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Joint Venture Agreement

A Joint Venture Agreement can help you combine forces with another company to reach a mutually beneficial goal. Joint Venture Agreements help companies minimize risk, share costs, and are usually... Read More

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Making a Joint Venture Agreement

  • What is a Joint Venture Agreement?

    A Joint Venture Agreement can help you combine forces with another company to reach a mutually beneficial goal. Joint Venture Agreements help companies minimize risk, share costs, and are usually designed to protect each party's proprietary information.

  • What should be in a joint venture agreement?

    Joint Venture Agreements should include information concerning the purpose of the joint venture, dollar amount each party will contribute, duties of each party, percentage interest each party holds in the joint venture, and proportion of profit that each party is to receive.

    While most of the contract is generated automatically by Rocket Lawyer after you submit the above information, you should know about the standard topics this document can cover:

    Protection of proprietary information

    While working together, you'll be privy to each other's proprietary business information including intellectual property, technology, and technology improvements. For this reason, the Joint Venture document includes a confidentiality agreement to protect business information. You can choose how long you want confidences to be kept. It also stipulates that members who work with others require their associates to sign an approved Non-disclosure Agreement to extend the protection to include third-party entities.

    Protection from debts and liabilities

    This part of the agreement states that each joint venturer is responsible for their own debt and obligations. If one member takes on debt or hires a service to fulfill their part of the agreement, and they don't pay their obligations, the other members cannot be held responsible for that debt.

    Sale option to satisfy deadlock

    If a member cannot come to an agreement during the term of the contract and a deadlock is reached, a sales option is included in the contract. This agreement basically states that the other member(s) can choose to buy the other's portion of the venture. The contract also states that no member can sell their portion to a third-party without consent from the other members.

  • How does a joint venture work?

    Joint Venture Agreements are short-term contracts between more than one business entity for the purpose of completing a "venture" or project together. The agreements included in this document are designed to help outline the basic agreements and the purpose of the venture. Before you complete the agreement, both parties should discuss:

    • What the purpose of the collaboration is
    • Whether you'll have a combined name
    • Where your principal place of business will be
    • How much each member will invest
    • The interest in the company each party will hold
    • How profits will be shared
    • Duties of each member
    • How expenses will be managed
  • What is an example of a joint venture?

    An example could be a production company and a food truck organization joining up to host a large street festival. Similarly, if you have an app, you can decide to embark on a joint venture with a company that can market your app.

  • Is joint venture a legal entity?

    Joint Venture Agreements do not create a new entity, and therefore, do not make a joint venture a legal entity. The venture is operated through the legal status of the companies that compose the joint venture.

  • What are the benefits of a Joint Venture?

    The best Joint Ventures benefit every business entity involved. The benefits may include revenue, brand exposure, access to resources, strategic expertise, manufacturing experience, and more.

    Here are several more examples of why some companies may choose to form a joint venture:

    • Two similarly sized companies join for a specific event or single-product offering.
    • A large company chooses to work with a smaller company to have access to their technology.
    • A company with an established product or service may choose to work with a foreign company to help them break into a new market.
    • A small company may decide to work with a large company who has the resources to manufacture their product.
    • Two small companies may want to combine resources to win a bid too large for them to fulfill on their own.
    • Two or more companies may decide to work together to share risk.
    • Joint Venture agreements are often formed to combine markets to increase exposure.
    • A company may have more business than they can fulfill and may choose to enter a short-term agreement with another business to help them serve their customers.

    If you are considering a joint venture with another company, it is always a good idea to talk to a lawyer as part of your process.

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