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Utilizing a Joint Venture Can Grow Your Business
A joint venture is created when two or more businesses enter into a partnership to undertake a business venture.
January 07, 2012 /Law and Legal PR News/ -- Utilizing a Joint Venture Can Grow Your Business
Every business searches for avenues to increase their profitability and expand into new or different markets. Such expansion can be risky and expensive, however, under proper circumstances, a business need not venture forward by itself. Many businesses are sharing the costs and risks of new ventures through joint ventures with other businesses. A joint venture is created when two or more businesses enter into a partnership to undertake a business venture.
When Is a Joint Venture the Right Decision?
A joint venture should only be entered into if it is mutually beneficial for both parties. Prior to entering into a joint venture, the parties should consider how they will benefit, what they might sacrifice, and whether the terms of the agreement are fair.
Joint ventures often go awry because the parties have different goals, unrealistic expectations, and/or there is a disproportionate allocation of risks, responsibilities and rewards.
Potential Issues
There are a number of issues a business should consider before entering into a joint venture, including, but not limited to, the following:
-Should the joint venture be conducted through a separate entity, for purposes of separating the liabilities of the joint venture from the general business of the Company?
-Should there be performance milestones that trigger an early termination right?
-Should there be performance milestones that effect the profit participation of the joint venture parties?
-How are joint venture expenses allocated?
-How will the joint venture be governed? Who has the authority to make which decisions, and how are disagreements resolved?
A Joint Venture is Right for My Business -- How Do I Get Started?
Both parties should carefully consider the risks and benefits of a joint venture before consummating a joint venture agreement. It is beneficial to have outside representation before finalizing a joint venture agreement. An experienced corporate attorney can often guard against unforeseen circumstances and help allocate risks appropriately.
Article provided by Alliance Legal Partners
Visit us at www.alliancelegalpartners.com
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