Conditions and procedure for creating a company in the future. At the same time, it is legally impossible to force a partner to participate in this process. However, alternative measures can be envisaged (penalty or a reverse option mechanism, which involves transferring a share to another organization).
Issues of conducting joint business without the need to create a corporation, which, under certain conditions, can give the partnership agreement an investment character (if one of the partners participates exclusively through property investments).
The procedure for managing a joint business, including mechanisms for its subsequent sale or liquidation, as well as the distribution of profits between partners.
The agreement may also cover any other issues important to the parties concerning their cooperation and mutual obligations.
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Types of partnership agreements
The table below describes the characteristics of the main types of partnership agreements:
View Description
Commercial A commercial partnership agreement is concluded between legal entities that unite under a single brand or trademark. This type of cooperation is possible if the agreement involves from two to 50 organizations. For example, a restaurant enters into an agreement with a courier service and a spice manufacturer. This allows each party to benefit.
Non-profit A non-profit partnership agreement can be used in areas where organizations are not profit-oriented. In this case, a partnership agreement can be concluded not only between companies, but also between individuals. Financing of such projects is carried out through voluntary contributions of participants, as well as mandatory membership fees.
Social Social partnership is a collaboration between individual entrepreneurs and government organizations that can significantly impact economic development. For example, a government program for training IT specialists, which promotes the development of the industry and is supported at the government level.
Strategic This is a long-term form of commercial cooperation, in which all parties to the agreement work to achieve a common goal. For example, the cooperation between IBM and Microsoft, which played a major role in the development of the high-tech industry.
Tactical This is a collaboration that involves solving a specific problem in a short time, for example, to win a tender or reduce customer acquisition costs. If the collaboration is successful, the parties may decide to extend the contract.
General (unlimited) This type of partnership agreement involves two or more parties joining together to manage assets. There is no limit on the number of participants in such an agreement. However, it should be remembered that in the event of bankruptcy, all partners are equally liable to creditors. Because of this feature, general partnerships are quite rare.
Limited A limited partnership is formed between a general partner and limited partners. In this case, each is responsible only for their own investment in the project. For example, when constructing large projects, a general contractor may work with several organizations. In this case, each of them is responsible only for specific tasks. If one of the suppliers fails to deliver materials on time, this will not affect the activities of the other parties to the agreement.
What conditions are specified in partnership agreements?
The agreement must include the following key points:
First of all, you should define the type of activity and its purpose, for example, production of goods, trade, construction or something else. The goals should be clear, measurable, realistic and time-limited.
It is also important that the purpose of the agreement is legal. The contract should not be based on the mutual satisfaction of the interests of the parties, as this may lead to it being recognized as a sham transaction.
The next point is contributions to the common cause. The parties can use money, property, as well as professional knowledge and skills, business reputation and connections. The procedure and terms for making these contributions should be clearly defined. If one of the partners provides intangible assets, it is necessary to describe in detail what exactly he must do and in what time.
The rights and obligations regarding the common property should also be established. It should be determined whether the property will be the common shared property of all participants or will be in common ownership. This is important to protect the interests of the partner who uses valuable equipment or real estate.
Next, it is necessary to prescribe the procedure for conducting common affairs, which can be centralized, that is, with the appointment of one partner, or distributed among all participants.
Be sure to specify how the expenses and losses of the joint business will be covered to avoid various problems in the future.
The issue of profit distribution also requires attention. If you miss this nuance, then each participant will receive a share of the profit proportional to their contribution. For example, you can stipulate that part of the profit will be directed to the development of joint activities.
Avoid cluttering the agreement with unnecessary information to avoid overloading it and making it too long.
What conditions are specified in partnership agreements?
The partnership agreement should be clear enough to avoid any questions from the parties. The goals set out in the agreement should be specific, measurable, realistic and time-bound.
Remember that most conflict situations with partners arise because the parties did not discuss important points in advance. However, it is impossible to predict all possible problems at once. Therefore, it is important to understand that an agreement is not something fixed and unchangeable. It must be flexible and adapt to changing circumstances and agreements.
Case: VT-metall
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