Joint Venture Agreement

A joint venture is an arrangement where two or more people pool resources, and then use these resources to achieve a task such as setting up a business. One of the benefits of starting a business as a joint venture rather than as a sole proprietor is that one can reduce the amount of credit they need to set up the business, since the cost of starting up would be partially augmented by the donations of the joint venture members. To make such a business run smoothly, a joint venture agreement is usually necessary.

This agreement clearly defines the roles of each member of the joint venture, the type of business they want to open as well as details regarding how the business will be managed. In addition to that, it’s also common to find information about how profits and losses will be shared between the individuals.

Failure to define such rules usually results in conflict later on. In the majority of cases, individuals who come together to start a joint venture business usually have different agendas and ideas about how the business should be run. By drafting this document before starting the business, these issues can be hashed out through discussion. This way, everybody will know exactly how things will work by the time the business starts.

The legality of this document is important, since it may be needed to solve disputes in a court of law. This is why legal representation should always be present during the drafting process. Attorneys not only ensure that the joint venture agreement is valid, but also provide ideas on how to draft some of the clauses.