Partnership Agreement

Mar, 03 2022

Contents:

A partnership agreement is one of the types of a service agreement. A company or an individual offers goods, assistance, advertising, or other bonuses to the second party, and in return they receive payment.

As with other types of contracts, the conclusion of such a transaction is impossible without a clear understanding of what the essence of the business proposal is, what results are planned to be achieved and in what time frame. No less unambiguously, the agreement describes the method of calculation and the amount of payment.

Commercial enterprises use the conclusion of partnership agreements for business development. Such an agreement allows you to combine technical and financial capabilities in order to jointly achieve your goals: increase profits, increase brand awareness in the market, find new customers.

Often LLC partnership agreements are concluded with marketing, advertising campaigns, as well as enterprises in the field of IT. This allows you to get advertising, exchange information and services, and sometimes even get or provide a loan. However, such agreements require careful legal preparation and verification of a potential partner so that the agreement does not damage the reputation of the business.

Types of partnership

If both parties are fixed in the contract as partners, we are talking about full participants in the case who actively develop it.

But one of the parties to the partnership agreement can also act as an investor. In this case, a special status is implied: the investor finances the enterprise to make a profit. At the same time, he can only control the work of the business, without actively participating in its development. As a rule, an investor invests in an enterprise, but does not act as its founder or head, although there may be exceptions. According to this type of contract, he can sell his share in the business at any time.

Russian legislation allows for several forms of partnership:

  • Joint stock Company (JSC) or limited liability company (LLC). In both cases, the investor can borrow money or become one of the participants of the company, contribute property to the authorized capital.
  • Partnership agreement. The partners form a single capital from joint contributions that will be invested in the development of future business.

The purpose of concluding a partnership agreement

As we have already mentioned, the goal may be to make a profit, exchange goods and services, increase brand awareness, search for new customers, and promote individual innovations on the market. If the contract is concluded to put new goods/services on sale, and then divide the profits, such a relationship can be formalized in the form of an agency agreement.

How does this type of agreement differ from a service agreement? The agency agreement does not set a certain value of property or services, it allows you to link the remuneration of the parties to the amount of profit they will receive when implementing their commercial plans. That is, if you earn less than you expected, you will not have to overpay partners: each of you will receive a certain percentage.

Status and form of the agreement

The partnership agreement on joint activities does not have a special form stipulated by the Civil Code. But this does not mean that you cannot sign a contract: Russian legislation allows you to conclude any kind of agreements that do not contradict it.

In fact, in this case we are talking about settling internal relations on paper. Therefore, such a contract can be written in simple language, without resorting to complex formulations or special legal terms. However, be careful: if the agreement contradicts the constituent, corporate or other agreements concluded by you, the court will give preference to these more formalized agreements. Thus, it is better to entrust the drafting of the contract and the verification of its terms to lawyers.

Stages of conclusion

It is better to discuss the partnership agreement on joint activities in advance, before the lawyers draw up the text of the document. To do this, it is advisable to allocate time and place, think through the issues that should be discussed in advance, and foresee possible conflicts. The better the parties prepare for the preliminary meeting, the more productive the negotiations will be.

Already at the first stage of preliminary preparation, it is better to invite a lawyer. They will act as intermediaries and help to quickly agree on all important issues: profit sharing, risks, etc.

The main stage is fixing agreements on paper. The help of qualified lawyers is especially important here because the contract must contain precise wording, this document should not contradict the legislation and the previously concluded agreements of the parties.

Main parts and contents

The provisions of the contract depend on the specific situation, goals and conditions. However, most often the following points are highlighted in the document

  • Obligations of the parties: which of the partners is responsible for what, who provides goods and services, in what time frame, who pays the funds.
  • Plans: scope of work, product range, scale of the enterprise, project objectives.
  • Amount of funds invested: each party indicates how much money it is willing to invest.
  • Reporting and accounting: it is important to prescribe not only the basic principles, but also certain methods and forms of accounting.
  • Work with personnel: who will be engaged in the search and hiring of specialists, if they are needed, how will the selection of employees take place, the organization of their work.
  • Withdrawal from the partnership: on what conditions, in what cases it is possible, as well as how to distribute shares and profits if one of the partners ends cooperation or the company ceases operations.

Contact VALEN’s lawyers for help. We will be happy to assist your business in concluding a partnership agreement and verifying a future counterparty.

Author of the article
Partnership Agreement
Valentina Khlavich
Managing Partner
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