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Many web developers prefer to create their own Website Development Agreements for clients. Do you know if your agreement template addresses all of the key issues it should? This article provides a checklist of the provisions that you should be including in your standard form agreement.

At a bare minimum, you need to include clauses that cover:

• who owns the website and content after the work is completed,
• protection of intellectual property rights for any software or resources used in building the site,
• detailed description of the various development phases, and what constitutes completion of a phase,
• functionality testing procedures,
• resolution of problems that arise during the development process,
• covenants, warranties and undertakings given by each party,
• confidentiality (non-disclosure) provisions to protect the parties, and
• what types of ongoing support will be provided.

1. Clearly outline the project specifications and development phases.

• Provide detailed specifications for the design of the website, which will then serve as criteria for final testing of the website to determine if the specifications have been met and if acceptance of the website is warranted. The specifications must be approved or modified by the client before work commences on the development of the site.

• Clearly define the developer's performance obligations to avoid any ambiguity between the parties. Clarify how extra work will be approved and billed.

• If the project warrants it, the Agreement should contemplate appointing a project manager to oversee and coordinate the development and to be the point of contact with the client.

• Set out a timetable for development / performance milestones and for progress meetings at key points in the timetable, and include the payment schedule attached to those milestones and key points.

• List all deliverables and resources required from the client and the times at which these are required. Include provisions which cover the implications if the client is late in delivering these items, i.e. how it will affect the timetable and completion date. Clarify what happens if a milestone is not met or the completion date is missed through no fault of the client.

• Ensure that the Agreement allows you to subcontract any part of the development services if necessary.

• The developer's performance obligations should include providing documentation and source code for all software used during the process.

• The Agreement must be flexible enough to allow for changes to the site specifications, and must also clarify how those changes will affect the timetable and development costs.

2. Make sure all parties agree on what is included in the contract price and how payments are to be made.

• Include everything that is included in the price, such as software licensing fees and applicable taxes.

• Payment should be tied to performance milestones. At least 1/3 of payment should be held back until the website has been thoroughly developed, delivered, tested and accepted by the client, and the website is ready to go live.

• There should also be a further holdback (10%-15%) for a reasonable period following acceptance to ensure that all defects have been detected and fixed.

3. Specify who owns the website and the elements.

• Unless otherwise agreed to with the client, the Agreement should expressly provide that the work done under the Agreement is a work-made-for-hire, and that all content, graphics, domain names, files and the look-and-feel of the site (together with all underlying code, software, digital programming) are the sole property of the client. A copyright notice should be displayed on the website.

• For greater certainty, the developer should sign over all proprietary rights in the work to the client under an assignment provision. Unless the developer is an employee of the client, the developer must convey copyright ownership to the client in writing in order for the client to acquire all rights reserved to the author under the copyright laws.

• Clarify whether the developer retains any rights to use any materials or software created during the development.

4. Cover all applicable hardware and software considerations.

• If the developer is providing any of the hardware, are any manufacturer's warranties being provided?

• If the developer is using any proprietary software in the development of the website, include provisions for the client to be able to license the software and access the source code in the event that the relationship between the parties is terminated or the developer goes out of business or becomes otherwise unavailable. The license granted to the client should be perpetual, royalty-free, irrevocable and worldwide, and should be transferable.

• Is any third party software or material (such as graphics) being used in the development? Have the required licenses / consents been obtained? Who is responsible for, and who pays the costs for, obtaining them? And who is liable for the performance of that software?

5. Clarify how third party infringement claims will be dealt with.

• Each of the parties should provide warranties that none of the material they provided infringes any intellectual property rights or other proprietary rights of any third party.

• There should also be mutual indemnification by each party of the other party.

• The developer should carry adequate liability insurance coverage to protect against third party claims.

6. Include confidentiality and non-solicitation provisions.

• The Agreement should contain confidentiality clauses to protect each party's confidential information and proprietary data.

• The Agreement should also contain a non-solicitation provision barring either party from soliciting the other's employees during and for a reasonable period of time following completion of the project.

• If either party wishes to refer to the relationship in its marketing materials (including putting the developer's name and/or link on the website), this should be agreed to in the contract.

7. Ensure compliance with laws and regulations.

• If the website collects any personal information from site visitors, all applicable local and international privacy and data security laws must be complied with.

• If the website is an e-commerce site which will be processing payment transactions, PCI compliance must be included in the scope of services.

