Crucial Things to Include in a Joint Venture Agreement
A joint venture (JV) arises when two or more business entities agree to pull their resources together to accomplish a specific task. This can be a new project or another business activity. When forming a joint venture, involved parties must sign an agreement. As with any business contract, certain terms and clauses must be included in a joint venture agreement. Below, we look at some of the crucial things to include in a joint venture agreement.#1: The Information of the Businesses Involved
A joint venture agreement should contain the information of each business involved. In the agreement, you should list the companies involved, what each business does, and any other relevant information about the businesses involved.#2: Members’ Information
Ensure the joint venture agreement includes all the necessary information about members. In the JV agreement, have all participating members' names, addresses, and contact information. JV members are those people who contribute capital, resources, and other assets. Typically, joint venture members are directors or C-level executives.#3: The Type of Joint Venture / The Purpose of the Joint Venture
There are different types of joint ventures. There are project-based, functional-based, vertical, and horizontal joint ventures. Each joint venture has a different purpose and lasts for a different amount of time. For example, project-based joint ventures usually last until the project is completed. On the other hand, a functional-based JV lasts for as long as the parties find it beneficial. Ensure the agreement describes the type of joint venture or, in other words, the reason for joining the joint venture.#4: Resources to Be Shared
Joint ventures allow existing businesses to combine resources to meet a particular goal. A company may bring capital, assets, skills, labor, or expertise. In a joint venture agreement, you must indicate what resources each company is to contribute.#5: Profits and Loss Allocation
In a joint venture agreement, it is crucial to include details about how profits and losses will be distributed among members. This clause is vital to prevent misunderstandings that could jeopardize the venture.#6: Rights and Duties
Ensure you include in your JV agreement the rights and duties of each party. For example, what are the voting rights of the joint venture members? Is the joint venture 50/50, or is one organization providing more resources than the other?#7: Dispute Resolution
The dispute resolution clause is crucial as it sets out rules and procedures for handling and resolving disputes. A dispute resolution clause should make it clear if members need to engage in negotiations, mediation, arbitration, or litigation when a dispute arises. This clause should be clear, comprehensive, and consistent with the laws of the relevant jurisdiction.
Please note that this is not an exhaustive list of the things to include in a joint venture agreement.Contact a Business Attorney Serving Santa Clara and Silicon Valley
Creating a joint venture agreement can be a complex task. For this reason, it is vital to hire an experienced business law attorney. Our experienced business attorneys at SAC Attorneys LLP can help you create a joint venture agreement. Contact us today to schedule a consultation.