What to Know About Creating a Joint Venture
Joint ventures are popular in rapidly expanding markets like media and technology, where companies merge innovations to create new products. But any two companies in any business sector—food, tech, transportation, real estate—can form a joint venture.
What is a joint venture?
A joint venture (JV) is simply an agreement between business entities or individuals teaming up on a new project. Entering into a joint venture requires two or more entities to combine resources, ideas, technology, finances, or a combination of factors to achieve a singular goal.
What’s a joint venture vs. a partnership?
Two main differences between join ventures and partnerships involve time and money:
- Time: Joint ventures are typically formed to achieve one specific goal, which means they usually have a limited duration. Partnerships aren’t necessarily established with an end date in mind.
- Money: While entities can enter into joint ventures with the explicit goal of turning a profit, a joint venture can also be formed for research or manufacturing purposes. Partnerships are usually set-up to make money.
Should I create a separate business entity for my JV?
Nope. While you may create a separate business entity (like an LLC) for your joint venture, forming an entirely new business isn’t necessary. In fact, depending on your business plan, it may be better (and easier) to enter into a contractual agreement instead of setting up an entirely new company for your joint venture.
Can I create a Joint Venture LLC?
Yes. In some circumstances, companies choose to form an LLC for their joint venture, what’s known as a JV LLC. The main benefit of forming a JV LLC is limited liability status, which protects the founding businesses from the potential losses of the new business. However, there are start-up costs, annual fees and tax implications associated with starting a JV LLC—it’s a good idea to seek legal counsel before deciding which business model is right for you.