• The website must contain all the required notices and disclosures for users (privacy, use of personal information, cookies, copyright, etc.)

8. Include liability provisions.

• Each party should indemnify the other for any loss or damages arising as a result of such party's breach of its obligations. The liability should be limited to the total of the fees paid by the client under the Agreement.

• Each party should indemnify the other against third party infringement claims with respect to content, material or resources supplied by that party.

9. Outline the specifics for website functionality.

• The Development Agreement should clearly specify the anticipated functionality of the website, including page load times, connection speed, mobile friendliness, download speed, number of simultaneous connections and response times for user requests, compatibility with all Internet browsers, security protocols, checkout and payment systems.

• The functionality provisions should also cover integration of the site with the client's existing data server structure.

• The client must be able to make changes to the website without interfering with the site's operation or functionality.

• Website functionality should also include the procedure for accessing, recording and compiling user data and analytics.

10. Include provisions governing installation and acceptance testing.

• The developer is responsible for transferring and installing the site and all associated software and files on the client's web server.

• The Agreement must address the following questions:

• Who will take responsibility for acceptance testing?

• Who will determine whether the testing has been successful?

• Will acceptance testing occur in stages?

• The client should have the right to reject the website if it fails to meet designated specifications and does not pass the acceptance tests.

11. Each party should provide specific warranties.

• In addition to the developer's warranty that there are no infringing materials, the developer should also warrant that the website will be delivered free from all known viruses and material defects, and will conform to the specifications. There should be a reasonable period of time allotted to resolve any defects or shortcomings.

• The client should provide a warranty that it is in full compliance with all applicable legal, financial and data protection matters.

• Determine how long the developer's warranty should be in effect, and set out the start date and end date.

12. Specify the types of ongoing support that will be provided.

• Determine whether the client will require training (e.g. html, CMS functionality, back-end administration, etc.) and if so, whether and for how long the developer will provide that training, and at what cost.

• Will the developer be providing support and maintenance after completion? Is this tied to a warranty period? If not, then consider signing a separate support and maintenance agreement.

• Determine the service level requirements, the costs to be billed to the customer, and billing and payment schedules.

Image courtesy of Pixabay.com

Careful preparation for meetings with the investment community seems as obvious as it is necessary. However, good intentions all too often get sidetracked and key preparations can easily be overlooked. The questions outlined below will serve as a checklist to make sure that every important item is addressed well in advance of your next investor session.

Are you a software developer?

More to the point, are you a software developer who wants to draft up a standard form of contract yourself, instead of having a lawyer do it? This checklist can help you cover the basics, but remember that it's always advisable to have a lawyer review your final form of agreement before anyone signs it, to make sure everyone's interests are addressed (it saves on litigation costs later).

Let's look at each of the sections that should be included in a standard-form Software Development Agreement, and the issues that should be addressed to protect your interests and those of your clients.

1.  Parties to the Contract

Every legal contract should begin with the names, addresses and contact information of each of the parties. If any party is a corporate entity, the jurisdiction in which it was incorporated should be included as well.

2.  Full Description of the Software and the Development Process

All of these items should be addressed. They can be briefly described in the main body of the Development Agreement, with the specific details attached as a schedule or appendix.

• Specifications of the software being developed.
• Definition of milestones, and criteria for the start and end of each phase of development.
• Timetable for deliverables.
• Progress reports, including:
  • milestones achieved and completion of each phase,
  • problems encountered,
  • timetables for problem resolution,
  • any changes to functionality.
• Testing specifications and criteria for passing each test.
• Standards and procedures to be applied.
• Customer's right to conduct quality audits and to review the developer's testing of the software.
• Installation, support and training that will be provided by the developer.
• Developer's obligation to deliver the software and documentation in accordance with the specifications.
• Customer's obligation to supply hardware, software, support, personnel.
• Provisions describing the process for customer's acceptance of the software and documentation.

3.  Background Technology

Any background technology (such as existing code and applications that will be utilized in the development of the new software product) must be described in sufficient detail, and the ownership of that background technology established - whether it is owned by the customer or the developer.

4.  Definition of "Proprietary Information"

Each party will be providing such things as business data, source code, and other types of confidential or proprietary information. The term should be well-defined, as it applies to each of the parties.

5.  Ownership of Software and Documentation

• Who owns the software and documentation (taking into consideration ownership of the background technology)?
• What are the rights of each party are with respect to licensing and sublicensing the software?
• The developer should assign its intellectual property rights in the software to the customer.
• It is also important to set out any restrictions on the use of the software (if applicable).

