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Joint Venture Agreement

This Agreement is entered by and between Jonas Adam, individually or collectively as the "Signee" and Jane Smith, as the "Signer", together referred to as the "Parties".
The Contract is dated [the date both parties sign].

1. Agreement terms

The Parties agree that the following agreement is dependent on the terms presented as follow:

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What is a Joint Venture Agreement?

A Joint Venture Agreement is a legal contract that 2 or more parties who are going into business together form that will bind them to certain terms for a period of time. If you do not want to create a new legal entity or a formal partnership, then this Joint Venture Agreement can contractually protect the interests of all parties involved while still allowing them to file individual tax returns. Essentially, it allows you to see the benefits of sharing risks and resources without being penalized on taxes and protects the interests of all parties involved in case anything happens. 



A Joint Venture Agreement is a contract that forms a business partnership without the necessity for a new legal entity. (Source)


What are the essentials of a Joint Venture Agreement Template?  

A Joint Venture Agreement should have some fundamentals. These are things that must be included. The contract must include the names of the co-venturers and parties that have agreed to work together. It must also include the amount of time, money, and property that each party will invest in the ventures. You should define the time as well. This will need to be designated as either a limited time venture or an indefinite period of time.  

The agreement should also name a manager. The manager named in the Joint Venture Agreement will be responsible for operating the day-to-day functions of the venture. It needs to include the purpose of the venture, too. This defines the scope of the activities and denotes the reason that resources are being joined in this collaboration. 

To protect the interest of all parties involved, you should also define the profit assignments. Each party should know exactly how the profits are being distributed. This can be based on anything but is usually determined by a ratio of contributions, both by time and finances.

There are a few things that are commonly included in sample Joint Venture Agreements, but that are not required. Here are a few more things that you might want to include in your contract. 

You may want to designate that neither party can assign the venture. Many ventures also include confidentiality clauses or non-disclosure agreement (NDA) that bind the parties in a venture to confidentiality regarding proprietary information. You can also choose to designate an exclusivity clause that will prevent your partners from doing business with others. You can also include a designated point of termination, for example, you can terminate upon the successful accomplishment of the goal you have in mind for creating the ventures or after a certain length of time. Note that the terms under which the joint venture can be broken, similar to a partnership dissolution agreement, should be clearly thought through and outlined clearly to avoid any future issues.

These agreements are also known as Strategic Alliances, Consortium Agreements, Cooperative Agreements, Co-Venture Agreements, and Joint Undertakings. (Source)


Why would people need a Joint Venture Agreement?

There are a lot of reasons to form a joint venture. A lot of businesses can benefit from strategic partnerships with other companies, and instead of a merger, a joint venture with a limited scope and purpose would allow them to create a more flexible situation with an increased chance of success. 

A lot of companies will enter joint ventures in order to create strategic alliances that will give them access to markets they were unable to enter before. It is also a great idea for when you have someone who has developed a new piece of technology or product that you want the use of, who doesn't want to sell to a specific business. You can enter the joint ventures to contract for the right to use it and share in profits once it is developed.  

You can also expend your own business development by entering into new networks of people. This allows you to leverage another company’s reputation and brand loyalty to increase your own sales. You can also decrease the cost of research and development by collaborating with several other parties to develop the breakthrough together and collectively reap the benefits. 

Another great thing about this is that a joint venture is much easier to dissolve than a formal partnership. The nature of joint ventures is that they lack permanence. You can easily dissolve them once a company buys out the other venture, if market conditions change, or if new goals develop. Once a joint venture has fulfilled its purpose, it can also be dissolved. This often happens when shared goals are no longer shared, too.


What are some major benefits of Joint Venture Agreements?

Some of the benefits that you can leverage in a joint venture are well worth forming the contract. Larger companies are able to use the new research that smaller companies have created, while smaller companies will benefit from the market penetration of the larger companies. In global joint ventures, domestic companies can learn how to market to foreign companies on a social level and foreign companies are able to make some great connections and learn the domestic company’s expertise. 

It also allows businesses a lower risk way to experiment with expanding their core business and lets them test whether developing a new line of services or products would be beneficial. Companies are able to merge their resources and expertise in a specific area of business to create an unstoppable team.


What’s the catch? Are there risks when forming Joint Ventures?

With everything, there are some risks involved. That’s why the Joint Venture Templates can help you create an airtight contract that can decrease much of the risk involved when it comes to legal protection of your assets. Here are some potential drawbacks.

If your business objectives are unclear, then you may have trouble benefiting from the joint venture. One company can easily end up with all the benefits while another foots the bill. If there are misunderstandings and miscommunications when the Joint Venture Agreement is drafted, then it can also lead to disproportionate value levels, where one party is bringing more to the table than the other and receiving fewer rewards by comparison. Finally, it can also have consequences if the goal of the venture is not met because you can have lost investments or a very delayed return on those investments.

Note that a joint venture is an partnership on relatively more equal footing between the parties, compared to a working with a vendor, agency, or subcontractor, for example. So it's worthwhile to clearly understand how and why you want to work with this third party and choose the appropriate contract for doing so.