All about Joint Ventures

Joint Venture is sometimes mistaken to be a partnership. It is in a way but legally, a word has a meaning and there shouldn’t be a grey area. A partnership is two people owning a business together, basically in the simplest of word. A Joint Venture on the other hand is two or more already existing companies coming together to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control. So, it’s kind of like doing one project together.

What are the things you should consider before forming a joint venture? One is picking the right partner. You need to pick a company that can compliment yours and that you can compliment as well. You need a plan and you need to know who will be bringing what to the table. Look at the credentials of the company, you should be confident enough to say and think that you trust what they say. Always have an exit strategy ready; since none of us can predict the future, we might as well have different plans ready just in case.

Think of all things in the long run, like availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners or special allocations of income, gain, loss or deduction to be made among the partners. It is best that all corners are covered by both parties before getting into the joint venture as it will make everything, including ending the joint venture, a lot smoother.

Next are having all your strategies for all parts of the JV in place. The business strategy must be well articulated, and in a crystal clear form. The less grey the better. Human Resource Strategy must be aligned and must support the goals of the JV. Have career paths, identities, culture and management all cleared up. How what works and who does what, this is especially important when it comes to international Joint Ventures. Define leadership, communication.

A Joint Venture doesn’t have to be a complicated process, but it just needs to be detailed. Don’t leave small things out that can cause problems in the middle of your project. Some things that seem small and insignificant can stir up big problems that will affect the whole project. When everything is in place, agreed upon and studied by both parties, then you should be well on your way to a great project.

Here's to your Success!

Rivers
MeetRivers.com


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