JOINT VENTURE AGREEMENT

How to form a joint venture and ensure success.

Sometimes in business, it may become necessary to work closely with another person or organisation. When a specific project or task requires that two or more people or organisations team up to work together, yet they do not want to enter into a permanent relationship, this is the time for a joint venture. Often confused with a partnership, joint ventures are typically formed through a formal agreement between two or more parties. The parties agree to work together towards a common goal, with all parties contributing time, effort, resources or skills. A Joint Venture Agreement is the formal written agreement that forms the basis of the relationship. If you are considering forming a joint venture, this is what you need to know:

WHAT IS A JOINT VENTURE? Similar to a partnership, joint ventures are often formed on a project basis. If separate entities wish to work together, they will often draw up a Joint Venture Agreement to formalise the terms of the collaboration. Since they do not wish to form a permanent relationship, the joint venture agreement enables them to work together while not being joined together in a more permanent business structure.

WHAT IS THE DIFFERENCE BETWEEN A JOINT VENTURE AND A PARTNERSHIP? Joint ventures are usually employed when two or more parties want to work together on a temporary or minor basis. The project upon which they collaborate can be anything, but it is usually not the major part of their business activities. Joint ventures are usually side-project, extensions or other minor collaborations between otherwise independent parties.

HOW MANY PEOPLE CAN BE IN A JOINT VENTURE? Though there is no technical limit to how many parties can be part of a Joint Venture Agreement, generally the agreement exists between any party who is willing to participate. Some projects require multiple people or organisations, each with a separate or minor role. Such projects are ideal situations for the Joint Venture Agreement.

WHAT DO I NEED TO INCLUDE IN THE AGREEMENT? Joint Venture Agreements must be able to provide a solid foundation for a multi-party project. Depending on the nature of the work involved, these agreements can be very simple affairs or very complex. No matter how intricate the project, the Joint Venture Agreement must state the nature of the business involved, the identity of all the parties, the length of the project, the division of profits and many other such statements. A properly formed agreement will allow all parties to understand exactly what their obligations are during and after the project, as well as the rewards for their participation.

When you need to work closely with another person or organisation, yet you know the project only requires a limited investment of time or resources, you’ll want to draft an appropriate Joint Venture Agreement. Even the simplest project can run into unanticipated events, and a properly drafted agreement will allow the parties to handle the problem without causing conflict between them. Even if you are best friends with the other person, a Joint Venture Agreement will allow you to work together much more easily because everyone will be certain what their duty to the other parties are.

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