In today’s business world, partnerships are a powerful way to grow, innovate, and reach new markets. Whether you're co-developing a product, bidding on a joint tender, or launching a new service together, working with another business can offer huge benefits. But how do you make sure that everyone is on the same page and protected when the project begins? That’s where a collaboration agreement comes in.

What is a collaboration agreement?

A collaboration agreement is a legally binding contract between two or more parties who agree to work together on a particular project or initiative. It sets out the terms of the relationship, who is responsible for what, how money is handled, and what happens if things go wrong, or right.

It's not a company merger or joint venture (though those may follow later). A collaboration agreement is often used where two independent businesses wish to keep their own identities but work together for mutual benefit on a defined project.

Why use a collaboration agreement?

Even if you're working with a trusted partner, it's essential to get the terms of your collaboration in writing. Here’s why:

• Clarify responsibilities – Avoid misunderstandings about who is doing what.
• Protect confidential information – Ensure sensitive business know-how is kept secure.
• Manage finances – Agree upfront on costs, payment terms, profit-sharing, or loss allocation.
• Set timelines – Define key milestones and delivery dates.
• Address disputes – Include clear procedures for resolving disagreements.
• Protect intellectual property – Decide who owns what before and after the project.

Without a written agreement, you risk disputes, confusion, and costly fallouts later on.

Key clauses to include

A well-drafted collaboration agreement will usually cover:

• Purpose and scope of the project
• Roles and contributions of each party
• Intellectual property rights—who owns the outcome?
• Confidentiality obligations
• Funding or profit-sharing arrangements
• Timelines and performance expectations
• Termination rights—how to end the agreement
• Dispute resolution procedures

Depending on the nature of your project, other clauses may also be needed, such as compliance with regulations, insurance, data protection, and more.

Case study: Two tech companies collaborate on a new app

Let’s say BrightSpark Marketing Ltd , a digital agency based in Manchester, partners with CodeCrafters Ltd , a software development firm in Leeds, to create a new social media app aimed at small retailers.

They agree to:

• Work together for six months to develop and launch a beta version of the app.
• Share the development costs 50/50.
• BrightSpark will handle market research and user testing.
• CodeCrafters will handle all coding and software development.
• Profits from the app (once launched) will be split equally.

To formalise this, they enter into a collaboration agreement . It spells out:

• Each company's role and responsibilities
• Ownership of the app's intellectual property (to be held jointly)
• Confidentiality of user data and designs
• What happens if the app is successful—or if one party wants to exit early

By having the agreement in place, both parties know where they stand. It reduces risk and gives them a roadmap to follow, ensuring the project runs smoothly.

In short

A collaboration agreement doesn’t have to be complex, but it should be clear, tailored, and legally sound. It gives your business the protection and clarity it needs when embarking on a joint project.

If you’re thinking about teaming up with another business, consider getting legal advice early so your collaboration starts off on the right foot.

If you’d like help with drafting or reviewing a collaboration agreement, feel free to get in touch. It’s a small step that can make a big difference.  

Contact Sarah Naylor on 01302 320621 or at sarah.naylor@switalskis.com.