A joint venture is not a structure, but is really a contract. A joint venture exists when two or more people agree to contribute goods, services, labor or capital to one business enterprise. Canada has no specific laws governing joint ventures, outside of contract law. Currently, joint ventures are governed by the contract between the parties involved in the jurisdiction they are agreed to be governed by.
The main advantages of using joint ventures are:
Ø You can make up the rules as to what the joint venture contract will look like.
Ø Joint Ventures are very flexible.
Ø Joint Ventures bring people together to share resources and/or talents.
Ø Joint Ventures can simply end when the deal is done (unlike a partnership or corporation).
The main disadvantages of using joint ventures are:
Ø Contracts can be complicated and costly.
Ø The objectives of the Joint Venture may not be clear, or each JV partner may have different objectives that cause conflict.
Ø Legal Contracts come down to interpretation, and in Joint Ventures there are no major laws governing them.
Joint ventures can be used in conjunction with corporations, trusts and other types of structuring. If you have structuring questions, don’t hesitate to contact us!
On my next blog, we’ll discuss Limited Partnerships. Please check back on Thursday!
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