Joint venture lawyers knows that a good joint venture is one with clear contracts that govern everything from its formation, to its running, and dissolution. A joint venture is a partnership between two businesses for a defined period of time. It has its own objectives, independent to those of each of the partner businesses. All expenses, risks, liabilities, and capital are shared between the parties in an agreed-upon ratio. If successful, all profits will be split in accordance with the joint venture agreement drafted by a lawyer.
A joint venture can be structured as an LLC, corporation, or a partnership.
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In California, “[a] joint venture is ‘an undertaking by two or more persons jointly to carry out a single business enterprise for profit.’” Weiner v. Fleischman (1991) 54 Cal.3d 476, 482. “A joint venture has been defined in various ways, but most frequently perhaps as an association of two or more persons who combine their property, skill or knowledge to carry out a single business enterprise for profit.” Holtz v. United Plumbing and Heating Co. (1957) 49 Cal.2d 501, 506.
Joint Venture Elements
There are three basic elements of a joint venture:
First, the members must have joint control over the venture (even though they may delegate it).
Second, they must share the profits of the undertaking.
Third, the members must each have an ownership interest in the enterprise.
Whether a joint venture actually exists depends on the intention of the parties. Where evidence is in dispute the existence or nonexistence of a joint venture is a question of fact to be determined by the jury. See Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 370. California law requires little formality in the creation of a joint venture and the agreement is not invalid because it may be indefinite with respect to its details. See Boyd v. Bevilacqua (1966) 247 Cal.App.2d 272, 285.
Under California Jury Instruction CACI 3712, the jury is instructed as follows:
Each of the members of a joint venture, and the joint venture itself, are responsible for the wrongful conduct of a member acting in furtherance of the venture.
You must decide whether a joint venture was created in this case. A joint venture exists if all of the following have been proved:
Two or more persons or business entities combine their property, skill, or knowledge with the intent to carry out a single business undertaking;
Each has an ownership interest in the business;
They have joint control over the business, even if they agree to delegate control; and
They agree to share the profits and losses of the business.
A joint venture can be formed by a written or an oral agreement or by an agreement implied by the parties’ conduct.
A joint venture exists when there is “an agreement between the parties under which they have a community of interest, that is, a joint interest, in a common business undertaking, an understanding as to the sharing of profits and losses,
and a right of joint control [citing this instruction].” ’ ” (Simmons v. Ware (2013) 213 Cal.App.4th 1035, 1053.)
The law requires little formality in the creation of a joint venture and the agreement is not invalid because it may be indefinite with respect to its details.” (Boyd v. Bevilacqua (1966) 247 Cal.App.2d 272, 285
We turn next to the element of joint control. ‘An essential element of a partnership or joint venture is the right of joint participation in the management and control of the business. [Citation.] Absent such right, the mere fact that one party is to receive benefits in consideration of services rendered or for capital contribution does not, as a matter of law, make him a partner or joint venturer. [Citations.]’ ” (Simmons, supra, 213 Cal.App.4th at p. 1056)
What Are the Legal Aspects of a Joint Venture?
The state where the joint venture is formed will govern the laws for the joint venture. The corporate laws, labor laws, and commerce laws of the state will apply to the joint venture. For taxation purposes, the federal government will treat a joint venture like a partnership. This means income from the joint venture can be filed in the personal income statement rather than a corporate tax statement.
A business joint venture lawyer can assist businesses in a successful joint venture. Seek counsel and guidance throughout the process.
Joint Venture Standards
Companies must meet the following standards when forming a joint venture:
File a certification with the department of commerce for a trade name certification
Draft contracts defining the business joint venture intent
Include agreements on the ownership, equity control, and decision-making authorization of each party
Define the contribution of each party to the capital and assets
Define how any revenues and losses will be shared between the partners
While there are some state and federal laws that regulate joint ventures, these partnerships are mainly defined by the joint venture agreement. This is a contract which stipulates the contribution of each party, how the partnership will be run, and how each party will exit the joint venture. The contract will ensure both parties are on the same page, minimize liability, and increase the chances of a successful partnership.
The Global Impact of Joint Ventures
Joint ventures are a popular way to move into international markets. The local partner will lend credibility and help them navigate the laws of the state or country. A business joint venture attorney will help you to navigate the complexities of an international agreement. They will assist with navigating taxation, regulations, laws, and statutes of both countries.
Limitations of a Joint Venture
No matter if your joint venture operates internationally or domestically, it will face many of the same regulations of general partnerships. These similarities include:
All partners are liable for their share of the debts, dependent on the terms of the contract
Assets are shared as per the stipulations of the joint venture contract
If one partner leaves or dies, the joint venture is terminated
A buy-sell provision allows the interests of a joint venture to be transferred to heirs stipulated in the contract
If there is a first right of refusal clause in a joint venture agreement, then transfers of interest can be prevented
If the joint venture remains with one person only, then the agreement is no longer a joint venture.
A business joint venture attorney is key to a joint venture succeeding. They can pre-empt any issues and prevent them through strong and thorough contracts.