What is a joint venture?

 

A joint venture is a way of structuring a business venture. A joint venture involves two or more businesses pooling their resources together to carry out an entrepreneurial plan and achieve a particular goal. In forming a joint venture, not only are the resources and expertise of the businesses shared, but the risks and rewards are also shared.

Businesses form joint ventures for all sorts of reasons. Often, a joint venture is pursued in order to expand into new areas, which may or may not be closely related to their current operations, and they are often useful for expansion into new markets, especially overseas markets.

A joint venture may be formed either by simply entering into an agreement that sets out the terms of the joint venture, or by setting up a separate business entity. If a new business entity is formed, the types of business structures that will normally be suitable are either: a business partnership; a limited liability partnership; or a company.

A company and commercial solicitor can advise on the most appropriate structure for your particular venture. A company and commercial solicitor will make a thorough investigation of the proposed joint venture before deciding on an appropriate way of structuring the arrangement. It is important to get this right initially in case any problems arise later.

A commercial lawyer will also advise on the precise terms of the written agreement that underpins the joint venture. This will need to include terms covering: the financial contributions of the parties; the ownership of assets, including intellectual property; how profits, losses and liabilities are to be shared; how management and control will be allocated; and broader considerations such as the objectives of the joint venture. Your commercial lawyer should also include provisions on what will occur if a dispute arises and how the joint venture can be terminated.

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