How to Handle a Joint Venture Agreement

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A joint venture is similar to a business partnership. Two or more parties agree to work together for the purpose of starting and running a business. The difference is that joint ventures may be between two different corporate entities and may only last for a specific period. A joint venture agreement protect the interests of both parties in the venture.

Establish how the joint venture will be conducted. The easiest way to accomplish this is to divide the company into shares. If the joint venture is equal, then both parties will have equal shares. If one partner is investing more or taking more risk, then that partner will be entitled to more shares.

Specify the length of the joint venture agreement if this is to be a temporary partnership. Set a date rather than relying on the achievement of goals to signal the end of the partnership. If the goals have not been reached by the end of the contract term, you can sign a new agreement to lengthen their partnership.

Handle how profits will be shared. Clearly delineate the terms, including profit-sharing distribution as well as the sharing of any company stock. Cover what happens to that stock after the agreement is dissolved: State if the remaining partner buys out the stock of the other or if he will be allowed to keep it.

Decide if the company will be operated as a corporation or as a partnership, either limited or full. By its nature, a joint venture cannot be operated as a sole proprietorship. Generally, a partnership structure is more advantageous to a joint venture because it allows for the shares of the company to be divided among the two partners.

Confirm how day-to-day decisions will be handled for the joint venture. If both partners need to be consulted, this will change how the company operates. Come to a firm agreement on this before signing and completing the joint venture agreement.


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Kate McFarlin is a licensed insurance agent with extensive experience in covering topics related to marketing, small business, personal finance and home improvement. She began her career as a Web designer and also specializes in audio/video mixing and design.