What Is an Alliance Agreement?
An alliance agreement (also known as a partnership agreement) is a formal document solidifying the alliance between two business partners. The purpose of why businesses decide to have a joint alliance is to accompany each other to achieve a common goal, which most likely concerns profits. Some businesses forge alliances with other businesses if ever they have an upcoming project that requires the goods of other businesses. For instance, a real estate business proposed a construction project to build more residential towers or buildings for lease, but they don't have the materials to make it possible. So, they reached out to other businesses that are capable of supplying construction materials and forged an alliance with them. Hence, they now have a business partner that plays the role of a supplier.
An alliance between two businesses can also be for marketing purposes or simply for strategic purposes. There are some lesser known businesses that forge alliances with bigger businesses to give themselves publicity, which is a huge marketing advantage. This is what you call a strategic alliance (also known as strategic partnership).
How to Write an Alliance Agreement
As a businessman, it's expected that you know the importance of forging an alliance with other businesses. As the saying goes "No man is an island". With that in mind, we have gathered a few tips to help you write an effective contract agreement.
1. Choose an Appropriate Title
The first thing to do when writing an alliance agreement is to decide on a title. You can do this with the help of your business partner. You can either use both of your last names or the names of your businesses as the title. For instance, Stark and Parker Business Alliance, or Rand Enterprises and Wayne Enterprises Alliance. Basically, you can choose any title as long as it gives a hint of who's and what's involved in the simple agreement.
2. Identify Your Roles
In every partnership, both entities must have a role. Otherwise, what's the purpose of having a partnership or alliance in the first place. The alliance agreement must have clear statements about your business's role and the role of your business partners. Before doing this process, thorough negotiations and discussions must first be done before writing them in the alliance agreement. See to it that you and your business partner agreed and accepted your respective roles in your alliance.
3. Elaborate How Both Businesses Profits
The ultimate purpose of most business alliances is to maximize profits. It's simply the number one motivation on why a business decides to accept alliances with other businesses. It's very likely that you and your business partner have the same motivation. Hence, that's the reason why you should elaborate on how both of you will profit out of your alliance. You can create a detailed breakdown of how the finances will flow, most importantly on how profits will be dispersed.
4. Implement Methods to Resolve Possible Disputes
If major issues arises between you and your business partner, it's important to resolve it immediately to avoid further consequences which might lead to huge financial losses. You can implement that if ever major issues arises, it'll be resolved at court in front of a judge. But the best method to resolve business disputes is through mediation and arbitration.
5. Proofread and Review
Before you print and affix your signatures in the alliance agreement, make sure to proofread and review it first. Double check if all the factors that you and your business partner agreed upon are present in it, and make sure they're accurate.