• May 2019
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Joint Venture

Any business arrangement in which a minimum of two parties agree to merge their resources in order to accomplish a specific business-related objective.

A joint venture serves as an independent entity, even as each participant remains liable for costs, losses and profits associated with the enterprise. Depending on the circumstances, a joint venture may be a new business, a new project or another form of collaboration. They may be limited in nature or may serve a continuing purpose. Individuals and businesses remain distinct legal entities throughout a joint venture because the joint venture itself is treated as a separate entity. As a result, businesses and individuals may collaborate in regards to joint ventures without losing their autonomy.

For example, Google Earth is a product of a joint venture between Google and NASA. In order to create searchable, 3D renderings of Earth’s surface, Google needed regular access to advanced satellite technology. As Google Earth is free to the public, Google was able to collaborate with publicly-funded NASA in order to develop and maintain it. Obviously, this joint venture did not merge Google and NASA legally outside the scope of any contracts governing the joint venture of Google Earth itself.

As one party necessarily counts on any other parties to the joint venture to uphold their “end of the bargain” and may incur consequences if that trust is misplaced, it is important to secure a legally-binding JV agreement before assuming any costs associated with a proposed joint venture.

 

EXAMPLE:

Kid: “I want to start a lemonade stand.”

Mom: “Really? How are you going to manage that?”

Kid: “I would like to propose a joint venture. You pay for the initial supplies and I will head up R&D, marketing, industry compliance efforts and labor. We will split the profits 30/70.”

Mom: (Blinks.)

Kid: “Dad had a bunch of work buddies over for pizza when you were out with Aunt Catherine last night.”

Mom: “Ah.”