Developing a Partnership Agreement: Avoiding Conflicts Between Partners and Ensuring Long-Term Collaboration
Cost of services:
Reviews of our Clients
... our work on joint projects assured us of your high level of professionalism
A successful business often relies not only on innovative ideas and unique solutions that propel the company on a path of rapid growth but also on a robust legal foundation. One of the crucial steps in the creation and development of any company is drafting a partnership agreement. This document is a vital tool that outlines the interaction between partners, their rights, and responsibilities. Without a well-conceived partnership agreement, serious misunderstandings can arise, potentially undermining the business’s efficiency and the relationships between partners over time. Our practice, with over 18 years of experience, consistently reaffirms this.
Our legal firm has repeatedly assisted in drafting various documents, including contracts and agreements for startups, and has provided legal support for startup projects in Ukraine. In one of our recent projects, we developed a partnership agreement for a Ukrainian startup that had relocated to France. In this article, we share this interesting case of partnership agreement development and the experiences that might be beneficial for you.
You may also like: Developing Agrreements for Startups in Ukraine
What Issues Does a Partnership Agreement Address?
A team of five developed an online platform offering personal stylist services powered by artificial intelligence. They approached our company with the aim of crafting a partnership agreement that would ensure harmonious team operation and protect each participant's interests. This agreement aimed to address several key issues:
- To foster a sense of shared purpose — it was crucial for the startup members to feel like co-owners, not just contributors.
- To anticipate mechanisms for resolving potential conflicts to prevent future misunderstandings.
- To establish clear decision-making rules, especially for situations where team members disagree.
- To motivate long-term cooperation by creating conditions that encourage participants to stay involved in the startup until receiving initial investments and beyond.
Initially, before finalizing the agreement, our legal team thoroughly examined the client's needs through several consultations with startup members. We also analyzed the startup's activity specifics, business model, and potential risks to tailor our approach to the client's unique characteristics.
The next step involved drafting the partnership agreement. In addition to addressing the client's specified concerns, we included detailed provisions on the following aspects:
- Procedures if a team member decides to leave.
- Steps to follow if a member leaves their main job for the startup.
- Decision-making processes regarding new team members or investors.
- Procedures for amending the agreement.
- Distribution mechanisms for options among the participants and handling of options if someone exits the team.
- Resolutions for situations when a member fundamentally disagrees.
- Actions if one participant insists on an idea opposed by the majority.
Our lawyers prepared several drafts, each reflecting different approaches to option distribution, decision-making, and document amendment. Each draft was presented to the team, and after thorough discussions, we arrived at the final version.
Particular attention was given to the distribution of options, as the correct allocation was crucial for motivating the participants. We considered both the current contributions of each member and the potential for attracting new team members and investors.
The final phase of our collaboration was presenting the agreement. It's important to note that the presentation of a partnership agreement is just as crucial as its drafting. The clarity and correctness with which all aspects of the partnership agreement are explained can significantly influence the team's cohesion and the startup's subsequent success.
During this phase, all team members convened to review the document. Our lawyers clarified the main provisions of the agreement through clear examples and diagrams. After presenting the key points, we facilitated a Q&A session, allowing each participant to raise questions. This approach enhanced understanding and addressed potential issues during the discussion phase. Following this, the document was successfully signed by all parties, becoming a cornerstone in the startup's development. We are confident that this agreement will help the team achieve success and are prepared to continue supporting the startup on its journey to the first investments and market entry, as a lawyer for a startup is key to a promising future.
You may also like: How to Hold Someone Accountable for Breaching a Non-Disclosure Agreement (NDA)?
Partnership Agreement as the Foundation for Successful Business: Preparing a Partnership Agreement
A partnership agreement is an essential document for any business, as it helps prevent conflicts and motivates the team to achieve results. The effectiveness of a partnership agreement not only determines the success of a business project but also shapes the long-term relationships between partners. Therefore, we always recommend entrusting this task to professionals. Our company has extensive experience in concluding such deals and is ready to help your business lay a solid foundation for success.
We recognize that each business is unique, so we approach each project individually. Our team of lawyers will assist you in developing a partnership agreement that not only meets your specific needs but also ensures legal protection and transparency in the relationships between partners, crucial for smooth operations and mutual trust. We will also provide expert advice, help avoid common mistakes, and ensure the proper execution of the agreement.
Contact us to develop a partnership agreement — give your business a chance for a successful start and continuous development!
