Wednesday, February 15, 2023

Joint Venture Agreement

When two or more parties enter into an agreement to combine their capabilities in order to complete a certain project, this type of business arrangement is known as a joint venture agreement. This includes anything from a brand-new venture involving new markets, to one party venturing into the market space(s) of the other party.

Even though the joint venture stands on its own and is distinct from other business interests of the parties. The expenses, losses, and profits accrued as a result of the venture are the property of each party solely.





A joint venture (JV) can be formed using any legal structure such as partnerships, limited liability companies (LLCs), corporations, and any other type of proprietorship, however, it is a common perception for it to viewed only in the sense of a partnership.

Companies that combine their expertise by way of a joint venture are able to utilize these combined resources to accomplish the venture's objective. Leveraging resources in this manner is one of the primary motivations for forming joint ventures. A joint venture collaboration between a company with a well-established manufacturing process and one that has superior distribution channels might capture a large segment of the market while offering a more superior product to the end user.

A joint venture agreement is usually drawn up for short-term projects, but they can also be formed for a longer-term objective. Joint ventures can, through the combination of large and small operations take on multiple projects and deals simultaneously.

A joint venture can also result in cost savings where both businesses in the joint venture can consolidate their production at a lower per-unit rate than they would individually. This is especially advantageous in instances when technological advancements and their implementation can become too costly for the companies to achieve if pursued outside of the joint venture.

Say your company wants to expand its service or product offering to new countries, it can sign a joint venture agreement to supply products to said country’s regional corporation and take advantage of the already existent ecosystem. Companies that want to enter foreign markets frequently employ joint ventures, in which they collaborate with the regional market leader to do so. A joint venture with a local entity is sometimes almost the only way to conduct business in some regions, this especially true for those countries with policies preventing foreign entities from entering their market.



The joint venture agreement details each party's rights and responsibilities and is a crucial document in this regard, this is regardless of the joint venture type or structure. It is therefore essential that your joint venture agreement be meticulously written to avoid unnecessary court battles at a later stage. The agreement clearly articulates the various aspects of the joint venture: the goals, the venturer’s initial investments, how the daily operations of the venture will be handled, accounting for the profits and losses.



Establishing new proprietorship is a route most commonly followed when entering into a joint venture agreement. This, and due to the business type will in turn determine how the taxes are paid. If the joint venture is set up as an LLC, its profits and losses will reflect on the owner’s individual tax returns. The joint venture is a separate legal entity and will pay taxes in accordance as a separate business.

The joint venture agreement will detail if it is merely a contractual relationship. The agreement will stipulate the taxation on the profits and losses and how they will be divided hereto.


The term partnership is reserved for the incorporation of an entity owned by two or more people. Joint ventures however, bring together two or more distinct businesses into a new one. Safe to say, the partnership agreement is not a joint venture agreement.

An association of two or more companies known formally as a consortium, bears the similarities of a joint venture although it is not one, in that, companies can form a consortium without having legally incorporated a separate business entity. For instance, a group of companies can work together to offer their customers better prices and special rates without formalizing the process, whereas everybody continues to operate their businesses independently and pursuant to their own objectives, with each party being responsible for its risks, profits, losses, and governance within the consortium.



During the lifespan of the joint venture, the risks and benefits are shared among the joint venturers, this allows each venturer access and use to the resources of the other venturers, without the financial obligation that would be attached if they were not involved in such a venture, this is one of the main advantages of a joint venture. Once the venture is retired the parties hereto are able to resume their identity and continue with their operations.



When a joint venture agreement is in place, it will typically be accompanied by non-disclosure and exclusivity agreements. These might prohibit participating companies from partaking in certain activities outside of the venture during the course of the project.



When a joint venture reaches the end of its lifespan, a definite plan detailing how the venture will be dissolved in order to avoid lengthy discussions, costly legal battles, biased practices, and the effects of the dissolution on customers; while taking into account any potential financial loss, such a plan -in practice- is known as an exit strategy. Exit strategies provides to the joint venturers certain advantages especially in terms of conflict avoidance or resolution. The exit stagey will stipulate the rights of the ventures regarding the selling of the new business, operational spinoffs, and or employee ownership and retention.



Joint venture agreements are only ideal when the mission and success of the venture is being equally committed to by all parties hereto.


Joint ventures enable the business entities involved to be able to enter into new markets at a relatively low cost. Although this seems like the perfect situation, bear in mind that in a joint venture each company contributes its own expertise, and the venture’s costs are shared.



**Note: Also remember that a joint venture for which a separate business entity has not been established may expose the venturers to liabilities like those attributed to a partnership. And that, even though the joint venturers share control, the work load and resources, these are not always divided equally.


This article the joint venture agreement has been written for your benefit in understanding the importance behind this agreement, write and download more documents at the Business Own Corporation's - MIND Repository.









nounjointplural nounjoints


a place at which two or more components are joined.

"The valve of a car is joined with a seal to prevent unauthorized valve operation"



The points of partition at which the body of person or animal’s skeletal are fitted together.

"Her stiff joints make bending for any reason quite difficult"



A specific place where people meeting for drinks, or entertainment.

"the arcade joint"



1.    An activity or thing which is shared, held, or made by two or more people together.

"a joint response was given by the opposing teams"

o    sharing in a position, achievement, or activity.

"a joint winner"

o    LAW

When two or more parties are viewed as one - regarded together.


verbjoint3rd person presentjointspast tensejointedpast participlejointedgerund or present participlejointing


Make something available or fasten with joints.

o    Weld together the joints of the chain.







nounventureplural nounventures

1.    An undertaking involving certain risk.

"pioneering ventures into territories where no one has been before"

o    Entering into a certain type of business venture.

" the two spectacle manufactures have entered into a joint venture"


verbventureventures venturedventuring


Embarking on a certain course of action that involves risk.

"she ventured into deep an uncharted waters"

o    expose to the risk of loss.

"agents use other people's money to take risks, they do not venture with their own capital"

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