A joint venture usually offers great advantages, but it also can come with certain risks which could be attributed to the high complexity of arrangements of this sort. The difference between a joint venture and a partnership lies in the fact that the latter concerns an ongoing business in all regards, whereas the former only concerns a single project. Remember that proposing a joint venture is the beginning of the negotiation, not the end with every venture having a specific purpose, which should be described in a written joint venture agreement that defines the asset contribution of and distribution to each party for the venture.
The new company is operated as a wholly-owned subsidiary of the two or more companies that engage in the venture despite the new company being considered a legally independent entity.
Advantages Of Joint Ventures:
Your business growing faster increased productivity and higher revenue generation is one of the major joint venture advantages. Other benefits of joint ventures include increased capacity, new markets, and distribution networks become accessible, there’s a partner to share risks and costs (i.e. liability), higher accessibility to greater resources, such as technology and finance.
Another huge advantage is flexibility as your venture having a limited lifespan and only covering a part of what you do may limit the commitment for both parties and the exposure of the business.
Risks Associated With Joint Ventures:
Disadvantages of a joint venture become prominent if the abilities or resources of the business you have formed a relationship with aren’t a match for yours. Although a lot of time and effort goes into building the right business relationship, still it can be tough to avoid all joint venture risks. Problems like inadequate support on the partner’s end in the early stages, poor co-operation due to differences in cultures and management styles, partners having different opinions and objectives for the venture, the objectives of the venture aren’t well-defined for everyone involved, etc.- are bound to arise.
The business plan should be clearly communicated to everyone involved for the venture to work. It is an only comprehensive research and detailed analysis of the aims and objectives that can set you up for success.
If you are looking forward to forming a joint venture, a Florida Entrepreneur Law lawyer can help represent, draft and protect your business’ interests in the agreement. Hiring a business dispute attorney in Florida is a wise choice as he/she can draft and negotiate the contract to your liking. Besides, an attorney can help resolve a dispute if a joint venture goes haywire.
Expand and grow your business by partaking in a joint venture:
- Higher accessibility to geographic locations.
- Access to specialized knowledge/staff.
- Access to new markets.
- Sharing risks and costs.
Experts recommend that you enter into a confidentiality and non-circumvent agreement when you are at the initial phase of exploring a potential joint venture. The parties in a joint venture will enjoy certain rights, including equal control and power over the project/transaction and equal ownership of the project.