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Joint Venture - Explained

What is a Joint Venture?

Written by Jason Gordon

Updated at September 25th, 2021

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Table of Contents

What is a joint venture?Discussion QuestionPractice QuestionAcademic Research

What is a joint venture?

Joint ventures operate similarly to general partnerships, but they are specifically formed for a limited purpose or a single project. Unlike a general partnership, the joint venture does not arise by default through the activity of the joint venturers; rather, it requires the specific intent and agreement of the parties. As such, a joint venture agreement should be in writing to avoid the interpretation of the activity as a general partnership. Accomplishing a specific goal or working on a specific project is a key characteristic of the joint venture. If the joint venture is repeated, it makes it more likely that a court would interpret the relationship to be a general partnership.

Note: The joint venturer's may be individuals or business entities; however, it is most commonly used by two separate business entities to undertake a special project or commercial activity. They are particularly common when one business wishes to expand operations into a new market, such as when expanding sales to a foreign country.

Example: ABC Corp is interested in expanding its product sales into China. China has proven to be a difficult regulatory environment and customer market for US companies. Instead of entering the China market directly, ABC Corp decides to do a test run of its product sales with 123 Corp, a Chinese company. ABC and 123 agree to jointly sell and market ABC's product in China for a 6 month period. At the end of the period ABC Corp can decide if it wishes to enter into the Chinese market directly or pursue distributor or licensing relationships.

Next Article: Limited Partnership Explained Back to: BUSINESS ENTITIES

Related Topics

  • Uniform Partnership Act
  • Uniform Limited Partnership Act
  • Partnership Agreement
  • At-Will Partnerships
  • Responsibilities of Partners to the Partnership
  • Silent Partner
  • Funding the Partnership
  • How are Partners Compensated
  • Splitting Equity in an Industrial Partnership
  • Terminating the Partnership
  • Types of Partnerships
  • What are the main characteristics of a General partnership?
  • Tort Liability of General Partner
  • What are the main characteristics of a Joint venture?
  • What are the main characteristics of a Limited partnership?
  • Family Limited Partnership
  • Master Limited Partnership
  • What are the main characteristics of a Limited liability partnership?

Discussion Question

Can you identify an example of a prominent joint venture?

Practice Question

When is operating as a joint venture an effective business strategy?

Academic Research


joint venture

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