Key points for any strategic alliance agreement

In my LinkedIn Discussion group, Successful Business Partnerships, my colleague, Marian Banker brought to light an article by Ivan Hoffman, Esq., on “The Strategic Alliance.”

One of the key aspects of an alliance is its flexibility – it can be whatever you want it to be. But that flexibility mean that you need to define those parameters. In writing. Because there is no exact legal relationship (like there is in forming a corporation or LLC), it’s up to the parties to define the legalities of their relationship by contract.

What should you include in a strategic alliance agreement? Hoffman suggests you spell out:

1. The nature and purpose of the relationship
2. The term (length of time) you want it to be in place
3. Participation rights — who’s entitled to what and when.

I’d also recommend that you pay particular attention to two key issues:

• Money. How will the money flow? Usually, because a strategic alliance is not a company unto itself (it’s two or more independent companies collaborating), it doesn’t have its own bank account. So if “the alliance” gets paid by a client, to whom does the check get paid? Whose bank account gets the deposit?
• Intellectual property. If any kind of intellectual property is involved, both alliance members are, technically, entitled to use 100% of what’s created for their own purposes, unless there’s a written agreement otherwise.

These are not pretty issues to have to untangle should you and your “ally” go separate ways.