Joint venture

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Joint ventures: an overview

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:

  • 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.

Joint ventures are widely used to gain entrance into foreign markets. 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 updated in July of 2021 by the Wex Definitions Team]

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Category: Enterprise Law