02 Aug Why You Need a Joint Venture Agreement
This is the second installment of my series on Joint Venture Agreements. We have already talked about the importance of a JV Agreement. Chances are, if you are reading this you already suspect a JV Agreement may be something you need, but let’s talk about when you need one of these and what they can do for you. These reasons are not mutually exclusive and are not meant to be an exhaustive list, but are merely guides to give you a better idea of how you can use a JV Agreement as a tool for your business. If you are still unsure about whether you need a JV Agreement or what type of document is right for you, just send us an email or give us a call.
Reason #1: When you are not starting a new business, but instead are combining services with another business, for a specific purpose and a typically certain amount of time. If you are creating a new business entity (LLC, Corporation) then you will need the governing document for the appropriate entity type and a Partnership Agreement, but not a Joint Venture Agreement.
Reason #2: Someone (or people) or some businesses have a resource you need (but don’t have) to be more profitable. Note that a JV Agreement is commonly between more than two parties.
Reason #3: Entering into a JV Agreement will give you power over a product, or service that you wouldn’t have as a regular customer. For instance, your largest customer has asked you to modify a commonly sold product, but in order to make this product your customer requests you need the components that are sold by another company and their personnel to install this component and maybe the companies who sell this component do not offer installation to their customers. Under a JV you and the component part manufacturer are able to combine your skills and products to service your largest client in a way that neither party would have been able to benefit from without combining your services. This is a good example of combining products and know-how.