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A joint venture, or JV, is a cooperative agreement that two or more business entities enter together. Frequently, the purpose of a joint venture is to begin a new business activity or accomplish a specific task. Each entity that is part of a joint venture must contribute assets to it and agree on how to divide expenses and income.
The joint venture often acts as its own entity, so it keeps a separate legal status from the participants and their other business interests. Entities in a joint venture may include:
A contract sets up a joint venture by outlining how the participants will manage the joint venture, divide control, and divide profits and losses. The contract must also outline the resources each entity will bring to the venture, including:
Some joint ventures involve two companies with different areas of expertise coming together to provide a new service or create a new product. Other joint ventures involve a company that wants to break into a foreign market forming a venture with another company that already has an established presence in that region.
Some advantages of forming a joint venture include:
Two main types of joint ventures exist. Two or more companies can participate in either type of joint venture, and either type can affect one specific product or a full product or service line.
A personnel-based joint venture is a partnership that covers the people participating in the agreement and the experience these individuals bring to the project. Staff members for each participating company are placed to work on a project. Examples of this type of joint venture include architects from different firms working together to refurbish an outdated building or programmers from different companies working together to upgrade or design an app.
An equipment-based joint venture is a partnership that involves machinery or technology. For example, two furniture companies could form an equipment-based joint venture if one company does not have the correct manufacturing technology to produce a new furniture line and another company does not have designers to complete the project. The collaboration would allow the first company to develop its desired product without a large outlay of capital, while the second company gains a portion of the profits without taking on development costs.
If a joint venture operates based on an agreement between the existing companies and does not involve forming a new legal entity, it is called an unincorporated joint venture. A joint venture can also create a new and separate business entity. In the latter case, the new entity can be structured as:
Businesses and individuals create joint ventures for a variety of reasons, including:
Theoretically, a joint venture could be arranged by a simple handshake, but most business entities that form a joint venture outline the venture's terms in a signed contract created with legal assistance.
Most joint venture agreements will include the following information:
Taxation will vary depending on the type of joint venture created. If the venture is an unincorporated joint venture, the entities who sign the joint venture agreement will need to account for any profits made when it comes to taxes.
The most common scenario for a joint venture is that the parties entering an agreement create a new entity. If the joint venture is created as its own separate business entity, the venture will pay its own income taxes based on its specific form of business, such as a partnership. A joint venture itself is not recognized by the IRS (Internal Revenue Service), so its business form helps the participants determine how to pay taxes.
The joint venture agreement may detail how profits and losses are taxed. However, if the agreement created is just a contractual relationship between the parties, then the agreement will need to specify how taxes are divided.
Examples of joint ventures between well-known companies can help shed light on the possibilities that joint ventures provide. Here are some examples:
A successful joint venture starts with an agreement that clearly details each party's role and responsibilities in the new entity, so it's important to work with an experienced contract lawyer to create a strong agreement.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.
Fabian graduated with honors from the University of Miami School of law, where he served as the articles and comments editor for the law school's Race and Social Justice Law Review. He received the John F. Evans Memorial Scholarship Award for excellence in the university's Litigation Skills Program and the HOPE Pro Bono award for completing more than one hundred (100) pro bono hours. Additionally, he received the CALI Excellence for the future award in Sports Law. He focuses his practice on corporate, real estate and immigration matters. Fabian has experience representing luxury hotel owners and operators in connection with the drafting of hotel management agreements, restaurant license agreements, and complex restaurant leases for domestic and international projects including: Nobu Tulum, Nobu Punta Cana, Nobu Orlando, Nobu Chicago and the Nickelodeon Hotel in Riviera Maya, Mexico, among others. He has represented clients in the commercial real estate industry in connection with the drafting of purchase and sale agreements, promissory notes, and mortgages. Lastly, Fabian routinely counsels corporate clients in connection with the drafting of articles of organization, operating agreements, and other documents related to acquisitions, restructurings and investments.
Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.
Talin has over a decade of focused experience in business and international law. She is fiercely dedicated to her clients, thorough, detail-oriented, and gets the job done.
Stan provides legal services to small to medium-sized clients in the New England region, and throughout the U.S. and abroad. His clients are involved in a variety of business sectors, including software development, e-commerce, investment management and advising, health care, manufacturing, biotechnology, telecommunications, retailing, and consulting and other services. Stan focuses on the unique needs of each of his clients, and seeks to establish long term relationships with them by providing timely, highly professional services and practical business judgment. Each client's objectives, business and management styles are carefully considered to help him provide more focused and relevant services. Stan also acts as an outsourced general counsel for some of his clients for the general management of their legal function, including the establishment of budgets, creation of internal compliance procedures, and the oversight of litigation or other outside legal services.
Sam Widdoes has practiced law in California since 2014. He began his career as a litigation associate at a boutique firm in Los Angeles, and founded a production development company with a partner in 2017. Since then, Sam has served as the head of business and legal affairs at District 33, while working hand-in-hand with writers, directors and actors to develop, pitch and produce scripted and unscripted content. In that role, Sam produced the documentary series BLACKBALLED for Quibi/Roku, and will produce the upcoming documentary feature AS WE SPEAK directed by J.M. Harper for Paramount+/MTV, and the doc series THE BLACK BOX for MRC and XYZ Films. He is also the executive producer of an upcoming limited series with CBS TV starring Judith Light and Noah Wyle called SHADOWS IN THE VINEYARD, and a feature comedy for Spyglass Entertainment, among other projects. In early 2022, Sam opened WIDDOES LAW, APC, after recognizing a need for experienced legal services in the unscripted and documentary spaces. Since opening his own practice, Sam has advised producers, editors, directors and rights holders on a variety of agreement negotiations, including option purchase contracts, collaboration agreements and documentary producer deals. Sam also serves as production counsel for several documentary features, series and short films, and will draft, negotiate and advise on all legal aspects of the projects, including financing, production and distribution. Sam earned his Juris Doctor from The Catholic University of America, Columbus School of Law in 2013, where he graduated on the Dean's List and as a member of the Society of Trial Advocates. He holds a BA in journalism from the University of Richmond, and sits on the Board of Trustees at Turning Point School in Culver City, California. Sam is passionate about quality storytelling, and supporting those with the vision and drive to share their stories with the world.