6.  Payments

The section of the Agreement that deals with payment of the development fee should deal with more than just how much and when payments are to be made. All of the following should be addressed:

• The payment schedule should be based on accomplishment of development milestones.
• Amount of development fees and allowable expenses, including any maximum amount.
• Do expenses over a certain amount require customer's prior written approval?
• Do the development fees include applicable taxes?
• Developer's invoicing schedule and due dates for payment of invoices.
• Process for customer's acceptance of development milestones.
• Customer's right to buy out of the contract in the event of early termination.

7.  Termination

• Provisions for termination by either party, and for what reasons.
• Notice period and form of notice, which should include the reasons for termination and the effective date of termination.
• Survival of terms (such as confidentiality), licenses, and sub-licenses after termination. Which provisions will survive (continue to be binding after termination), and for how long?

8. Training

• What types of training services will be provided by developer?
• Where will the training take place?
• How long will training sessions take place, and how many participants will be accommodated?
• What sort of training materials will be provided? Who provides them?
• Is there a separate fee for training, or is it included in the development fees?

9.  Modifications to Software

• Spell out the customer's rights to modify the software, and to acquire any modifications by the developer.
• Who owns the modifications?
• Are there additional fees?

10.  Errors and Defects

• The customer should have sufficient time to use the software to detect any errors or defects in the software. This section should set a reasonable notice period, such as 90 days, during which the customer should notify the developer in writing of any errors or defects.
• The developer has an obligation to correct the problems, provided that the errors or defects did not come about by misuse on the part of the user.
• The parties must also agree on a fair and reasonable arrangement as to any additional fees for work required to fix errors and defects.

11.  Warranties

The developer's warranties to the customer should include:

• Performance of the software.
• Customer's right to use software and documentation.
• Ownership of the software, and developer's ownership of any background technology used in the development.
• Indemnification of the customer against third party infringement claims and damages.
• Survival of warranties after termination or expiration of the contract.

The customer should also provide a warranty of ownership if any of the customer's background technology was used in the development, and should indemnify the developer against claims and damages in that regard.

12.  Standard Clauses

There are certain boilerplate clauses that are included (in whole or in part) in all legal agreements:

• Procedure for giving notice by one party to the other party. It should always be in writing, and can be delivered personally, by mail (whether regular or registered/certified), by fax, or any of these.
• Governing law clause.
• Headings not to be construed as part of the agreement.
• Force majeure provisions.
• Severability of clauses, in the event that certain provisions are deemed invalid.
• No amendments unless agreed to by all parties.
• Schedules and attachments to form part of the agreement.
• Entire agreement, i.e. no other agreement exists between the parties with respect to the software development.
• Non-merger (survival) clause setting out which provisions will survive termination.

To get you started, you can find template software licensing and development contracts at MegaDox.com. These are fully editable templates which are easily customized to include all the details of your client transactions.

Image by StockSnap from Pixabay

To answer my own question, not dead yet (nod to Monty Python). But it's definitely ailing.

It seems like most of the service sectors could use a refresher course in courtesy. Remember back in the day when you would pull into a service station (keyword "service"), and a smiling attendant would come out, pump your gas, check your oil and even wash your windows? And when you paid for the gas, you might even get a free air freshener for your car! (If you're under 40, all of this will sound like some impossible Pleasantville fantasy.) Today you drive up to the self-serve gas bar, pump your own gas, clean your own windows (if you can find a squeegee), check your oil (or decide to skip it because you'll get your hands dirty and you're on your way to work), and pay by credit or debit card at the pump, thereby avoiding all human contact. Faster? Decidedly. More enjoyable? Get real. Smiling? Not.

Convenience isn't everything.

We all realize that we save money by doing it ourselves - whether it's pumping gas or bagging our groceries. Nobody is against saving money if it means skipping a few little amenities. But the whole concept of "Service" seems to have gone out the window along with those little amenities. And as a side effect of convenience, we're robbing millions of high school kids of potential after-school jobs at the gas station or the grocery store. So whatever cash we save on gas and groceries, we end up having to pay out for our kids' gas and cell phone bills.

What exactly is "customer service"?

The term "customer service" is made up of two words that naturally go together. Customer Service is defined as "an organization's ability to supply their customers' wants and needs." The definition of a customer is someone who purchases goods or services (that word again).

