Purchase & Joint Venture Agreements
At YLG, we provide our clients with excellent legal advice and explain the laws concerning Joint Venture Agreements.
A Joint Venture (JV) is a cooperative enterprise entered into by two or more business entities for the purpose of a specific project or other business activity. The reason for a joint venture is usually some specific project. Joint ventures can be informal (a handshake) or formal, and they can be short term or long term. Often the joint venture creates a separate business entity, to which the owners contribute assets, have equity, and agree on how this entity may be managed. The new entity may be a corporation, limited liability company, or partnership. In other cases, the individual entities retain their individuality and they operate under a joint venture agreement. In any case, the parties in the JV share in the management, profits, and losses, according to a joint venture agreement (contract).
Joint ventures are often entered for a single purpose – a production or research activity. But they may also be formed for a continuing purpose.
Joint ventures are, basically:
- Separate companies with a shared interest and goals
- Both companies have some proprietary (ownership) basis for this shared interest. For example, two companies with online patents for accounting apps might form a joint venture.
- They agree to share income and expenses.
Both companies in a joint venture maintain their separate identities for all purposes except those of the joint venture.
To explain the differences between a Joint Venture and a Partnership, although both are contract based, a partnership is a legal arrangement where two or more people own a business together. This means that the entire business is shared for as long as the business exists. Both partners contribute money, time and expertise to making a profitable enterprise, and that enterprise lasts until the partnership is dissolved. In contrast, a joint venture is for a specific project. There is a time limit on joint ventures, and they have clearly stated limits on their purposes. You might enter a joint venture in order to make a product that neither partner can afford to make on her own.
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