Having an idea is one thing but executing that idea all alone can be difficult to pull off. A joint venture allows you to merge resources with another party for a particular project. You get to share the risks involved in pulling the idea off with someone else so you do not have to shoulder burdens alone. However, you may also be required to share the rewards.
When forming a joint venture, it is important that you have a professional by your side as this greatly increases your chances of success. An experienced corporate law attorney is your safest bet as they will ensure that you do not get the shorter end of the stick.
How Can I Make My Joint Venture Successful?
When you speak to a corporate law attorney, there are several tips they will give you to ensure the success of your joint venture. Two major things can make or break your venture and they will be explained below.
1. The Structure of Your Joint Venture
A joint venture can either be purely contractual or a separate legal entity. Contractual joint ventures exist due to an agreement between the parties and are usually suitable for short-term contracts. Long-term contracts are better executed when the joint venture is formed through a limited liability company or a corporation.
Creating a separate legal entity often provides you with more protection as it comes with a laid-down structure. The profits and losses of the venture will also be clearly defined because the corporation will have its accounting structure. This makes it easier to keep track of finances and other responsibilities.
Taxes are also much more difficult to determine and pay under contractual joint ventures. This is not the same under a separate legal entity.
2. Your Joint Venture Agreement
Having a well-documented and written agreement is always advisable when forming a joint venture. By doing so, you are ensuring that your partner cannot deny or ignore their responsibilities. It is always easier to prove your case in court when you have physical evidence of your agreement rather than relying on an oral contract.
Your agreement should contain some essentials such as:
- The names and addresses of both partners
- An accurate description of the joint venture and what it aims to achieve
- The structure for the financing of the venture and payment terms
- The duration of the agreement
- The composition of the board in the case of a separate legal entity
- Dispute resolution mechanisms
- Procedure for termination of the venture
The list above is not exhaustive as there are many other factors your attorney will consider when drafting your agreement. Thorough research is incredibly important when drafting your agreement because a well-drafted agreement is your protection. Going into a joint venture with inadequate protection will cause you to suffer loss.
At HechtSchondorf, we have a wide range of experienced corporate lawyers who can guarantee success in your joint venture. We also offer a free consultation for first-timers. Contact us here today to get started.