Joint Ventures & Contract Law
A Joint Venture is a business undertaking where two or more parties agree to pool resources and/or expertises to pursue a common goal or objective.
A Joint Venture may be the right option for if:
- You have a business and may need to access new markets or a new customer base (this could potentially
- You need to share the risks and financial obligations of your business whilst giving benefit of sharing profit with a partner(s).
- You are searching for a complementary partner with certain resources. technical expertise, industry connections or business infrastructure expertise that you may not have.
Choosing the right partner for your joint venture projects and having a well drafted and well-defined agreement with clear decision-making processes, liability obligations, profit allocation and share, can ensure success and longevity of your Joint Venture. Additionally, choosing the right legal framework for the Joint Venture is critical. You may consider:
- Contractual Joint Venture – No separate legal entity, just a written agreement outlining how the parties/partners will share resources and profits, typically used for short-term projects.
- Limited Liability Company – This is the legal incorporation of a separate legal entity offering limited liability protection. This structure helps to shield personal assets from the business liabilities and may be the best option especially where the parties may want to separate resources and to have one entity under which the Joint Venture objectives are maintained.
- Partnership (General or Limited) – These may be easy to establish; however, partners may face unlimited liability due to the law. General partnerships expose all partners to full liability, while limited partnerships allow certain partners to have liability protections.
- Equity Joint Venture – This is where each partner invests capital and takes an equity stake in the Joint Venture; sharing both profits and risks based on ownership percentages. Thus the importance of a
Each structure has legal and financial implications, therefore, seeking legal counsel early is a key consideration to protect your interests and to have the interest of the other parties recognized.
