joint adventure
A joint adventure (modernly referred to as a joint venture) is a combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the risks associated with its development. The parties to the joint venture must be at least a combination of two natural persons or entities.
The parties may contribute capital, labor, assets, skill, experience, knowledge, or other resources useful for the single enterprise or project.
The creation of a joint venture is a matter of facts specific to each case. Although there is no statutory definition of a joint venture, courts in several states such as New York have recognized the following are the elements of this type of association:
- The intent of the parties to enter into a joint venture for a particular enterprise.
- An agreement (written or oral) between the parties manifesting their intent to associate as joint venturers.
- Mutual contributions by the parties to the joint venture.
- Some degree of joint control over the single enterprise or project.
- A mechanism or provision for the sharing of profits or losses.
A joint venture is not a partnership or a corporation, although some legal aspects of a joint venture (such as income tax treatment) may be ruled by partnership laws. Partnerships, unlike joint ventures, are meant to be a continuous entity for making profit, not for one particular project. While not partners, joint venturers can be held legally responsible for the liabilities and debts incurred in the name of the joint venture. Further, a court may find a joint venture where none actually existed if the parties held themselves out as a joint venture.
Joint ventures are widely used for construction projects and to gain entrance into foreign markets as a simpler way to guide the legal relationships between the parties instead of relying solely on contracts or creating a partnership for just one project. With construction projects, multiple parties with different levels of capital, skill, and labor are often needed for each project, and entering into a joint venture sets the legal relationships between the many entities for the single project. In multinational transactions, foreign entities form joint ventures with domestic entities already present in markets the foreign entities would like to enter. For example, the foreign entity may bring new technologies or business practices into the joint venture, while the domestic entity already has commercial relationships and requisite governmental documents within the country, along with being entrenched in the domestic industry.
[Last reviewed in October of 2023 by the Wex Definitions Team]
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