Whether our business is located in a brick and mortar building, online, or a combination of both, when we serve a customer we are promoting our brand. The way in which we serve that customer will shape how they perceive our business and will determine not just whether or not the customer will return, but also what they will have to say about us to family, friends and colleagues.

Customer satisfaction is essential!

Every business owner knows that a business survives solely on the goodwill of its customers. No matter how deep the pockets of your investors are, no matter how flashy and cool and sexy your products are - if your customers leave your store feeling unsatisfied or unhappy, your business is doomed.

Bad  word-of-mouth gets around pretty quickly these days via X, Youtube videos, Google Reviews and other customer complaint / review websites. This morning's bad customer experience can become this afternoon's trending topic on X. Your marketing fail could soon be plastered all over the Internet for all to see, and your brand can be dragged through the virtual mud.

For a business that relies on local visitors - such as a restaurant -  this is the kiss of doom. You now will have to look at spending a lot of time, effort and cash cleaning up the PR mess and hoping people will forgive and forget. Or you could just take steps to avoid it in the first place.

How to level up your customers' satisfaction level.

Let's go back to that definition of customer service and the part about "supplying a customer's wants and needs." How can we know what they want and need? Well, you can get a clue as to what they NEED by the fact that they've come to your shop or website.

If you sell cars, chances are they're not shopping for window blinds. So you have your first clue - now you narrow the field by asking them what they're looking for, then leading them to the items that fit that description. Narrow the field more by determining the price range, color, size, and other factors that will ultimately affect their decision to purchase.

We've dealt with what the NEED. But what do they really WANT? That part is pretty easy. They want what YOU want - to be dealt with respectfully and fairly, and to be treated as a person. An important person. Someone whose opinion matters. Someone whose time is as valuable as yours.

Personal Example #1: Lousy customer service.

I'm going to share an incident that happened to me not long ago. I went to the Customer Service counter in Real Canadian Superstore to ask a question. There were three people behind the counter who were obviously enjoying themselves, joking and giggling together. Unfortunately there were also three of us customers standing on the OTHER side of the counter waiting, and waiting, and waiting, while they had their little laugh fest, and we were not amused. After a couple of minutes of wasting my valuable time, I gave up and left.

Now to be fair, I've had positive experiences with Superstore's customer service people on other occasions. But THIS one stands out in my mind. Do I still shop there? Yes, but only because they have a big gluten-free section and their prices are better than the competitors. (Celiac disease sometimes means compromise.) But just because I want to save money doesn't mean I want to cease being treated like a human being.

Every business, no matter the size and no matter the clientele, must train their staff to be prompt, courteous and respectful. Don't waste our time.

Personal Example #2: Great customer service!

Now let's take an example from the other side of the aisle. I stopped at Tim Horton's one morning to fill up my travel mug with Tim's Dark Roast. The lady behind the counter got my coffee for me and then asked me if I was right- or left-handed. Why? Well, so she could put the lid back on my travel mug with the drinking spout on the appropriate side. Now THAT is great customer service.

One last tip for client-facing staff.

Remember to SMILE! If you don't enjoy your work, then you should go work somewhere else. Don't take it out on your customers. We didn't hire you - we're just standing in line waiting to be served.

You may be asking, "How do you do all this if your business is online? How can I strike up a meaningful relationship with people I've never met?" Well, people chat with customers on social media every day. "Prompt, courteous and respectful" still apply. Using the words "Thank you" liberally in your emails, post-checkout pages, and contact pages will make your customers feel appreciated.

And yes, you can SMILE with your telephone voice and with the words you use on social media!

Make customer service part of your everyday life.

Let's keep Customer Service alive and well by practicing it every day in our own businesses, and by reinforcing it in others whenever we encounter it in our lives. If a support person or salesperson meets or exceeds your expectations, let them know - and let their supervisors know too. Recognition is like a pat on the back - it encourages people to strive to do their best at all times. If your employees are doing their best for your customers, word will get around and your business will be all the better for it.

Image by Tumisu from Pixabay

Several hundred people die in workplace fires in North America each year. Would you know what to do if a fire broke out in your workplace?

Many commercial buildings distribute emergency safety plans to each of their tenants, and hold fire drills once or twice a year to give workers a chance to practice their escape. But if your company has not developed its own fire safety plan yet, here is a set of steps to follow to help you escape a fire emergency.

