Joint Venture

A Joint Venture (JV) is a contractual agreement entered into by two or more business entities for the purpose of a specific project or other business activity. Typically, all parties agree to share in the profits or losses of the business venture.

Often the parties to the joint venture enterprise will create a separate business entity such as a corporation or partnership, to which the joint venture parties contribute assets, take equity positions, and agree on how this entity is managed and operated.

Joint ventures are often entered into for a single purpose but they may also be formed for a continuing purpose. Joint ventures are an effective way to unite the strengths of the different partners allowing them to take a more prominent role in the market place.

The joint venture agreement should at a minimum include details of the purpose, how the two (or more) parties share in profits and losses, how the parties share in making decisions about the joint venture and how the parties will deal with disputes and cash contributions. The intention of the parties is an important factor in determining whether an arrangement constitutes a joint venture or a partnership. Although the definition of a joint venture may seem very similar to that of a partnership, when a partnership is formed, the partners normally intend to treat any property as partnership property, and each partner ordinarily acts as the agent of all the other partners.

The intention of the parties is often apparent in their conduct, the nature of the undertaking and the other circumstances of the arrangement. Unlike a partnership, A joint venture is almost invariably confined to a particular defined business undertaking.

At Sodagar & Company, we can assist with the preparation of your joint venture agreements and set up structures to suit your business objectives. Please contact us to see how we can be of service.

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