Table of Contents
- Download a Free Joint Venture Agreement Template
- The Definition: What is a Joint Venture Agreement?
- The Reasons to Form a JV
- The Benefits and Downsides of Forming a JV
- The Differences Between a Joint Venture and a Partnership
1. Download a Free Joint Venture Agreement Template
Our Joint Venture Agreement sample addresses the following details:
- Who is pooling resources and sharing risks
- What is the purpose and scope of the venture
- Where the principal place of business is located
- When the venture is dissolved, either after some time or goal completed
- How profits and losses are distributed among the co-venturers
2. The Definition: What is a Joint Venture Agreement?
A JV Agreement is a contract between two or more parties who want to do business together for a period of time. Instead of creating a formal partnership or new legal entity, a contractual joint venture (“JV”) allows the parties to continue filing their tax returns yet reap the financial benefits of sharing resources and risks.
A JV Agreement will identify the following fundamental elements:
- Parties or Co-Venturers: the two entities that have agreed to work together.
- Contributions: how much money, property, or time each of the co-venturers will invest.
- Management: the person responsible for the day-to-day operations of the venture.
- Purpose: scope of JV activities and reason to join resources and collaborate.
- Profits: how profits will be distributed, either based on contributions or another formula.
- Term: whether the venture is for a limited time or indefinite period.
Here are some other useful details a Joint Undertaking Agreement might include:
- Assignment: neither party may assign the venture
- Confidentiality: both parties agree to keep all proprietary information confidential
- Exclusivity: neither party is required to do business only with the other co-venturer
- Termination: the venture will end when a goal is accomplished or by a certain time
JVs have a limited life and purpose, requiring less commitment than a more permanent partnership that imposes more responsibilities and obligations on each partner.
As a reference, people often refer to this document by other names:
- Consortium Agreement
- Cooperative Agreement
- Co-Venture Agreement
- Joint Undertaking
- JV Agreement
- Strategic Alliance
Joint Venture Agreement PDF Sample
The sample joint venture agreement below details an agreement between ‘Annette J Luna’ and ‘Nicholas D Entrekin.’ Annette J Luna and Nicholas D Entrekin agree to establish a joint venture for the purpose of developing and running a chain of ice cream stores.Joint Venture Agreement
3. The Reasons to Form a JV
If your business could benefit from sharing resources with another company, a joint venture for a limited period of time and limited purpose may increase your chances of succeeding. Companies often enter into JV Agreements in the following circumstances:
- Create strategic alliances to gain access to wider markets
- Develop new technologies, products, or services
- Expand business development through new networks
- Leverage one company’s brand and reputation to increase sales
- Lower research and development costs through collaboration
- Share expertise or relationships to penetrate new markets
Since most co-ventures in the United States are formed as LLCs, an LLC Operating Agreement is often needed to define each owner’s responsibilities.
Unlike a formally organized partnership, co-ventures are not permanent and are often dissolved in these kinds of situations:
- One company buys the other business
- Market conditions change
- New goals developed
- Purpose has been fulfilled or not
- Shared goals no longer apply
- Time period for the business relationship has lapsed
Create Your Free Joint Venture Agreement in minutes.
4. The Benefits and Risks of Forming a JV
Here are just a few of the benefits that can be leveraged when a co-venture is used:
- Larger companies can access new research materials from smaller companies
- Smaller companies can benefit from a larger company’s market presence
- Domestic companies can learn about social reality of local area from foreign company
- Foreign companies can be exposed to new relationships and expertise from domestic company
- Businesses can experiment outside of its core business to develop new product or service
- Companies can merge their wealth of expertise in a specific business area
This American Life explains a historic joint venture between General Motors and Toyota, known as the New United Motor Manufacturing Inc. or NUMMI for short.
Unfortunately, there are several risks involved in forming a JV:
- Unclear business objectives
- Miscommunication or misunderstandings due to differences in managment styles or culture
- Asymmetric business relationship in which one side brings a disproportionate amount value than the other
- Delayed return or loss of investments
Sony-Ericsson, now Sony Mobile, is another famous Japanese-Swedish joint venture to create smartphones using each company’s respective expertise in consumer electronics and the telecommunications industry.
5. The Differences Between a Joint Venture and a Partnership
Without a Joint Undertaking Agreement, the law may assume your collaboration is actually a legally recognized partnership and apply the default state laws for tax and liability purposes.
Here are just a few of the differences between a venture and a partnership:
The U.S. Small Business Administration provides more information on co-venture agreements here.