A Joint Venture Agreement (JV) is a business partnership where two or more parties collaborate to leverage their strengths for profit. It can vary in form and requires careful planning regarding goals, roles, and structures. Embarking on a joint venture can be an exciting opportunity for businesses to combine strengths and pursue profitable ventures together. However, navigating the complexities of a JV requires careful consideration and planning to ensure its success. To learn more about joint ventures, from their benefits to what the right process is, continue reading to learn more.
A JV is a business arrangement between at least two parties with a view to realizing profit by working together and leveraging from each parties’ respective strengths.
A joint venture may take a number of forms, from a contractual arrangement up to including establishing a new legal entity with each party as shareholders. There is no such thing as a standard JV. Done properly, joint venture’s can be highly profitable arrangements. However, there is also considerable potential for things to go awry if parties do not take the time to consider their goals and the basic elements of their JV. Before you enter into a Joint Venture Agreement (JV), you should properly consider the legal and practical considerations. We have put together a list of 8 issues that you should consider before entering into a JV.
Below are some tips for parties to keep in mind before entering into a joint venture. Above all else, it’s important that parties engage in open and frank discussions to allow themselves the flexibility to maximize the commercial benefits of the JV.
A party to a JV’s reputation will be tied to their JV business partners’ reputation. The wrong partner can undo many years of goodwill a business has accumulated. Parties should consider undertaking a brief check of the credentials of their business partners to ensure that there are no hidden time bombs which could affect the JV.
These searches may include searching court records, credit histories or reviewing financial/accounting records. Be aware that your potential JV partners may also be undertaking a check of your own history
– so it may be in your interest to ensure that any potential issues are disclosed early on.
Parties to a JV should agree on the objective of the JV and their respective roles before starting any work on the JV itself. What will each party do, and how will they do it?
How will any property (including intellectual property created by the JV) be owned and dealt with? Who will be part of the management team for the JV and what will their obligations include?
Also consider the scope of the business and territory of the JV. Are there any carve-out areas or exclusions that any individual party may retain for themselves. Once agreed upon, these terms should be documented in a written agreement, including the performance indicators so that each party will know how every partner is contributing to the JV.
