Joint Venture Agreement

A joint venture agreement is a business agreement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. In a joint venture agreement, each of the participants is responsible for profits, losses and costs associated with it.

A joint venture agreement also means that it is an arrangement where two companies develop a new entity to their mutual benefit.

Under joint venture agreement, each party contributes cash, property, assets or other resources to the business venture.

Advantages:

  • Access to new markets
  • Specialised expertise and resources
  • Adding financial and purchasing power
  • Beneficial to both the businesses

Clauses to be included in an agreement:

A joint venture agreement must be a written agreement. Some of the important points to be included in joint venture agreement are as follows:

  • The business objectives of the joint venture cash, property, assets, etc.;
  • The structure of the joint venture;
  • Each party’s contributions to the venture;
  • Dispute mechanism between the parties;
  • Duration or procedure to terminate joint venture;
  • A confidentiality clause

Ways to set up Joint Venture:

There are two ways in which a joint venture can be set up:

  • One is for two businesses to agree to join forces and cooperate with each other in a limited and specific way.
  • Two businesses either decide to set up a separate and independent business to handle joint venture.

Hence, a joint venture can give you:

  • More resources
  • Greater capacity
  • Increase technical expertise
(All Inclusive)