What is a Joint Venture Agreement?

A joint venture Agreement is a contract between two or more parties who want to do business together for a period of time. Instead of creating a formal partnership or new legal entity, a contractual joint venture ("JV") allows the parties to continue filing their tax returns yet reap the financial benefits of sharing resources and risks.

The agreement may establish a business purpose, governance structure and operational rules for the joint venture, The agreement should also set forth the terms and conditions under which the joint venture may be terminated, as well as the choice of law and venue for resolving any disputes.

A JV Agreement will identify the following fundamental elements:

  • Parties or Co-Venturers: the two entities that have agreed to work together.
  • Contributions: how much money, property, or time each of the co-venturers will invest.
  • Management: the person responsible for the day-to-day operations of the venture.
  • Purpose: scope of JV activities and reason to join resources and collaborate.
  • Profits: how profits will be distributed, either based on contributions or another formula.
  • Term: whether the venture is for a limited time or indefinite period.

useful details a Joint Undertaking Agreement

The Benefits of Forming a JV

  • Larger companies can access new research materials from smaller companies
  • Smaller companies can benefit from a larger company’s market presence
  • Domestic companies can learn about social reality of local area from foreign company
  • Foreign companies can be exposed to new relationships and expertise from domestic company
  • Businesses can experiment outside of its core business to develop new product or service
  • Companies can merge their wealth of expertise in a specific business area