In seeking out opportunities to further your business goals and grow your profits, you may be considering a joint venture with another San Diego business, or with businesses in markets elsewhere in California or beyond. A “joint venture” can be created when two or more persons or businesses join together for a single project or for a series of transactions. This forms a short term business that operates separately from your already existing independent business. In most ways, a joint venture is like a partnership, but the main difference is that a joint venture is meant to last for only a limited period of time to carry out a specific business project, while a partnership is usually meant to be an ongoing business. Often, businesses or entrepreneurs decide to join together because their products or services complement each other. Through a joint venture, you may want to combine products, unite manufacturing, create joint marketing or cross-endorsement plans, share technology or research and development efforts, expand product distribution, or combine resources and expertise in real estate development and investment. Whatever the plan, the objective is always to create a vehicle for greater mutual gain through the joint pursuit.
As an entrepreneur, you shape your business strategies with an eye toward reducing risk, and a joint venture agreement can be designed to do the same. With a written agreement, you can also minimize uncertainty while avoiding damaging misunderstandings and conflicting expectations so you can maintain a better business relationship. Depending on the type of joint venture you begin and the kinds of risks involved, you may want to structure the new business as a limited liability company (LLC) or corporation created for your specific purpose, or instead detail the project solely through written agreements. What you do to protect yourself and to fully develop your joint venture will be incorporated into your joint venture agreement. Among other things, the contract should set out:
- What services, property, or other assets will be contributed by each joint venturer
- Whether intellectual property (e.g. copyrighted material, trademarks, patents needed to manufacture products) will be licensed for use in the joint venture
- What your respective ownership interests will be
- How profits or losses will be shared
- How assets will be divided
- What rights and duties each partner will have, including operational and decision making roles
- How future investments will be handled, should the need arise
- What your exit strategy will be, such as a buyout procedure
Some of these provisions can affect your tax obligations, and when entering into a joint venture you must always take into account potential legal liability. For instance, a business partner’s actions can be binding on you, such as when a partner enters into contracts on behalf of the joint venture. You and the other members of the joint venture also take on fiduciary obligations of loyalty and are charged with acting with reasonable care, among other duties that work to promote your common business dealings. We’ll help you answer key questions through a joint venture agreement, while also managing any related concerns with a confidentiality agreement and a non-competition agreement if needed, and obtain any necessary licenses, permits, or filings required locally in San Diego or by the State of California. If you’ve decided to seize an opportunity to collaborate with another business, a comprehensive joint venture agreement can go far in helping you maximize your chances of success. Contact San Diego Law Firm’s skilled business lawyers at (619) 794-0243.
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