A joint venture partnership is made between two or more individuals or business owners to work together on a particular project, product, or event. The companies do not become one; instead, they maintain their separate individual entities while working on a particular goal together. The purpose of a joint venture is to combine resources to maximize efficiencies of each entity for the particular project.
Limited Time Span – While some JVs do last a long time, most of them are temporary until the completion of the project. Many businesses find themselves entering into several consecutive JVs due to the success of others.
Clearly Defined Objective – Another thing that denotes a JV partnership is that they usually have a very clearly defined objective or reason for being put into place. Each entity involved knows their place and what is expected, as well as the goal.
The degree of Involvement Is Obviously Defined – Each part of the JV alliance has a particular thing that they are supposed to do, and this is clearly spelled out in an obvious manner. Each partner knows what is expected, what to do and when to do their part.
Spelled-Out Financial Contributions – Since the business entity is not going to be formed in a JV, the financial responsibilities of each member must be expressed. Sometimes one person is responsible for the finances, will deduct expenses from income and then distribute the profits as spelled out in the contract.
Plans Spelled Out for Problems or Disputes – In a JV that is temporary in nature, there can still be issues and disputes that arise. The contract usually spells out what to do and who will be the final say in any dispute – typically an unbiased arbitrator or in some cases the person with the main financial input gets the final say.
Termination of JV Arrangement Detailed – Since a JV agreement is not permanent, usually the contract spells out exactly when and how the arrangement will end and what will happen to the intellectual property when the arrangement is complete.
Non-Disclosure Information – Most of the time both parties require some sort of non-disclosure information to keep trade secrets, contact lists, financial and other information private since some of them will necessarily be revealed during the JV partnership.
Other Legal Information – It is important to check with your state and country about various terms and issues that should be covered in your JV agreement. Together with your JV partners, you may want to determine which of your locations will have the final say on any legal issues that should arise.
A joint venture partnership is a great way to expand your reach because you get to use each other’s contacts, resources, and skill set. But, it is important to understand what a JV is and what it is not. It is not combining two businesses permanently and it’s usually a temporary joining of forces.