Understanding the Requirements of a Joint Venture

You may be running your own business but you are seeing an untapped market for a particular product that you can deliver. However, you recognise that there are constraints if you will work on this undertaking as an individual company.

You also see that the undertaking or the particular project that you want to implement can be realized if you consider another company or companies to enter into the business.

This can be because you need the expertise in a particular business area or because of the financial requirements that need to be satisfied to implement the project. If this is the case, your best option is to enter into a joint venture.

A joint venture is a legal agreement between two or more parties for the purpose of managing a particular business undertaking. It is clearly different from a partnership because a partnership requires the agreement between or among individuals to enter into a business for the purpose of making profits.

A joint venture is limited to a project or an activity that can be a subset of the bigger business venture.

To realise your goals of introducing the new product through a joint venture with another company, you should get a business or commercial law service to take care of the document that enumerates all specific areas or consideration for both parties. With a legal company to provide this service, you can be assured that the interests of both parties are well-protected and all expectations are clearly set.

The success of this endeavour can be hinged on all the details of the venture as specified in the legal document. Without the guidance of business or commercial law experts, the joint venture can be a hit and miss implementation and the risks that the parties will face can be high. Thus, it would be safe to start right by getting the service of the legal experts.

When you set up a joint venture with your lawyer around, both parties will have to agree on how the undertaking will be run and managed. You also have to specify the profit sharing and tax issues as well as the liabilities in case something goes wrong with the venture.

You can also specify the extent of involvement of both parties in the implementation of the project. This way, a clear structure will be set and problems about management can be avoided. With a smooth start by setting all the requirements that you need to agree with, you can expect a smooth flow and implementation of the joint venture.

The major requirement of a joint venture lies on the understanding of the parties in the different aspects of venture implementation. If these are set up and defined clearly with the guidance of a commercial and business law service, the effort will be minimal. All the documentary requirements will be taken care of easily.

The only minor requirement needed will be the documentation requirements for the businesses entering the venture. The eligibility of the companies should be established and the separate business personalities will still be retained.

The only thing that changes is the fact that the parties are shaking hands on the creation and implementation of an activity that both businesses have interests in. They now both have the responsibility in making sure that this activity succeeds through the individual levels of expertise that both will contribute to the venture.


08 March 2012