HOUSTON BUSINESS REVIEW

CYA: A Lesson on Strategic Alliances, Pt. 2
By Shahara Wright

Shahara D. Wright, Business Law Attorney, "Serving businesses from start-up through expansion". You can cantact her by: calling her at (281) 980-2040, sending her an e-mail or visiting her website. For more information concerning Shahara Wright click here.

After reading Part 1, you know which business entity to form regarding your Strategic Alliance (Alliance). Therefore, Part 2 of this series is dedicated to the ins and outs of the agreement. Whether the agreement takes on the form of Bylaws, Regulations, or a contract, the document will be sure to serve as the crux of relationship. Take to companies for instance, that have complimentary businesses and decide that they want to advertise together to bring in more revenue. As with any Alliance, each company has its strength and weaknesses. One has better cash flow but the other has more visibility. They must determine how the marketing venture is going to work. Will the Alliance cover any and all marketing or just the publications that they choose one by one? Will the Alliance be allowed to grow into other areas or just stay with Marketing? In addition, how will they advertise? Together, they must decide if they will use one name or both. If they are in two separate and distinct locations, whose phone number will they use? What about location? How will they distribute the phone calls? How will the profits from the advertising be split? What if one’s services are needed more than the other’s?

Trust and communication are the only way to construct a good Alliance contract. Understanding this answers the legal question of consideration and helps to define the nature of the agreement. If the first business has more cash flow, it can certainly advertise by itself. However, the second business’ services are requested more often and the first company does not provide such a service. But because the second company does not have the money to do the type of advertisement needed, and the first company wants to increase revenues, they choose to join in advertisement. Knowing this, one company will be doing most of the work, but it would not have the work if it were not for the other’s financial capabilities.

Alliances are difficult creatures. Most businesses have formed only one Alliance and if they are lucky two. An honest discussion regarding expectations and desires can save you from entering into a contract that would ultimately hurt your company. If you do not feel that you can trust the particular company that you are working with, then you are sure to have legal disputes down the road. Businesses choose Alliances to improve the company or the product but rarely recognized that Alliances are not designed just to benefit one company but the other as well. Hopefully, this will get you moving in the right direction when it comes to forming Strategic Alliances. Many decisions are both management and legal and you must seek help when making formal arrangements.

This article provides general information. This article does not provide legal advice about specific legal problems. Consult an attorney about your particular situation.