing deal, and the right one depends on what the person brings.

The simplest option is also the most familiar. You hire someone, you pay a wage or a salary, and you get their work without giving up a thing. An offer letter that lays out the job, the pay, and what you expect covers most of it, and you'll want to state whether the role is full time or part time. If you go this route, our earlier piece The Most Important New-Hire Document walks you through proper documentation for key employees.

When you need a particular skill for a stretch of time rather than a permanent seat, hire a contractor or consultant. You pay for the work, not the person, and you can scope it to a single project. A consulting agreement that defines the work, the deliverables, the pay, and the end date does the job, and you can add a confidentiality clause if they'll touch anything sensitive.

The rule underneath all of this has been moving. The federal government stopped enforcing the strict 2024 version of the contractor test and is shifting toward one that turns more on how much control you have over the work, though the new rule isn't final yet. Several states, California among them, apply their own stricter test no matter where the federal rule lands. Through all of it the basic point holds: calling someone a contractor doesn't make them one; how the relationship actually works does.

Misclassify someone and the bill for back taxes, penalties, and back wages can dwarf what you saved. Get the arrangement documented. Our earlier piece How to Hire Subcontractors Without Getting Burned: 9 Golden Rules covers the traps.

Sometimes the opportunity is a single project: bidding on a contract, launching a product, going after a market you can't reach alone. A joint venture lets you team up with another business or person for that one thing. They share in what the project earns, but they never become part of your LLC, and when the project ends, so does the arrangement.

This takes more care than a hire. You'll want an agreement drafted by an attorney that spells out the purpose, who does what, who decides what, and how the money gets split, tailored to the specific deal, because no two ventures share the same shape.

A revenue share ties someone's pay to a percentage of what the business brings in, usually because they're the reason it's coming in. Unlike a joint venture, it isn't tied to one project; it rides on the ongoing performance of the company. It's a clean way to reward someone who drives sales or lands clients without making them an owner.

The drafting is where this lives or dies. Define what counts as revenue, how it's measured, the exact percentage or formula, and when the payment lands. Vague terms here turn into arguments later.

If what the other side brings is intellectual property, a brand, a technology, a distribution channel, then a license or strategic partnership lets you use each other's assets without merging ownership. The money usually moves as a royalty, a percentage or a flat fee for the use, and it runs both directions. You might license your product to a larger company, or pay someone for the channel that gets your barbecue sauce onto a grocery shelf.

This is the most complex of the six. Royalty structures, usage rights, and protection for the underlying property all need to be nailed down, and the agreement should say exactly how the property can be used, protected, and passed along to the end buyer. The upside is real income from an asset you keep.

When you want more customers, a sales or marketing agreement pays someone for the results they bring: the leads, the sales, the campaigns that land. They have every reason to grow your business and no say in how you run it.

Set clear performance metrics and a commission structure so both sides know what counts and what it pays. Put guardrails on it too: how they're allowed to pitch you, what territory they cover, and a firm rule that they never tell a customer they work for you. An outside seller without boundaries can do real damage to your name.

The mistake isn't picking the wrong method; it's reaching for a partnership when a simpler arrangement would do. Run down this list before you offer a piece of the company. If you need labor you hire; if you need a skill for a while you bring in a contractor; a collaborator for one project gets a joint venture. Every option here lets you grow without handing anyone a share. Pick the lightest one that gets you what you need, write it down, and keep the company yours.

The Co. Letter provides general business information. It is not legal, tax, or financial advice. Consult a licensed professional for guidance on your specific situation.

Each of these arrangements runs on a written agreement. The Co. Letter Premium gives you a library of approximately thirty professionally prepared templates, including the offer letters, consulting agreements, and revenue share and licensing terms behind the options above, so you're not drafting from a blank page. You can upgrade your free subscription to Premium by clicking here.

Question: I formed an out of state LLC and also bought virtual office space services from the registered agent company that formed my LLC for me. When I tried to open a bank account the bank said that my registered office address can't be the same as my virtual office address. Any suggestions?

Answer: Thanks for sending this in, and don't let it rattle you. This trips up a lot of new LLC owners, and it's fixable.

Here's what's going on. The address your registered agent gave you is a shared commercial address that dozens, sometimes hundreds, of other companies use too. Banks see that pattern in their verification systems and treat it as a flag, because the same address showing up on a stack of unrelated businesses is exactly what they're trained to scrutinize. It isn't personal, and it doesn't mean you did anything wrong.

You've got a few ways through it. Start by trying a different bank. Address policies vary widely, and the newer online business banks tend to be far more flexible about virtual and registered-agent addresses than the big national ones. Call ahead and ask about their address policy before you apply, so you don't waste the trip.

If you'd rather stay with the bank you met with, go back to your registered agent and ask whether they can assign you a different suite or a separate address. Many of them keep offices in more than one city, Reno and Las Vegas in Nevada for instance, and a different address can be enough to clear the flag.

The cleaner long-term fix is to register your LLC as a foreign entity in the state where you're actually doing business, then use a real address there for the account. If you formed in Nevada but you operate in Florida, you'll need to register in Florida anyway, and that gives you a genuine local address the bank should accept. One caution: make sure the address you give the bank matches what's on your EIN letter and your state filings, because a mismatch can stall the application on its own.

Let us know how things work out.

The Co. Letter is not your attorney.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!