A joint venture agreement is suitable for two or more businesses wishing to come together for a specific project for a specific length of time but who do not wish to be bound together indefinitely. For those wanting to work with someone on a more long term basis then a partnership agreement may be more appropriate.
The main advantages of a Joint Venture are independence, cheapness and simplicity as compared to a partnership agreement.
There are great benefits to entering into a joint venture including:
- Access to new markets and distribution networks
- Increased capacity and more resources
- Sharing of risks with your partner
- Access to specialised staff and technology
Success in a joint venture depends on thorough research and analysis of aims and objectives. These should then be incorporated into a written joint venture agreement. Trust forms a key element of successful joint ventures and agreeing exact terms when you set up your joint venture will help to minimise these risks and give the confidence to enter fully into your relationship without reservation.
Key clauses in a Joint Venture Agreement include:
- The initial and future contributions of the joint venture partners
- The structure of the joint venture, eg whether it will be a separate business in its own right or on a contract basis
- Management and control, eg respective responsibilities and processes to be followed
- How liabilities, profits and losses are shared
- Resolution of disputes between the partners
- Sale and transfer of partnership status
- Ending the joint venture
There are two main types of joint venture. The most common is a contractual joint venture, where you can establish an agreement to co-operate, without setting up a separate business. For larger or more complex projects an incorporated joint venture, where you set up a separate business in order to carry out a particular activity or project may be more appropriate.
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