Knowing who you want to enter a joint venture with and what your goals are from a business perspective, it seems like you`re ready to gather the documents for the joint venture. The following list contains examples of joint ventures: The following list of questions is intended to help potential parties assess whether a joint venture or contractual joint venture is the best way to achieve their joint venture objectives. It can also help the parties identify areas where they have different views on the proposed joint venture. This is neither an exhaustive list nor a list that can always be crossed linearly, as many of these considerations are interconnected and/or deal with overlapping issues. While joint ventures are similar to partnerships in many ways, a joint venture is a collaboration on a specific goal or project, and a partnership is a business structure that dictates how it should operate in terms of state law and how it is identified for tax purposes. Other joint ventures are documented with contracts and look a lot like service contracts, meaning they don`t look like a joint venture at all. I have had clients who want to keep things very simple and streamlined and who agree to a seven- or eight-page agreement on joint services. The difference between a documented joint venture with a simple joint service contract and another service contract you`ll see there is the intent of the relationship. If I hire an accountant to audit my business and sign a service contract to do the work, the accountant is one of my salespeople. When I hire an accountant to co-create a series of seminars for business owners, we are essentially partners (see my note on what exactly this word “partner” means). That is the difference.
Starting a joint venture offers a number of advantages that are difficult to obtain through a contractual joint venture. For example, a joint venture may make it easier for the parties to share assets to be used in the venture capital firm, manage the liability risks associated with the business, and build a management team focused solely on the business. However, starting a joint venture can also be much more complex than starting a contractual joint venture. This complexity can make a joint venture more expensive and burdensome for the parties to the business than a contractual joint venture. By bringing more certainty to the taxation of the company, the creation of a joint venture can also offer more opportunities for tax planning than a contractual joint venture. This is particularly the case in a cross-border context; If the company has operations in more than one country, it may be advisable to establish several local national subsidiaries to manage their tax liability. In addition, recent changes to the tax code, particularly those that affect the taxation of non-U.S. income earned by U.S. taxpayers, require special attention. Two companies or parties forming a joint venture may have unique backgrounds, skills and expertise.
When combined by a joint venture, each company can benefit from the expertise and talent of the other in its business. Joint ventures and partnerships may also differ in terms of taxes as well as debt management. In a joint venture, each party files an independent tax return, while a partnership is taxed as a passed-on tax unit. Responsibility in a joint venture rests with each individual, while responsibility is shared in a partnership. They also differ in terms of ownership with a 50/50 partnership and a joint venture is awarded ownership shares. If the business imperative prescribes a contractual joint venture rather than another legal form of a joint venture, practical measures to minimize or mitigate the risk of a partnership arising from PA 1890 may include: Many elements go into a joint venture agreement, but some of the most important elements are: A joint venture can take many forms with varying degrees of formality. While it is common for joint ventures to be formed (with shares of a limited liability vehicle held by the joint venture participants), this form is not commonly used. Publish a project to the ContractCounsel marketplace if you need help creating a joint venture agreement. We will provide you with several business lawyer suggestions that you can review to hire the best resource. Joint venture agreements, also known as joint venture agreements, are contractual consortia of two parties. .