Partnerships, LLPs & Joint Ventures
Partnerships, Limited Liability Partnerships (LLPs) and joint ventures describe a category of business arrangements which rely heavily on contractual agreements for their governance. Ensuring those contracts are in place, that they are clear and deal with all key commercial issues is so important if parties are to avoid costly problems and potentially disputes down the track.
LLPs are an evolution of a traditional partnership, combining the flexibility of a partnership arrangement with the protections of a limited liability company. Both have been popular with professional service business over the years, such as solicitors, accountants, architects and so on, although their application is not limited to any particular sector. In recent years the prevalence of these structures has reduced, principally due to tax. With tax being an ever-changing landscape, the popularity of these structures may well return, especially as the tax advantages of the limited liability company has eroded over recent times which may continue.
The term ‘joint venture’ (or ‘JV’) and ‘partnership’ can describe one and the same thing, although a JV will more generally refer to a business venture between two or more established businesses. What these arrangements share in common, is a commercial venture between parties with the objective of generating profit. As a commercial endeavour, the parties should consider very carefully the detail of the arrangement and exactly how it is expected to work. What each party is responsible for, how decisions will be made, how profits and costs will be shared, and ultimately how any winding up of the venture may be brought about, are key topics for discussion. Any governing documents should regulate these and other issues in order to manage business risk, business reputation and to promote a good working relationships between parties. Ideally, relevant documentation is prepared and agreed before the relevant business ventures begin and money and other resources are committed. But it is never too late to put appropriate documentation in place.
No one size fits all, and it is important that your agreements faithfully reflect how you intend your partnership (or ‘joint venture’) to work. At LCF, we take the time to understand your business objectives, and to tailor documents which meet your requirements.
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