4 Legal Considerations For Your Joint Venture
Any business dealing must be considered from all legal angles
. Joint ventures are no different. When you join into a JV, you are contracting into a legal business entity with another business or individual. Thus, you need to protect yourself legally, and be sure that all your JV business decisions are made with all legal implications in mind.
Form a Legal Agreement
The first step you usually take in the joint venture process is finding another person with whom you can agree to do business. After proposals are made and negotiations take place, you and your new JV partner have an agreement, at least in spoken terms and on notepads.
The next step is putting all your agreements on paper and signing it. This becomes a contract between you and your JV partner. It must include the party names, the consideration (what you both will get out of the JV), all the actions, considerations, representations, and covenants you have agreed upon, and dated signatures at the end.
A joint venture agreement may be simply one page with a list of the agreements. However, if your JV is more thorough and complex, you may have pages and pages of detailed actions that should be in writing so that neither you nor your JV partner has any misunderstandings of your expectations. If your agreement is longer, you may do well to hire an attorney to draw up a formal legal agreement.
Form a Legal Entity
How will your JV operate? Will you become a partnership? Perhaps form a Limited Liability Company with specific business goals? Your JV business entity is an important consideration. If you will operate with any legal structure, you need to register your joint venture business with your state Secretary of State in their business division.
This step means completing forms, paying fees, and submitting any articles of incorporation if necessary to get your JV business registered. If your JV will operate under any name other than your registered business name, your business alias must also be registered with the state.
Business registration can be done easily by yourself by performing research into your state's business registry website. Of course, an attorney can handle your registration more quickly and thoroughly if you are willing to pay the fees.
Obtain IRS ID and Necessary Business Licenses
If your JV is operating under a new business entity, you are likely required to obtain a new Tax ID number from the IRS. A Tax ID is required for any other vendors with whom you do business, and it is necessary if you have employees so you can withhold taxes. Check with the IRS website for details.
Ending the Joint Venture
A JV may have a finite lifespan, or it may operate in perpetuity until you and your JV partner agree to end the venture. You may need the help of an attorney to draw up the ending agreement, especially if you and your JV partner do not agree on how to divide any accumulated profits or assets. You will also need to inform the state of the dissolution of your JV business entity.
There is much legal consideration when you form and operate a JV. Don't overlook the importance of these issues, and don't hesitate to hire an attorney if you are at all confused about what needs to be done.
by: Christian Fea
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