What is a joint venture?

What is a joint venture?

On Behalf of | Oct 4, 2019 | Business Formation & Planning |

When business opportunities present themselves, Louisianans need to be ready to act. This doesn’t just mean coming up with enough money to fund a business endeavor. It also means engaging in sound business formation and planning.

Upfront, choosing a business formation can make a huge difference in the way a business is operated and how risk and reward is distributed. A business plan can also clarify how a business will be structured and operated, as well as lay out goals for the future. In order to achieve these goals, it may become appropriate to engage in a joint a venture if the opportunity arises.

A joint venture is a business agreement between two existing entities whereby they work together for a common goal. These types of agreements are often utilized to further interests in research and production, but they can also be helpful when entering new markets, especially foreign ones. Through a joint venture, one business can gain access to a new market that already has a built-in distribution system while the other can benefit from being able to offer a new product or service.

A joint venture is different from a merger or acquisition in that the businesses entering into the joint venture retain their independent operations outside of the agreement. As such, a joint venture can involve any business form. It can be a partnership, corporation, or LLC.

The joint venture agreement is the most important part of these arrangements, though, because it specifies how profits and losses will be divided amongst the parties, and it will also dictate the duties and responsibilities of the parties involved.

Determining whether a joint venture is right in a given circumstance may be difficult. Those thinking about utilizing one of these agreements are best off working with an attorney who can help them negotiate and draft an agreement that is fair and likely to avoid litigation down the road.