Joint venture agreements are used to facilitate projects between partners that are temporarily working together. These agreements outline the partners’ expectations and protect the partners’ individual businesses, as well as the working relationship.
Joint ventures do not create a separate business entity and are typically joined into when parties are engaged in a specific joint project. They are limited in time and scope, as the parties do not always do business together, and often have an expiration date that allows the parties to renew or refuse to renew the agreement.
Joint venture agreements are helpful because, often, the parties involved are putting forth different types of skills, assets, and in different quantities. Moreover, with joint ventures, parties work together to the extent agreed upon in the contract, so it is important to have a clear and concise written agreement describing the agreed upon terms and conditions.
Terms a joint venture agreement usually covers are: The length of the agreement and conditions for renewal; what the business will and will not do; the money, assets and/or skills the different parties are putting forth to the project; how profits and losses, salaries, and expenses are to be distributed amongst the venturers; the calculation of profits; the duties and responsibilities of each venture; the management structure; Indemnity between the venturers; and dispute resolution
Elements of Joint Venture Agreements Include:
- Limits on time and/or scope of the work;
- Termination of the project, including how to divide the assets and profits;
- Ownership assignments of co-created assets and intellectual property;
- Liability assignments;
- Accounting and record-keeping between the venturers; and
- Division of expenses and revenues