In a joint venture, two or more companies join together to collaborate on a particular project. Through their collaboration, the companies share resources, profits, losses and expenses.
The joint venture is a legal entity separate from the companies’ other business interests. For example, if two companies form a joint venture to work on a housing development, their other projects and properties are not involved.
Before proceeding with a joint venture, managers of participating companies should clearly define how their joint venture will work and what each will contribute. The structure of a joint venture can vary depending on the partners and the project and will have legal and tax implications.
More about joint ventures
Important questions for companies to ask when considering a joint venture are:
- What will each participant contribute in money, property, effort, knowledge, skill or other assets?
- Will the companies involved share any property as part of the joint venture?
- Which management activities will be shared and which will be performed independently?
- How much profit is expected? How will it be divided?
- Who will own any new intellectual property, products or services created through the joint venture?