Legal Options For Web Designers Wishing To Enter Into A Joint Venture
At some point in the life of their business, web designers might have the opportunity to enter into a joint venture with another business on a project for one or more clients. The nature of these joint ventures can differ considerably with examples being:
- Teaming up with another web designer to create a large, corporate website
- Working with a web design agency that requires the particular web design skills you have
- Collaborating with a digital marketing agency to add a new website to a client’s marketing funnel
Whether any of these or some other joint venture opportunity, one aspect constant in all of them will be the need for a joint venture agreement to be created and signed by both parties. There are three main types of joint venture agreements, which are incorporated, unincorporated, and unit trust, respectively. Below are explanations for each of these.
Incorporated Joint Venture Agreements
An incorporated joint venture agreement is used when the two parties to the joint venture do so by creating a new company. From a legal perspective, it is via this company that the joint venture will be pursued rather than through the respective existing businesses.
An incorporated joint venture agreement usually means that each party has an equal share of the business unless a differential has been agreed upon where the split is 60% to 40%, for example. In either case, a shareholder agreement will need to be signed by both parties.
An incorporated joint venture agreement offers web designers a greater level of protection as it is the new company to which liabilities will apply and not their existing business.
Unincorporated Joint Venture Agreements
As you might have already surmised, an unincorporated joint venture means that two parties agree to work together, but that no new legal entity, i.e. a company, is formed. Instead, the two parties work on the joint venture in their own capacity, either as an individual or as a company.
Although it might not offer the same protection against liabilities as an incorporated joint venture agreement, given that there are several sections within the agreement that outline each party’s obligations, and the basis upon which the joint venture is being formed, there are some legal protections. The benefits of an unincorporated joint venture agreement include:
- Undertaking large projects that a web designer might not be able to on their own
- Access to a larger pool of resources
- Risks and costs related to the project are shared
- The arrangement is temporary and thus less legally entwined
- Becoming known to a larger array of clients and other businesses
Unit Trust Joint Venture Agreements
This is the rarest of the three joint venture agreements and most web designers are unlikely to be part of one, but in case the opportunity arises, you should know what it is. A unit trust joint venture agreement has characteristics of both the incorporated and unincorporated options. With unit trust joint ventures, the agreement works on the following basis:
1) The two parties form a company that will be the trustee of the joint venture trust
2) Directors of the company are appointed and own shares in the company
3) Joint venture partners own units in the trust and their percentage represents their equity
Conclusion
Given the complexities and the varying degrees of legally enforceable liabilities, we highly recommend that any web designers who might be considering entering a joint venture, first seek advice and representation from a commercial lawyer.
