Consultancy agreements are contracts between consultants (either self-employed or through an intermediary company) and their clients to provide consultancy services.
The consultant must provide the services with due care and protect the client’s confidential information. The consultant is entitled to remuneration for their work. The consultant is liable for any losses incurred by their negligence or a breach of duty, and is thus advised to have appropriate insurance.
The client must remunerate the consultant for their services. The client owns all copyright and intellectual property arising from the consultation.
Purposes of a Consultancy Agreement
- To appoint a self-employed consultant to provide services.
- To appoint a consultant through intermediary company to provide services.
- To provide consultancy services to a business on a self-employed basis.
- To provide consultancy services to a business through an intermediary company.
- Start date and duration
- Type of consultancy work arrangement - determines remuneration
- Mutual termination and notice
Consultant’s rights and obligations
- Provide consultancy services.
- Invoice client periodically.
- Protect client’s confidential information.
- Professional liability insurance.
Client’s rights and obligations
- Own all ensuing copyright and intellectual property rights.
Lawyers to be used
- When the consultant is involved in creating IP central to client’s business.
- Consultants generally own the intellectual property they create unless otherwise agreed. When the IP they are creating is central to the client’s business, it is especially important for lawyers to ensure that the client will own all IP rights arising from the work.
- When the consultant is or may become a managed service company.
- As independent contractors, consultants are responsible for paying their own taxes. The exception is managed service company consultants who must pay tax as though they are an employee of their client. Lawyers are needed to identify the appropriate payment structure for such consultants.
- What is a Managed Service Company? This is a service company that provides contractors who are also shareholders. The contractors work through their own limited company, and receive income subject to less tax than if they were employed by the company.
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