Partnership & Joint Venture Agreements
Partnership
What constitutes a Partnership?
A Partnership, in business, can also be known as a Joint Venture.
A Partnership can have from 2, and up to a maximum of 20 people.
The effect of the Partnership Act 1892
A Partnership Agreement is an important document for the protection of you and the Partnership. Partnerships are governed by the Partnership Act 1892 (‘the Act’). Without a Partnership Agreement, your business is bound by the Act.
The Act aims to set out an equitable framework for Partnerships. However, in reality, your Partnership may be very different from that envisaged within the Act.
For example:
The Act denotes equality between partners, and thus equal shares in profits, regardless of skill or investment within the Partnership
The Act declares equality of liabilities, meaning that both/all partners are equally liable for debts and/or obligations, regardless of which partner incurred the liability
The Act states, upon death or bankruptcy of one of the Partners, the Partnership will automatically dissolve
Why do I need a Partnership Agreement?
A Partnership Agreement can be tailored to suit the needs and reflect the dynamics your Partnership.
Protection
A Partnership Agreement that addresses future situations and prepares for them will ensure that harmony within the Partnership survives, and costly litigation and adverse outcomes can be avoided. Circumstances of major impact upon a Partnership include:
§ Significant business decisions
§ Major financial decisions
§ Loans both to and from the Partnership
§ Significant disputes within the Partnership
§ Death of a Partner
§ Serious accident suffered by a Partner
§ Marriage breakdown of a Partner
§ Valuation in the event of a Partner leaving
§ Bankruptcy of a Partner
A Partnership Agreement is an invaluable document that sets out important areas for consideration for the smooth running of your Partnership, such as:
- Mutually agreed goals for the Partnership
- Rules for the operation of the Partnership, including for
- funding
- structure
- management
- Roles and responsibilities of individual Partners
- Valuation of the share belonging to a Partner, should that Partner want to leave
- Dispute resolution mechanisms, meaning faster and cost effective methods of resolving disputes
- Entry and exit of Partners
- Involvement, if any, that a Partner is permitted with any other business
- Peace of mind with our help
At GJA Law we understand all the events that can occur, and can create a Partnership Agreement that is tailored to suit the specific dynamics of your Partnership.
You can protect the assets and energy you put into the Partnership with a properly constructed, personalized Partnership Agreement from GJA Law.
Contact us today to draft a Partnership Agreement for your particular needs.
Joint Venture (JV) Agreement
What is a JV?
A JV is an agreement between two or more parties to develop a product, an investment, an item of intellectual property, or a property, for mutual profit over a short term, or fixed period, and share the profits, or the results, of the project in an agreed way, without the ongoing obligations of a partnership arrangement, or forming a new company.
JV’s regulate the way capital is contributed into the project and how profits are distributed, the project management parameters and accounting practices adopted and accountability factors required for the venture to progress.
When would I use a JV?
For short term projects, where the objectives and possible outcomes are clear.
For example, you would use a JV for;
- the development of a property, oftentimes between a land owner, a developer and a builder,
- the development of a software concept, between the programmer, the investor/s, and possibly the marketer and the distributor,
- the development of a product, between the inventor, the investor/s and the manufacturer or developer.
What Advantages and Disadvantages are there over a Partnership?
The advantages of a JV are;
- no ongoing partnership obligations,
- liability is generally limited to the capital contributed,
- no need to set up a new company, unless the JV is successful and there is a need for ongoing development or marketing/distribution,
- the parties roles and obligations are clearly defined,
- dispute resolution procedures are in place
- the final “payout”, or distribution of the profits, is agreed,
- ongoing funding of the venture is defined.
The disadvantages of a JV are;
- if it is successful, you may have to pay additional costs for a more appropriate structure to exploit the results of the venture,
- Ongoing compliance and accountability standards need to be maintained between the parties,
- unless the agreement is drafted properly, the ability of one party to exploit the outcome of the venture over the other parties interests.
Contact us to develop a JV for your particular needs.