A joint venture (JV) is a form of a business partnership, in which two or more business owners or companies are engaged in a particular business enterprise for getting a profit. In a joint venture, each side takes equal responsibility for all the profits, losses, and costs related to that project or common business activity.
It often happens that the sides of the business enterprise need someone, a disinterested party, which can manage the entire project for its better performance and independent results. In that case, a JV broker becomes a so-called mediator between the vendor or product owner and the affiliate who is aimed at its promotion.
The basic elements of a joint venture usually include the following aspects:
- the number of businesses, considered as parties to the treaty
- the industry or area in which a JV will work (specific location, products, or technologies covered)
- basic responsibilities and rights of each participant
- the main structure of the joint venture (formal or informal, short-term or long-term, etc)
- JV management and control
- list of arrangements to be made after the deal is complete
As a rule, the reasons for entering the joint ventures might be different, starting from expanding the network to a foreign market, joining forces for the business benefits, new product lines developing, and so on.
With consolidating the partners’ forces, joint ventures help companies to reach the new goals by supplying enough resources and costs to the parties. Additionally, JV is a nice option for reducing the time needed for a specific task to be done, as well as for sharing various risks to the JV parties. The main disadvantages of the joint venture are usually related to the difference between the cooperation concepts of the participants. It includes the differences in management and culture, vague objectives, and restrictions in the JV’s flexibility. Also, with the contract signed, this type of partnership is hard for the parties to exit.
