What Is a Joint Venture?

Originally published by Austin TX Business Law Blog.

As a business owner, you may have come up with a great idea to expand or generate more revenue. Sometimes, however, you may have limited resources that prevent you from pursuing these types of ventures. If this is the case, you may want to consider a joint venture. Joint ventures are not just for big companies, although this is often the case, but for small companies too.

What is a Joint Venture?

A joint venture is when two or more businesses come to an arrangement where they combine resources to reach a certain goal. It is a cooperative arrangement between business entities in order to pursue a new business activity. Usually, a joint venture is established for a set time period in order to complete the goal that has been set forth.

To create a joint venture, the parties involved enter into a contract, a joint venture agreement. There is no requirement that something be filed with the state or federal government. The agreement should set forth what each party will be contributing to the arrangement. This may be money, property, assets, or other resources. Additionally, the agreement should set forth how profits and losses will be divided as well has management and control over the venture will be structured. While a joint venture has many similarities to that of a partnership, the central difference is the fact that a joint venture is limited in duration. A partnership is usually a long-term business relationship.

A joint venture may be set up in one of two ways. The parties involved may simply set out to combine resources and pursue the joint venture in the way set forth in the joint venture agreement. In the alternative, the parties may agree to establish a separate, independent business to handle the work associated with the joint venture.

To help ensure a successful joint venture, the parties involved should clearly set forth the goals and expectations of the endeavor in the joint venture agreement. The relative expertise, resources, and investments of the parties should be balanced and there should be an attempt to integrate both the cultures and management styles of the entities involved. As in most business ventures, there should be dependable leadership and support available throughout, but this can be especially important in the initial stages. Having a clear mission and purpose can also help motivate and guide everyone involved in pursuing the goals of the joint venture.

While business partnerships, such as that established in a joint venture, can be complicated, there are many benefits to consider when deciding on whether a joint venture is something that you want to pursue. For example, you have the opportunity to access new business markets and channels of distribution. Working with another business means access to specialized resources and expertise in different areas of research and development. You strengthen both financing and purchasing power. While you gain the resources and expertise of the other businesses involved, you both carry the risks and costs of the venture.

Business Law Attorney

If you are considering a joint venture, we at the Kumar Law Firm are here to provide you with sound legal advice to protect your best interests going forward. Consult with us on what you are considering and we will help guide you in the right direction. Contact us today.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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