Joint Ventures

Many people believe that a “joint venture” is a specific legal concept. It is not. It is simply the term given to some form of business co-operation between two or more parties for a particular purpose. That co-operation may be driven by a need to share costs and risk on a particular project, to pool differing sector expertise, to launch and market a product in a different country or maybe to develop an entirely new product or service. Each of these, then, is a “joint venture.”

Once you have agreed on a joint venture, you will need to give consideration to how you actually implement it. Will you use a separate legal entity - perhaps a limited company jointly owned, or a Limited Liability Partnership - or just a contractual agreement setting out how you will co-operate, deliver the project and reap the rewards. Each of these is possible and your choice will depend upon Tax considerations, the nature of the project, the risks and the extent to which the venture can be kept separate from the parties’ existing business interests.

Whatever you decide, however, one thing is clear. It is vital that you adequately document the joint venture relationship you are creating. Make sure that you cover: ownership, project management, cost/profit sharing, use or employment of staff, borrowing or other funding, dispute resolution and exit strategies. How you document these will depend upon your choice of legal vehicle, of course, but ignore them at your peril.

Contact: Robert Goddard