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Joint Venture Agreements

Oak Brook Joint Venture Agreement Attorneys

Joint venture agreements (also known as JV agreements) are a great way for businesses to combine sources for a shared goal and consumer markets.
 
The joint venture agreement allows one business to access the equipment, resources, or other resources of another without actually purchasing those assets. The benefit to both businesses is sharing the profits.
 
Sometimes the JV involves businesses creating a separate business (the joint venture) and sometimes the joint venture agreement is simply an agreement of collaboration. Sometimes a JV involves the merging of businesses.
 
The advantages of a joint venture include:
  • Leverage of resources
  • Saving costs
  • Combing expertise
  • Entering foreign markets
  • Exploring new revenue streams
  • Gaining from intellectual property
  • Gaining competitive advantage
  • Flexibility of the relationship

However, there are disadvantages— the potential lack of transparency and culture clashes. Because the businesses and assets of each JV party are still independent, the relationship may run into the same problems as two individuals doing business. This is all the more reason to have a clear joint venture agreement.

Our Chicago area joint venture agreement attorneys at Motiva Business Law help companies share resources to mutually grow their businesses. Contact us to schedule a consultation.

How can joint venture agreements be structured?

Joint venture agreements can come in different forms. The main types of joint venture agreements are:
  • Project-based joint venture: As the name indicates, the joint venture is based on a project with a specific goal. This is very common where one party provides research and the other party develops the product based on the research.
  • Functional-based joint venture: This type of joint venture is a more straightforward and basic venture. It is typically two businesses working together with their existing resources to grow their respective products, often in a new market.
  • Vertical Joint venture: This type of joint venture involves two entities that co-exist in the same supply chain such as buyers and suppliers. Each party focuses on its own expertise in the same supply chain, which results in more efficiencies.
  • Horizontal Joint venture: This type of venture is when competitors cooperate in the same space where there is opportunity.

What terms should be negotiated in a joint venture agreement?

To protect your interests, our attorneys will negotiate and include important terms, including:
  • Business address
  • Joint venture type
  • Purpose of the agreement
  • Names and addresses of the members
  • Duties and obligations
  • Voting and formal meeting requirements
  • Assignment of percentage ownership
  • Profit-loss allocation
  • Contingencies before closing
  • Term of the joint venture
  • Exit clauses and metrics

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Joint Venture Agreement FAQ

Before entering into a joint venture agreement, you need to be very clear on what your goals are in the arrangement, and how the other party is going to help you achieve those goals. In addition, you can conduct due diligence about the other company’s stability. 
Joint ventures can be financed like any other business. The parties can bring in investors with tools like SAFE agreements or convertible notes. Business loans are also an option.

It really depends on how the joint venture agreement is structured and what kind of joint venture agreement is involved. Either way, representatives from each business, sometimes in the form of a board of directors, should have a say in the control, and this should be clearly negotiated.

A joint venture is a business arrangement where two or more parties come together to undertake a specific project or business activity. It’s often a temporary arrangement, and the parties involved remain separate entities outside of the joint venture.

On the other hand, a partnership is a formal arrangement in which two or more individuals or entities agree to share the profits and losses of a business.

In summary, the main difference lies in the scope and duration of the collaboration: joint ventures are often temporary and project-specific, while partnerships are typically ongoing and involve sharing profits and losses in a broader business context.

For more information, check our blog post about the difference between a joint venture and a partnership. 

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