Seven Steps to Take Before an Emergency Arises

1. Determine your escape route. Map out a floor plan of the office and highlight the main escape route, with all exits clearly marked, including windows if those windows can be used as an exit. Advance planning will reduce confusion and minimize panic in the face of an actual fire.

2. Know the location of all fire alarms, sprinklers, fire extinguishers and hoses in your vicinity.

3. Establish a safe muster point where all staff will meet after escaping. For instance, you could designate a parking lot down the street as the location where all personnel will report so they can be accounted for. Keep an up-to-date list of all personnel so that each person can be checked off when they report in.

4. Review the emergency plan regularly with your staff. Provide each new employee with a copy of the plan as part of their orientation.

5. If your building does not have regular fire drills, schedule your own fire drill twice a year. Practicing the routine ensures that everyone knows what to do and where to go. Every second counts in an emergency. Fire drills give you a chance to review the procedures, improve response time, refine the escape plan and ensure that everyone gets out alive.

6. Make sure your evacuation plan provides proper arrangements for persons with special needs. Ensure that building management is aware of any staff member who will need assistance in case of an evacuation.

7. Appoint a fire warden and deputy fire warden to take charge during the emergency and direct people to the exits. The wardens will also be responsible for taking attendance at the muster point after evacuation.

What to Do If a Fire Starts

• STAY CALM - DO NOT PANIC. Easy to say, but hard to do when smoke and fire are involved. The more you concentrate on getting out alive, the less time you'll have to panic.

• If you discover a fire: (1) pull the fire alarm; (2) call 911; (3) evacuate quickly.

• Assist any disabled or incapacitated employees to get out of the building.

• Breathe through your nose to filter out smoke particles. If at all possible, place a wet cloth over your mouth and nose.

• Go to the nearest emergency exit and take the stairs. DO NOT USE THE ELEVATOR.

• If you can't see an exit sign, try to visualize the room around you and picture where the exits are. Locate a wall and follow it. It will eventually lead to a door or window.

• Listen for sounds from outside, as these can act as a guide to the exits.

• If you get trapped by smoke, crouch down as low as you can. Hot air rises, so any cool clean air will be found close to the floor.

• If there's anyone else with you, work with them to find an escape route. It will help both of you feel more confident and less likely to panic.

• When you find an exit, assist others who are still in the building by shouting or making other loud noises at the exit to guide them to your position.

• Check doors for heat by touching them, using the back of your hand and starting near the bottom. If the door feels hot, that means there's a fire on the other side. Close doors quickly if smoke or heat blow in. Shut all doors behind you when leaving.

• If the smoke is too thick for you to see, shuffle - don't walk. Keep your weight on your rear foot and use your forward foot to check the floor for openings (such as stairwells) and obstructions (such as furniture).

• If you have to use stairs to escape, go down backwards. This will keep your head nearer the stairs and cleaner air. Or, alternatively, go down in a sitting position which enables you to grip the stairs to prevent falling.

• If you're trapped and can't find an escape route, call 911 and give your exact location. If you're near a window, signal for help with a flashlight or something brightly colored.

• Once outside, meet at your designated muster point. If someone is missing, immediately alert the emergency personnel on scene.

Image by ThePixelman from Pixabay

Before you start that major renovation...

Are you planning to use a contractor to renovate your home? Before you do, have a set of plans drawn up and enter into a written construction contract with the contractor so the project can be performed in accordance with your specifications. These are critical items that will protect your interests as a homeowner and the interests of the general contractor as project overseer.

Here are 10 good reasons to have a written renovation contract signed and in place before you start.

1. A written contract creates a binding legal agreement between you and your contractor. It sets out the rights and obligations of each party and ensures that there is a permanent record of the terms agreed to between you and the contractor.

2. A contract may help to protect you against financial loss or personal liability in the event of accidents or injuries on the work site.

3. A clearly written contract can reduce confusion and misunderstandings by detailing what each party expects and requires from the other party.

4. Your contract should also list the work that is NOT included, such as work that should be done by you or by third parties who are not parties to this contract (for example, tile work to be done at a later date might be covered in a separate contract between you and the tiling contractor).

5. The contract should include all initial costs and estimates for the renovation project.

6. A written contract clarifies things like (i) the timing of the construction and expected complete date, (ii) the dates on which progress payments are to be made and the manner in which those payments are to be made, (iii) the procedure for any changes to the work, and (iv) the contractor's responsibility for carrying liability insurance and workers' compensation.

