Should You Enter Into a Joint Venture?

A joint venture can be a great opportunity to expand your business, make additional profit, and explore different revenue streams. But is it right for you, and what are the advantages of a joint venture?

A Joint Venture vs. A Partnership

A joint venture is a temporary collaboration between two businesses. It is not a partnership, in that it isn’t an ongoing business agreement, and the entities or people involved remain separate and distinct companies. Joint ventures often have one, specific goal or mission or project, and when that’s complete, the joint venture ends.

Expanding What Your Business Does

One advantage of a joint venture is it can allow your business to do things that it wouldn’t ordinarily have the experience, expertise, technology or ability to do. So, you team up with another business that does have those things. You do what your business does well, and the other joint venturer does what it does well.

By creating the joint venture you are now expanding into and benefitting from some area or product or service that your business, alone, may not be able to do.

Using Intellectual Property

Although simply sharing intellectual property can be done with a licensing agreement, it may also be done with a joint venture agreement. The agreement can allow the parties to use each other’s IP in connection with furthering the goals of the joint venture.

Imagine, for example, Kellogg’s wants to make cereal that tastes like Oreo cookies. Whereas Kellogg’s may not normally be able to use Oreo, a trademarked name, through a joint venture agreement, they may be able to sell, for example Oreo’s Corn Flakes.

This can immediately enhance credibility, given that the general public is already familiar with the brand names, giving your joint venture instant credibility.

Sharing of Risk

A joint venture can be a risk; you don’t know whether this new idea or project will work or sell.

But much like a partnership, the joint venture agreement can share the possible expenses or losses, mitigating your risk (of course, you’ll also share in the profits as well). You can also share any equipment, or expertise of employees, saving your company from incurring those expenses, as it would do if it wanted to explore new areas on its own.

It’s Only Temporary

Because a joint venture is temporary, and because your company remains intact, as an independent company, you can exit the joint venture when the project is over, or pursuant to the terms of the agreement. This means that you don’t have to make any long term commitments, and you aren’t tied to an idea that might go sour.

The Right Relationship

Remember that joint ventures are long term, if temporary, relationships. That means that all venturers have to work well together, and employees and officers may have to be willing to engage in some give and take, much like any successful relationship.

Questions about your joint venture? Contact the West Palm Beach commercial litigation attorneys at Pike & Lustig for help.

Source:

investopedia.com/ask/answers/033115/what-are-primary-advantages-forming-joint-venture.asp