What is a Joint Venture?

What is a Joint Venture?

A joint venture is a contractual agreement between 2 parties to undertake a particular task. Most often, the common task is aimed at market penetration efforts that require a huge amount of resources or the establishment of local business partnerships. They can also be created to strategically acquire resources that would otherwise be hard to obtain such as technology, R&D, or intellectual property. Although joint ventures share some similarities with a general business partnership, there are many differences that set the two entities apart.

The biggest difference between a joint venture and a business partnership is that a joint venture consists of two separate businesses joining forces to come together and undertake a specific task, whereas a partnership is two individuals coming together to create a single business. While the individual partners in a partnership share an identity, the businesses in the joint venture retain their separate identities as businesses.

The main goals of the two are quite different. A general partnership is created when two individuals decide to take on an entire business venture as co-owners, an arrangement where all profits and losses are shared between the business partners. Although the goal is similar for a joint venture, it is usually limited to a specific time frame or a specific task. Furthermore, while a general partnership is considered one entity, a joint venture is considered three entities.

Liabilities between joint ventures and business partnerships differ as well. Many states hold that the individuals in general business partnerships are jointly and severally liable for all business debts; each partner is personally liable for any debts incurred by the partnership. Partners in a joint venture enjoy more limited liability since they retain their individual identities. They are usually only liable for the amount of their investment in the joint venture itself.

A joint venture can be a great way to accomplish a particular business task that otherwise would be difficult or maybe even impossible to accomplish through just one business. If you are considering forming a joint venture with another business, consider contacting us to help you ease through the process. In order to ensure that your business goals are adequately being addressed, it is imperative to have sound legal representation through the formation of the joint venture contract.

 

Authored by: Rohit Deedwania

Photo by: Salvatore Vuono

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