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It is not usually legally binding (but it can be, depending on the circumstances). We have a separate guide that goes into more detail about this matter, called What is a Memorandum of Understanding and is it Legally Binding? If in doubt as to whether an MOU is going to be legally binding, the parties should seek legal advice. The MOU will set out the basic terms that have been discussed, and a formal contract will be prepared later. MOUs are often used when one party is buying a business, a property, or a piece of expensive equipment from the other party. It is not usually legally binding, but of course, this all depends on the particular circumstances of the parties, and in some cases, MOUs have been found to be legally binding. It is intended to be quick and easy to prepare, so that the parties can set out their basic agreement, and can confirm they are on the same page. We will discuss these options in some more detail below.Ī Memorandum of Understanding (sometimes called an " MOU") is an informal document, outlining the basic terms of a deal, but not going as far as a formal contract does. While this a process that needs to be handled through the Australian Securities and Investments Commission, we have a number of documents which can be used in the ongoing administration of the company, such as a Shareholders Agreement, Directors Resolution, Members' Resolution, Share Certificate and various other related documents.īut which structure is right for you? That's a good question. We have a Loan Agreement which can be used for this purpose.Īnd in some cases, the businesses might choose to create a new company. We have a Partnership Agreement which can be used for this purpose.Īlternatively, one business might choose to lend some money to the other business, to finance the project. Or the businesses might choose to create a partnership together.

This is a contract which sets out the details of the project. Once they are ready to finalise their arrangements, one of the most common options is for the businesses to use a Joint Venture Agreement. Alternatively, some businesses find that an Agreement Between Co-Founders is more appropriate for their circumstances. There are many ways that businesses may choose to cooperate on a project.Īs a starting point, most businesses choose to use a Memorandum of Understanding to set out the general terms of the project, before they go ahead and create more formal arrangements. These are temporary projects which the businesses are developing together. So when we are talking about a project or a venture, we are referring to the apartment development or the food festival. Once the festival is over, the project comes to an end, and the businesses could go their separate ways again. Each of the businesses involved could share in the costs of setting it up, as well as the revenue that it creates for them. Or a number of local bars, restaurants and musicians could decide to work together to set up a multi-day food festival. Once the development has been completed and all of the apartments sold, the businesses could part ways and the project comes to an end. By working together, the businesses are able to combine their resources and expertise, in order to mutually benefit from the project.įor example, two construction businesses could work together on a particular apartment development. These generally are specifically defined and temporary in nature, as opposed to a business, which may continue indefinitely. In this guide, we are talking about specific projects or ventures that several businesses might embark on together. What do we mean by a "project" or a "venture"? Therefore, it is important for you to first spend some time understanding your options, so that you can choose a structure that suits your circumstances and will help you to achieve your goals.ġ.

We have a number of documents available to help you with this, but they all serve a different purpose. If you are considering a new project or venture for your business, then there are a number of ways you may choose to structure it.