7. A good renovation contract also provides how any disputes that arise between you and your contractor can be resolved.

8. The contract will give you a means of being released from your contractual obligations if the contractor defaults in performing its obligations.

9. The contract should specify a warranty period for defects in workmanship or materials within a reasonable time period so the contractor can fix those defects which are detected within the stated warranty period.

10. Lastly, a contract that has been signed by both parties clearly establishes that the terms and conditions contained in the agreement were found to be reasonable and acceptable at the time that they signed it.

Image by Iqbal Nuril Anwar from Pixabay

Strategic planning is critical to the success of your business. It is an opportunity for management and staff to brainstorm and discuss a wide variety of ideas that might not otherwise be suggested or considered as potential strategies. It also reinforces the company's core values and sharpens the focus of the whole team on the mission, the goals and the objectives.

Aim to hold a strategic planning meeting for all key personnel once a year, and encourage departments to hold followup sessions at 3- or 6-month intervals for executive managers and department heads.

Bring a copy of your current business plan to the meeting so it can be referred to when needed. Keep in mind the purpose of the meeting: to evaluate past projects and goals and to develop new strategies based on opportunities discovered through market research and analysis.

The 11-Step Checklist

Following these 11 steps can help you set the stage for a more creative and productive strategic planning meeting:

1. Pick a venue that is outside of your business premises. Look for a casual and quiet setting with few distractions so that the participants will feel relaxed and can focus on the business at hand.

2. Provide beverages and snacks and, if the timing and duration of the meeting calls for it, bring in lunch or dinner.

3. Leave the titles at the door. Make it clear that each person will be treated as an equal, no matter what their position in the organization may be, and that everyone will have an equal voice in terms of suggestions and criticisms.

4. Comfort counts. Promote a more comfortable atmosphere by inviting everyone to dress casually.

5. Encourage open discussion of the topics. This will not only stimulate more brainstorming as the meeting progresses, but it will also serve to fully define the subject and determine its merits.

6. Celebrate strengths and look for solutions to weaknesses. Don’t let the meeting devolve into a "bitch session". Point out ideas that merit consideration and explain how certain suggestions may not fit into the overall scope of the company’s strategy. 

7. Don’t try to prioritize ideas brought forth in the meeting. This is mainly a brainstorming session where ideas are explored in relation to their strategic impact on the business, and they are best discussed and explored as they are suggested and not according to an imposed agenda.

8. Encourage brainstorming. Provide the means for people to advance ideas visually and immediately to the whole room - white board, flip chart, colored markers, etc.

9. Cover each topic thoroughly before progressing to the next. Keep in mind that you are exploring strategic solutions. When discussing each subject, come up with realistic timelines for specific actions to be taken after the meeting has been adjourned.

10. Within a week of the meeting, write a summary of all the ideas discussed at the meeting and circulate it to everyone who is part of the strategic planning team.

11. Follow up at regular intervals to ensure that progress is being made in implementing the ideas that were adopted.

Image AI generated by Pixabay.com

This is a question that we get asked frequently, so it seemed like a natural topic for a blog post. Let's do a comparison of the two structures.

Formation and Duration

A partnership is a business entity that is not registered as a corporation or a limited liability company and which is owned and carried on by two or more parties for the purpose of generating profit for the partners.

A joint venture or (JV) is formed when two or more parties join together to take on a specific project. The parties share the costs and the risks, as well as any gains and benefits, and contribute money, property, effort and know-how to the venture.

While a joint venture is usually set up for a fixed time frame (i.e. the life of the project), a partnership is typically long-term and is intended to carry on as long as the partners want to continue doing business together.

Participants in a JV do not usually intend to conduct a common business with the other co-venturers, and they're free to carry on their own businesses outside of the business of the JV. Partners in a partnership, on the other hand, are typically already carrying on their business within the context of the partnership (for instance, attorneys or accountants).

Participants' Contributions to the Business

Participants in a joint venture are required to contribute money, property, expertise, knowledge, time and other resources to be used by the joint venture. They are also entitled to receive a percentage of the revenues or proceeds from the business of the joint venture in proportion to the resources they contribute.

In a partnership arrangement, the partners may also contribute money, property, know-how, and other resources to the partnership, but they are not required to do so. Partners are also entitled to a commensurate share of the profits from the partnership.

