What is a Joint Venture?

A joint venture, or JV, is a legal business arrangement in which two or more parties come together to complete a certain project or other business action. In most cases, parties involved in a joint venture typically share the costs, risks and rewards associated with the particular venture. In general, the JV is considered its own entity, separate from the parties’ original businesses. In other words, the participating parties in a joint venture retain their individuality.  A joint venture may take the form of an organization, limited liability company (LLC) or partnership. 

Key Takeaways

• Joint ventures or JV’s are particular business arrangements in which two or more parties come together to undertake a specific project or business venture.
• In a joint venture, the parties involved generally share the expenses, risks, and rewards associated with the particular project or business venture.
• Generally, joint ventures can be structured in different ways, including as an organization, limited liability company (LLC), or partnership.

Understanding Joint Ventures

Joint ventures are very similar to business partnerships, with one major distinction: partnerships usually pertain to an ongoing business relationship while a JV focuses on a single business transaction or goal. The exact terms of the joint venture depends on the specific circumstances and needs of the parties involved. Nonetheless, companies or individuals may choose to enter into a joint venture in order to tackle a project that would be too costly or too complex for any one party to undertake on its own. The arrangement allows parties to pool their resources, expertise, networks and funds into a single entity. 

Advantages of Joint Ventures

Establishing a joint venture can offer numerous advantages, making it a desirable option for many different types of businesses. The following is a brief list of its main benefits.

• Pooling Resources: Joint ventures enable the parties involved to utilize their respective resources in order to achieve the goal of the venture.
• Access to Markets: Parties may be able to gain access to new or foreign markets by entering into a JV.
• Increased Flexibility: Compared to other types of business arrangements such as partnerships or mergers and acquisitions, joint ventures can provide plenty of legal flexibility.

Disadvantages of Joint Ventures

Although joint ventures have plenty of advantages, it is crucial to keep in mind that they come with their own set of risks. A few disadvantages that parties should be aware of include:

• Conflict: Joint ventures can lead to disputes and misunderstandings between the parties involved.
• Complex Legalities: Joint ventures are legal arrangements that involve a number of complicated legal and financial components.
• Lack of Control: By entering into a joint venture, the directors of the companies involved may be forced to give up a sense of control over their business ventures.

Bottom Line

In conclusion, joint ventures are common business arrangements that offer a number of benefits. Nevertheless, it should be noted that joint ventures carry serious risks and can involve several legal challenges. Contact one of our top tier business attorneys today if you are in need of any assistance with joint ventures.