At one point or another, you may realize that you do not wish to continue alone with your business endeavours. Due to a need of resources or mutual benefit, you may need to collaborate with another individual or corporation. This is considered to be a joint venture.
One of the first things you are going to need to do is determine if that person or company is right for you. More importantly, you need to know that they will help your business rather than hinder it. To make sure of this, you are going to need to get an ASIC extract. This will give you all of the information that you require regarding your potential partner and their financial and business details.
Once this is done and you have made your choice, you can proceed to creating a joint venture agreement. This is a contract that determines each partner’s contribution and remuneration as well as other conditions. Here are some of the elements a joint venture agreement should contain:
Intellectual Property Ownership
This is one of the issues that seem to get murky when planning a joint venture. More often than not, these types of partnerships tend to end. This is usually due to market changes and the inability for a joint venture to adapt to a changing environment. However, you may still have been partners for several years. During this period of time, both you and your business partner may have contributed ideas and concepts to develop. These ideas are considered to be intellectual property. At the time that you are working together, these concepts belong to the business. Once you are no longer a team, you or your partner might begin questioning ownership of this intellectual property. This is why you need to determine these terms ahead of time and place them in the agreement.
Division of Control
When forming a joint venture, your partner usually has a certain amount of control over the company. The actual percentage needs to be decided beforehand. This is not just about ownership, however. It is also regarding the division of labour, responsibilities, and duty. Each individual’s role within the company needs to be clearly defined and mentioned in the agreement.
Financial Contributions and Individual Profits
The other thing that needs to be put in this contract is how much each party will contribute and how much they will return in term. If you are heavily dependent on your party for capital, they would be contributing more money than you. This, in turn, could result in them receiving greater profit as well. In certain instances, however, there is equal input or your business partner may only be offering ideas and plans. Thus, you will need to decide just how much each person gets, depending on what they do.
This may seem like an unusual condition, but it is an important one, nevertheless. This clause is in case the partners are unable to reach a collective decision regarding the company or the business processes. To avoid further conflict and to minimize fallout, there should be strategies already in place. These will help you and your partner resolve the issue quickly and with as little animosity as possible. Once you have come up with a probable and viable technique, this too will be added to the legally binding agreement.
These are just a few of the terms that need to be included in a joint venture agreement with an outside party. This will prevent any legal missteps from occurring, both while the parties are engaged in the venture, as well as when the venture is dissolved.