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Often, two businesses will develop a new entity together to benefit each other’s own respective business interests. These agreements normally call for the sharing of certain resources such as capital, intellectual property, or personnel and can take a variety of different forms. With the aid of a qualified attorney, you can ensure that you and your business partner’s joint venture agreements are legally sound, preventing potential legal liabilities in the future.

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 an entity’s assets are 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 participantswill 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 businesses.

Simply stated, a 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. 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).

Joseph Centrich has experience dealing with a number of joint venture issues. If you are in the Woodlands, Conroe or the Houston area and need to discuss a joint venture, contact Hopkins Centrich to speak personally with a business law attorney.