There are several factors typically considered in determining the appropriate form of entity or other structure, such as a joint venture, to operate the proposed venture: 1) how the entity and/or the participants will be taxed under federal and state law; and 2) who will be liable for its contract, tort and statutory obligations (the entity itself will always be liable to the extent of its assets; the question is whether owners will be liable if entity’s assets insufficient to satisfy all claims).

Although these two considerations tend to receive the principal focus in the entity choice or non-entity joint venture decision, other factors can be critical: (a) the application of non-tax laws and regulations to the venture and the participants, (b) the ability of the participants to order their duties and rights by agreement (e.g. limitation of fiduciary duties), (c) the participants’ exit strategies, (d) the manner in which the participants will share the economic benefits of the venture, (e) the possible need for additional contributions by new and existing participants, (f) the manner in which the participants
will make day-to-day and policy decisions of the venture, (g) the agency rules applicable to the venture and (h) particular requirements of the participants separate business.

Simply stated, an Illinois joint venture is the development of a business opportunity through the special collaboration of two or more business entities acting together, while remaining independent.  Joint ventures have become increasingly popular in recent years, especially in the real estate, e-commerce, internet and technology industry.  Generally, these formal business entity partnerships allow venturers to combine, and take mutual advantage of complementary experience, expertise, financial resources, and services. Joint ventures may be conducted through a variety of business structures, such as, corporations, limited liability companies, and general and limited partnerships.  Designing an appropriate business structure for a particular joint venture will depend on a variety of factors, including:

  • Tax and Accounting goals,
  • Business objectives, and
  • Financial needs

An effective joint venture must be designed in a way that enable it to handle the potential management and operational issues that it is likely to encounter. Our corporate attorney's offer comprehensive legal services to establish successful joint ventures.

There are a variety of alternative business structures to choose from. If the joint venture will be operating principally in the United States, it can take the form of a corporation, a general partnership, a limited partnership, a limited liability company, or another form of business entity formed under the laws of any particular state (formal joint venture). If the joint venture will be operating principally overseas, then the venturers may choose to form an entity pursuant to the laws of the country in which the joint venture will be doing business. Finally, the venturers might decide not to form an entity at all, but rather to create the joint venture by means of contractual relationships that establish the relative rights and obligations of the venturers (informal joint venture).

A joint venture can be a valuable and flexible method of pursuing a business opportunity.  For example, the establishment of internet websites and e-commerce businesses built on robust featured platforms for ultimate search engine optimization can be expensive.  In many cases, these websites and businesses are created by serial entrepreneurs or start-up businesses that lack the resources to properly capitalize and finance the business.  As such, these entrepreneurs and start-up companies look to share the cost of the operation with other entrepreneurs and businesses in the form of the myriad of business entities listed above.  To be effective, however, the joint venture must be designed in a way that enable it to handle the potential management and operational issues that it is likely to encounter.