Business FormationBusiness LawContracts

The Benefits of a Joint Venture

There are many situations where two existing businesses, or two just starting entrepreneurs want to jointly take on an endeavor, but do not want to be so tied to each other as to be the same entity. This is where a joint venture can come in handy. It creates a legally binding relationship, and if done correctly all of the fiduciary duties of being in business together with out all of the red tape when it is time to go your separate ways.

Like any contract, it is important to ensure that it is well written and extremely explicit as to what each person’s duties and responsibilities are. Some more explanation of the importance of well drafted contracts can be seen in my “Anatomy of a Contract” series.

Probably the two most important things to ensure that are included, other than what the contract is about, are that each member has a fiduciary duty to the Joint Venture (this means they have a duty to put the best interests of the Joint Venture first) and that you properly indemnify all parties from each other’s potential wrong doings that occur outside of the Joint Venture. The whole point of the Joint Venture is that you are not tied, lock stock and barrel to the other party, not being properly indemnified ends up defeating that purpose.

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