What does joint venture mean

You may find it difficult to work with the other business and have to sort through disputes. The joint venture could end badly and result in wasted time, effort, money and resources. The project or goal you've taken on through the joint venture could end up failing. You can open yourself up to additional liability and other legal risks by working with another business especially if you don't create a separate entity for the joint venture. As you can see, there are both advantages and disadvantages to forming a joint venture and you'll want to weigh these points against one another before deciding if this type of arrangement is right for your business.

As we've explained, companies or business owners commonly form a joint venture to access new markets, gain an edge over competitors, or tap into complementary resources. Therefore, if you think this type of arrangement may be a worthwhile opportunity for your business, here are the steps you'll need to take to form one:. First, finding a joint venture partner or more than one partner for larger joint ventures starts with clearly defining your objective. You can ask fellow business owners what distributors they use and do some independent market research.

Then, reach out to different distributors to gauge their interest in a joint venture. This being said, you should evaluate the people who you'll be working with both in terms of their skills or knowledge and their cultural fit. Obviously, they must be able to prove the reach of their distribution channels.

However, you should also assess how committed they are to the final goal. Can you trust the people in charge? Does the firm have any other commitments or conflicts of interest that would hurt this arrangement? When trying to find a partner, you should be prepared for a lot of negotiation and back and forth in the process of forming your arrangement. After you've found a partner, your next step will be to structure your joint venture.

As we've discussed, there are two ways to do this:. Form a separate legal entity for the joint venture, such as a corporation or limited liability company, with each party having an ownership stake in the new entity. Operate under a joint venture agreement without creating a separate legal entity. This is called an unincorporated joint venture.

Just as is the case with forming a joint venture itself, there are both advantages and disadvantages to the two structure options. Forming a separate legal entity for your joint venture is the more expensive and complex option. If you form a corporate joint venture, for example, the joint venture will be responsible for filing and paying its own business taxes.

However, having a separate legal entity also provides more legal protection if something goes wrong. The faster, less expensive option is to get started with a simple contractual arrangement.

Once again, no matter what type of joint venture you create, you should draft a joint venture agreement that contains all the details of how it will be run. You can start with a joint venture agreement template, like the one shown above, to create your own agreement for your specific arrangement.

Depending on the business you're working with and the risks associated with the joint venture, however, you might also decide to consult a business attorney for assistance. This being said, at a minimum, your joint venture agreement should contain the following information:.

Formation process i. How the parties will allocate profits and losses, which need not be equal though an outside claimant is free to sue either or all parties. Meeting schedule to decide on important matters. However, as the complicated definition of the proposed excise duty had unexpectedly revealed, the definition of a "foreign company" or a " joint venture " itself was obviously difficult.

It was a true joint venture. One of them said that they ' have come a long way together ', and had been friends long before they decided to cooperate in a joint venture. The multinationals, sometimes in joint venture with the state or large private businesses, have invested in manufacturing as well as in other sectors of the economy. There is actually no provision for the promotion of joint venture companies or of temporary relationships between undertakings.

From Europarl Parallel Corpus - English. See all examples of joint venture. These examples are from corpora and from sources on the web. Any opinions in the examples do not represent the opinion of the Cambridge Dictionary editors or of Cambridge University Press or its licensors. Translations of joint venture in Chinese Traditional. See more. Need a translator? Translator tool. What is the pronunciation of joint venture? What is a joint venture?

Why enter into a joint venture? Joint venture structures There is no distinct legal form for a joint venture in the UK, allowing each joint venture relationship to take the form which is best suited to its own circumstances and specific purpose.

Can own its own assets, sue and be sued and enter into contracts in its own right. Liability is limited to the amount each party contributes by way of share capital. Comprehensive legislative framework supports the contractual arrangements between the JV parties. Tailored share rights can reflect the size, contributions and motivations of the JV parties.

Permits employee share incentive schemes. Realising an interest by way of a sale of shares will not disrupt the legal ownership of the underlying business. Disadvantages Potential for double taxation — tax will be applied at the JV company level and possibly again on the JV parties directly when they take profits out of the JV company or realise their investment in it. This lack of tax transparency is, however, not always a disadvantage in practice and the tax position will depend on the nature of the JV parties themselves e.

Comprehensive legislative framework can restrict flexibility. The joint venture has to work contractually, but there should also be a good fit between the cultures of the two organisations. A good starting place is to assess the suitability of existing customers and suppliers with whom you already have a long-term relationship.

You could also think about your competitors or other professional associates. Broadly, you need to consider the following:. If you opt to assess a new potential partner , you need to carry out some basic checks:. Before you consider signing up to a joint venture, it's important to protect your own interests. This should include drawing up legal documents to protect your own trade secrets and finding out whether your potential partner holds intellectual property rights agreements.

Also, it's worth checking to see whether they have other agreements in place, either with their employees or consultants. When you decide to create a joint venture, you should set out the terms and conditions in a written agreement.

This will help prevent any misunderstandings once the joint venture is up and running. You may also need other agreements, such as a confidentiality agreement to protect any commercial secrets you disclose. Your business, your partner's business and your markets all change over time.

A joint venture may be able to adapt to the new circumstances, but sooner or later most partnering arrangements come to an end. If your joint venture was set up to handle a particular project, it will naturally come to an end when the project is finished. Ending a joint venture is always easiest if you have addressed the key issues in advance.

A contractual joint venture, such as a distribution agreement, can include termination conditions. For example, you might each be allowed to give three months' notice to end the agreement. Alternatively, if you have set up a joint venture company, one option can be for one partner to buy the other out.

The original agreement may typically require one partner to buy out the other. The original agreement should also set out what will happen when the joint venture comes to an end. For example:.

Even with a well-planned agreement , there are still likely to be issues to resolve. For example, you might need to agree who will continue to deal with a particular customer. Good planning and a positive approach to negotiation will help you arrange a friendly separation.

This improves the chances that you can continue to trust each other and work together afterwards. It can also raise your profile in the business community as a reliable and productive partner. Our information is provided free of charge and is intended to be helpful to a large range of UK-based gov. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice.

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