Partners usually intend to treat any property contributed to the partnership as partnership property. In a joint venture, the property contributed by the co-venturers is returned to each of them when the joint venture is wrapped up unless it has been sold to the other participants.

Management of the Business

The day-to-day business of a joint venture might be carried out by one co-venturer on behalf of all of them, but usually major strategic and operational decisions will require the consent of all the participants and cannot be made by one co-venturer as agent for the rest. This helps to ensure that the participants have mutual control.

In a partnership, mutual control is not always a consideration. Sometimes only particular partners (such as senior partners in a law firm) have management roles. And a general partner can act as the agent for all other partners and can transact business and enter into contractual obligations and debts without the consent of the other partners.

Risks and Benefits of Each Type of Entity

There are risks in either type of relationship and it is important that you have a good level of trust in the people you are partnering or venturing with. Do some background checking on the other parties to make sure you feel comfortable about entering into a relationship with them.

• A partnership can incur obligations on its own account (much like a corporation) but a joint venture cannot - only the participants (co-venturers) can sign contracts and incur debts.
• In a partnership, each partner is jointly and severally liable for the debts and obligations of the partnership, with the exception of limited partnerships, in which the limited partners' liability is capped. In a joint venture, each participant is liable only to the extent of its interest in the JV.
• As for benefits, a partnership operates on the expectation that it will produce profits for the partners. That is the chief benefit that all of the parties work towards. The benefits of participating in a joint venture, on the other hand, may be tangible (such as development of a real estate property) or intangible (such as R&D of a new manufacturing process).

Tax Considerations

There are significant differences between the way taxes are calculated for joint ventures vs. partnerships, and tax laws vary from country to country. International ventures must also be aware of the rules governing their business under existing or future double tax treaties. Obtain the services of a tax consultant who knows the tax laws for partnerships / joint ventures in your own country and in any other country you're going to be doing business in.

For legal purposes, neither partnerships nor joint ventures are considered corporate entities separate and apart from their participants. But for income tax purposes, the net profit or loss of a partnership (i.e. expenses, capital cost allowances, etc are deducted) is calculated before a share of the net profit or loss is allocated to each partner, even though the partners will be taxed on that allocation. In a joint venture, the gross revenues / production, expenses, and capital receipts and outlays are allocated among the co-venturers based on their respective interests, and each of the participants then calculates its own net profit or loss and tax payable.

Selling or Transferring a Partnership or JV Interest

The transfer of a partnership interest typically requires the consent of the other partners. And because the partners generally have an indirect interest in the property and assets of the partnership, a partner can transfer its interest in the partnership itself but NOT its interest in the partnership assets. The partnership retains the beneficial interest in the partnership assets as long as the partnership is in operation, and the partners will not be entitled to a share of the net proceeds from those assets until the partnership is dissolved.

In a joint venture, the co-venturers retain their individual ownership of the property they have contributed to the joint venture, so they have full control over the contributed property. This means that the assets of the joint venture are not owned jointly by the co-venturers, and typically a co-venturer would be able to sell its interest without obtaining the consent of the other co-venturers (subject to any rights of first refusal the other participants may have under the terms of the Joint Venture Agreement).

A partnership interest is generally considered capital property for income tax purposes, and the sale of that interest would result in a capital gain or loss. An interest in a joint venture is not considered capital property and is taxed on the same basis as the sale of an interest in each of the assets of the venture.

Death of a Participant

Since a joint venture is usually limited to a single project or undertaking and only exists for a finite time, the death of one of the participants will not normally terminate the joint venture (unless the joint venture contract is a personal service contract), whereas the death of a partner has a significant impact on a partnership and may well mean the end of the partnership.

Put It In Writing

Whether you're setting up a partnership or joint venture, Do Your Research and get legal and accounting advice before you start. The participants should then put together a written agreement which clearly defines the terms of the relationship, the responsibilities of each of the participants, a procedure for transferring a party's interest, and a mechanism for terminating the agreement.

A written agreement is required if you intend to make a joint venture election for tax purposes. It is important to agree in writing as to the value of each participant's contribution of capital and resources, and to specify the proportionate interest of each participant in the profits or production of the JV in order to reduce the potential for conflict down the road. For instance, if the JV's activities involve the manufacture of products a participant's specified interest might be a percentage of each product produced.

Consult an Expert

Keep in mind that the foregoing information is a generalization and is intended as an overview. To get information about the specific laws and requirements in your area, you should obtain legal and financial advice from local experts.

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