The Who, What, When, Where, Why and How of Joint Ventures

Copyright (c) 2008 Christian Fea

What is a Joint Venture?

When two entities enter into an equal partnership, this is a joint venture. The essential defining factors of this union are equal risk and equal reward. That means that each party will divide the costs evenly, and will also share the profits. The parties may enter into a legally binding agreement that covers the responsibilities and expectations of each. Later, we will discuss the different forms a joint venture can take. First, we will get a more complete understanding of a joint venture.

When is the right time to partner?

You will have to take a good honest look at your company. Consider the timeline of your success. Where did you begin? Where are you now? Where do you see your company in 5 years? In 10? After grasping that perspective, explore the key components needed to get you to your short term goals, and then your long term goals. Finally, if what is needed could be supported by partnering with a company who does or has what you need, then now may be the time to form a joint venture.

Why a Joint Venture?

Entering into a joint venture has some known benefits. The first and maybe most appealing of them is the concept of spreading the liabilities between the two parties. Most parties are willing to put in their share of equity, feeling assured that the other party is equally invested. As the saying goes, people follow their money. Because of this, entering into a joint venture is a more secure form of partnership, as both have shared the risk. Both parties' reputations and profitability depend upon their doing their part to succeed.

Where do I find the right company to align with?

You'll have to ask yourself what parts of the country or internet you'd like to reach. Or if part of your company's vision is to become international, then a joint venture may be required. Many US companies must form a joint venture with an international one in order to do business in that country. The US company must partner with the foreign one in order to be legal.

Who should I JV with?

At times, choosing the right entity to join with can seem overwhelming. After all, you have a company to run. If you have your own research and development team, they can help find the company whose partnership will help your company develop into its next level of success. However, consider that there are joint ventures brokers who can do this job for you. After collecting information of your company's vision, they can help you find the best match for you particular goals.

How do I form a Joint Venture?

A joint venture will most commonly take the form of a corporation, a limited liability company, or a limited liability partnership. Many things should be considered when choosing which is right for you. Each of these have different tax implications, and it is recommended to consult a tax professional is deciphering the best fit for both parties.