Joint Venture Agreement Explained
A joint venture is a strategic alliance where two or more businesses pooling their resources and expertise to achieve a particular goal
. Businesses of any size can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects.
The prime difference between a joint venture and a partnership is that each member of the joint venture retains ownership of his or her property and members of joint ventures are taxed on the joint venture profits according to whatever business structure has been established for each business.
Before starting a joint venture,the parties involved need to understand whatthey each want from the relationship. Whatever your aims, the arrangementneeds to be fair to bothparties. Any deal should:
recognize what you each contribute
ensure that you both understand what the agreement is expected to achieve
set realistic expectations and allow success to be measured
If you do decide to form a joint venture, it may well help your business to grow faster, increase productivity and generate greater profits. Joint ventures often enable growth without having to borrow funds or look for outside investors
A successful
joint venture agreement can offer:
access to new markets and distribution networks
increased capacity
sharing of risks and costs with a partner
access to greater resources, including specialized staff, technology and finance
The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas
When you decide to create a joint venture, you should set out the terms and conditions in a written
joint venture agreement. This will help prevent any misunderstandings once the joint venture is up and running.
A written
joint venture agreement should cover:
the structure of the joint venture
the objectives of the joint venture
the financial contributions you will each make
whether you will transfer any assets or employees to the joint venture
ownership of intellectual property created by the joint venture
management and control
how liabilities, profits and losses are shared
how any disputes between the partners will be resolved
an exit strategy
It's important to review your business strategy before committing to a joint venture. This should help you define what you can realistically expect. In fact, you might decide that there are better ways to achieve your business aims
Setting up a joint venture can represent a major change to your business. However beneficial it may be to your potential for growth, it needs to fit with your overall business strategy
You may also want to look at what other businesses are doing, particularly those that operate in similar markets to yours. Seeing how they use joint ventures could help you choose the best approach for your business. At the same time, you could try to identify the skills theyapply to partner successfully.
Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved.
Click for Details: http://www.netlawman.co.uk/bizdoc/joint-venture.php?docid=CPsp51
by: Miriam Taylor
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