Partnering with others in business can open doors to exciting opportunities, increased resources, and shared expertise. Before committing to a business partnership, it is essential to consider the legal set up. It will help address issues such as business goals, financial responsibility of each party, legal liability and exit strategies.

Some of the common ways parties can start a business partnership are:

• Setting up a partnership

A partnership is formed when two or more individuals agree to operate a business together, sharing profits and responsibilities under a partnership arrangement. Partnerships in WA are regulated under partnership legislation. This structure is often documented through a partnership agreement, which outlines each partner's contributions, profit-sharing ratios, and decision-making processes. Partnerships can take various forms, such as general partnerships or limited partnerships, each with different liability implications. While partnerships benefit from combined resources and expertise, they also come with risks, including joint liability for debts. This structure is commonly used in professional services, such as law firms and consultancies, where collaboration enhances service delivery.

West Perth Legal can assist with setting up partnerships and provide legal advice on or draft partnership agreements.

• Setting up a company

Incorporating as a company creates a separate legal entity that provides limited liability protection for its shareholders. This means that the personal assets of shareholders are generally protected from the company’s debts. Companies must comply with strict regulatory requirements and corporate governance standards, making this structure more complex and costly to set up compared to sole traders or partnerships. However, the ability to raise capital through share issuance and the perpetual existence of a company make it an attractive option for larger businesses and startups seeking growth. Companies are commonly found in various industries, including technology, manufacturing, and retail.

West Perth Legal can assist with setting up companies, and related legal documents such as shareholders agreements, company constitution and corporate governance documents.

• Setting up a trust

Establishing a trust involves creating a legal arrangement where a trustee manages assets for the benefit of designated beneficiaries. This structure can offer significant tax advantages and asset protection, making it particularly appealing for family businesses and investment purposes. Trusts can be complex to establish and require ongoing management, including compliance with legal and tax obligations. A trust can also provide flexibility in income distribution among beneficiaries. It is commonly used in scenarios involving family wealth management, property holdings, or when specific assets need to be protected from creditors or legal claims.

West Perth Legal can assist with setting up trusts and trust documents such as unit trust agreements.

• Setting up a joint venture

A joint venture (JV) is a collaborative arrangement between two or more parties to undertake a specific business project while maintaining their independence.  A joint venture can be an incorporated or unincorporated joint venture. The joint venture allows partners to pool resources, share expertise, and jointly manage risks and rewards. Joint ventures are often formed for a limited time or specific purpose, such as launching a new product, entering a new market, or undertaking a large project. While JVs can provide strategic benefits and enhance competitiveness, they may also lead to conflicts if partners have differing goals or expectations. Clear agreements are essential to define the scope of the venture and each party's contributions.

West Perth Legal can assist with setting up joint venture and related legal documents such as joint venture agreements.

• Through contractual agreements

In some cases, parties may choose to collaborate without forming a formal legal entity, relying instead on contractual agreements to define their working relationship. This approach allows for flexibility and independence while still establishing clear terms regarding roles, responsibilities, and profit-sharing. While this method can be straightforward and cost-effective, it may offer limited protection compared to formal business structures. Therefore, it is essential to meticulously draft contracts to mitigate risks and clarify expectations.

West Perth Legal can assist with setting up contractual agreements such as collaboration agreements.

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Ultimately, the most suitable way of documenting and structuring business collaboration depends on the type of business, legal risk appetite of the parties, tax considerations, budget and compliance costs. Contact us for an obligation free quote.