Partnership Structure for Regional Expansion

searcher profile

October 24, 2025

by a searcher from California State University, Chico in Sonoma County, CA, USA

I’m working on a deal that would give me exclusive rights for a regional rollout of an existing business. I’m partnering with the founder of a company that has a proven product. His responsibility is training me on the business model and providing the product, my responsibility is launching the venture in CA and handling all funding and operating requirements, similar to a franchise structure. He wants a non-compete so I can’t learn his process and replicate it, but my attorney says non-competes are basically unenforceable in California and even if they were, it doesn't make sense in this scenario because there are no trade secrets and it could create issues for me later. My attorney suggested forming a joint LLC with both of us owning equity in the new business, with clear terms for the partnership length, revenue share, and how to shut down the venture, if necessary. This would naturally act as a non-compete during the life of the business by not allowing either of us to operate a similar business during the life of our agreement. The founder prefers a royalty/license model but still wants some protection of his “secret sauce”, and not allow me to take his product into other states under a different name. Has anyone structured a hybrid license/JV that protects the licensor’s believed to be IP in CA? Again, this is essentially a start up business with no real patent or trademark. It is simply someone who has spent a large amount of time "perfecting" a business process and does not want me to compete with him under a different entity in the future. Any thoughts would be hugely helpful!
1
2
99
Replies
2
commentor profile
Reply by a professional
from American University in Irvine, CA, USA
Hi, Garren: I have structured several deals with similar considerations. If I were thinking about a deal like this, I would use also use an LLC to establish profit-sharing with the other company, for all of the reasons that you enumerated, as well as others. But to protect your "partner", I would have him put all of the IP rights into a stand-alone company which is wholly-owned by him, and provide the Operating Company with a master Exclusive License. In the License Agreement, he can include all of the protective provisions that he wants to with respect to the limited use of his technology rights within specific "territories," and restrictions on using it anywhere else. At the same time, having the IP licensed to, but not owned by, the Operating Company, will mitigate the risk of exposure in the event of any litigation or claims arising out of the business of the Company. If you would like to dig deeper on how this structure might work, feel free to DM me here.
commentor profile
Reply by a searcher
from California State University, Chico in Sonoma County, CA, USA
Ken, this is very helpful. Thank you for your thorough response!
Join the discussion