9. Non competition. Will parties to venture be prohibited from competing directly with new business? Is it restricted territorially?

10. Sharing of information. What rights do partners have to know about internal workings of venture? Are regular management accounts to be provided? For example, would www.lawyersbench.com have rights to a product developed by a JV partner, even if we had no direct involvement in day-to-day running of venture? What about independent auditing?

11. Profit sharing. How are profits to be distributed? When? Under what conditions? Can one party force a distribution of profits?

12. IPR. What Intellectual Property Rights will new venture acquire? DO they revert to any particular party if venture is dissolved? Who owns new IPR developed by venture?

13. Employees. How many employees will be needed, and how will they be organized? Will there be share options, or other incentives? Transferring employees from one business to another will almost certainly involve you in taking legal advice on process and related employee rights. At www.lawyersbench.com we would always have relevant 'key-man' insurance policies in place for special employees.

14. Administration. Map out who manages venture, who bankers will be, who will audit business and who is responsible for regulatory compliance?

15. Exit. Does venture have a defined life-span, or is it open-ended? What circumstances can force it to end prematurely? If this happens, how are assets to be distributed (including cash and IPR). If there are liabilities, not assets, who do they devolve onto?

If you answer all these points adequately, you should be well on way to a sensible well structured joint venture. As always, take legal advice before committing to any legal arrangement.

Partnerships

In my opinion, it is better to have died a small child then be in a partnership. Unfortunately, many business owners form partnerships and don’t even know it. This occurs when they go into business with another person. If no business entity is formed, law considers business to be a partnership and treats it accordingly.

Partnerships are dangerous for one primary reason: a partnership does not provide any protection from liability and, in many ways, invites personal liability. Under well-established law, most partnerships are classified as "general". This simply means that all partners are contributing to administration and running of partnership business. This classification can have grisly results.

In a general partnership, each partner is jointly liable for debts of any other partner arising from business. For instance, you and your partner go to a business dinner with a client. Your partner has a drink and then a few more. They then get into an accident on way home. Each of partners is liable for damages claimed by injured people. That means YOU! Even if you were not in car, did not rent car, never saw car and don't drink!

Partnerships are a recipe for disaster. Stay away from them whenever possible.

Limited Partnerships

Limited Partnerships ["LP"] are perhaps most misunderstood business entity. A limited partnership is similar to a general partnership, but allows a number of partners to limit their liability by being limited partners. It is critical to note that these limited partners are restricted to simply making a capital [cash, content, equipment] contribution to partnership. They cannot be involved in actively running business. If they are, they lose any protection from partnership debts. Many limited partnerships end disastrously. If you are married to idea of pursuing a limited partnership, you must do so in combination with corporations. That particular strategy is well beyond scope of this article, but feel free to contact me if you wish to pursue a limited partnership.

Business owners should protect themselves by forming entities for their business activities. The real issue is identifying structure that is best for your particular situation.