2011 aia presentation the good bad and the ugly of strategic relationships (2)
1. Forming Strategic Alliances â The Good, the Bad, and the Ugly  Austin AIA Annual Summer Conference Presented by Brenda Barrett Healey August 25, 2011 DALLAS ¡ FT. WORTH ¡ HOUSTON ¡ AUSTIN ¡ SAN ANTONIO
8. Contractual Relationship Joint Venture/Partnership Formation of an Entity/Business Initial Capital Minimal to zero; Each side pays their share of start up expenses independently Depends on terms of agreement Enough to pay for initial start up expenses and to pay for expenses anticipated until entity is generating enough revenue to pay for expenses out of revenue Should fund with enough initial capital so that owners do not have make additional capital contributions or loans to the business Individual Liability Only liability is what is agreed to in the contract or under law No liability for liabilities of counter partyâs business If construed to be a partnership, each partner has full liability for the liabilities of the partnership Assuming corporate formalities are maintained, generally not liable for debts and obligations of entity Participation in Management No participation in management of counter partyâs business General partners have the exclusive right to manage the business of venture Provided by statute and governing documents of entity Transferability of Interest Interest in contract may be assigned unless prohibited by contract Generally, a partner may assign right to distributions, but the assignee can only become a partner if other partners consent Securities law restrictions on transfer and restrictions may also be imposed in the operating agreement
9. Contractual Relationship Joint Venture/Partnership Formation of an Entity/Business Organizational Documents Contract Joint Venture/Partnership Agreement Certificate of Formation Bylaws , Company Agreement or Limited Partnership Agreement (or appropriate variation) Organizational meeting minutes or consent SS-4 If corporation, may have S Election form If corporation â Stock certificates If Corporation â Shareholder Agreement Accounting No need to establish separate books for the relationship; but each party has to appropriately account for the costs paid and revenue received from the relationship Partnership should keep separate books and records Must keep separate books and records Fiduciary Duties None Fiduciary duties to partners Governing body owes fiduciary duties to owners
10. Contractual Relationship Joint Venture/Partnership Formation of an Entity/Business Ownership of Work Created during relationship As specified in the contract Partnership generally Entity owns Termination of Relationship Defined term Must set a defined term when the relationship ends; can always be extended if things go well Can have a defined term but not required Is possible to have a defined term but typically do not Removal or Withdrawal of a counterparty Would likely be breach of contract and subject to damages Removal or withdrawal of a partner Removal or withdrawal of an owner Matters to attend to at termination Contract dictates what happens on termination and when termination occurs. Typically no assets of the venture so nothing to transfer Agreement and law provide procedure and requirements for dissolution and distribution of assets. May require final tax return Sell (or transfer in exchange for some value) all remaining assets and distribute to all owners in accordance with formation documents File appropriate legal paperwork to dissolve File final tax returns upon dissolution