Taking the risk out of joint venture agreements
Optimal Solicitors are here to support and guide you at every step of the process. We’ll provide tailored advice, explain legal jargon and work in your favour to achieve the very best possible outcome.
Whether you’re in the early stages of an agreement or ready to get started, we’ll answer any questions you have about joint ventures, and take the hassle out of arranging one.
Joint ventures – everything you need to know
What is a joint venture?
Examples of joint ventures
How many types of joint venture are there?
- Special Purpose Vehicle (SPV) – Where a limited company is formed explicitly for the joint venture agreement.
- Partnership or Limited Liability Partnership (LLP) – These have fiscal transparency, so each party is taxed directly on its share of profits and losses. Collaboration agreement – In this instance, a new vehicle isn’t created, but the JV is established in a contract.
Are joint ventures always 50:50?
How do joint ventures share profits?
How do I start a joint venture business?
- The complexity of the venture
- The liability protection you’ll need
- The cost you’re willing to spend on setting up the JV
Following this, you’ll then need to draft a joint business agreement. Some opt to put together a term sheet or letter of intent during the preliminary phase of starting a joint venture business, the latter of which needs to be signed by both parties and can be legally binding. Both of these essentially outline the terms and conditions of the JV.
Joint venture partnership agreement
How joint ventures work?
- The structure and aims of the joint venture
- The financial contributions to be made by each party
- If either of you will transfer assets or staff
- Details around ownership of intellectual property
- Management of the JV (the responsibilities and processes to be followed)
- How liabilities, profits, and losses will be divided
- The process for settling any disagreements
- Exit strategies for both businesses
What makes a successful joint venture?
- Good communication – This is an important part of any relationship, and should be treated as such. Consistent, honest communication where both parties listen to each other's views is essential to making sure that responsibilities are clearly understood and disputes are handled more easily.
- Complete trust – Each partner should trust one another, and be fully transparent too. Any relevant information (especially that which is financial) needs to be shared.
- A focus on performance – Just as with your own business, you should have clear objectives that are measured by performance indicators.
- Flexibility – The world of business is a dynamic one, and you have to be open to adapting. Frequently review how the joint venture is working, and whether any changes are needed.
- Clarity – If everyone knows their role and how the joint venture works, this will avoid any disputes. It’s best to establish this legally through a simple joint venture agreement.
How do you end a joint venture?
- How shared intellectual property will be separated
- How confidential data will remain protected
- Who can claim any future income of the JV
- Who’s accountable for any continuing liabilities
Joint venture advantages and disadvantages
Are joint ventures a good idea?
- Leverage combined resources, expertise, and experience within each business
- Make cost savings through economies of scale, especially with technology
- Share risks and costs, reducing the impact on one business
- Maintain flexibility, making sure neither business loses ownership and providing peace of mind that none of the parties are locked in forever
- Accelerate growth by more easily accessing new markets and overcoming barriers to entry
- If the right legal provisions aren’t in place, the exit process may be more difficult
- Too little oversight can result in a lack of direction or even damage to reputation, and too much could cause tension in the relationship and performance problems
- If the JV ends, you may find all the technology and expertise you’ve shared makes your former partner a much stronger competitor
Why do joint ventures fail?
- Differences – From processes to management style, such distinctions can cause the joint venture partnership to struggle in accomplishing the objective it was set up for.
- Conflict – Whether one party is not providing its share of funding or resources, or there are communication issues or even disagreements, conflict could cause the joint venture to fail.
- Unclear aims – If the goals aren’t clearly established, then a JV is much more likely to go wrong.
A joint venture vs. partnership
We’ve helped thousands of people, just like you, get the best outcome
Establish your joint venture with Optimal Solicitors
Optimal Solicitors can help. We’ll guide you on all the legalities before drafting the joint venture agreement. You can have faith that your interests will be protected, and that the JV won’t face any legal hiccups later down the line. We also offer additional, and complementary, corporate law services [LINK: Corporate Law] such as support with shareholder agreements [LINK: Shareholder Agreements] and disputes [LINK: Shareholder Disputes].