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A formalized joint venture between two or more individuals, companies or partnerships can be highly beneficial. It can give your company an edge by leveraging the strength of another entity. It can also provide a fast route for growth and increased market share, particularly in foreign markets.
Although joint ventures are normally intended to exist for a limited period of time (typically 5-7 years), they provide companies with the ability to obtain new expertise, knowledge and compensation in an entirely disparate market, while sharing financial support and risks.
However, the devil is in the details: Joint ventures can also introduce significant pitfalls.
For example, how will separate corporate cultures interact? Will members of the senior leadership and management teams support each other? Will objectives and expectations be met -- and if not, will a failed venture leave behind detrimental harm for your company over the long term.
For all of these reasons, before engaging in a joint venture, you should ask yourself these questions: How can you agree to a joint venture that benefits all parties while making sure your company’s rights and best interests are represented fully? Are both parties providing the same resources and contributions to the venture? How do you negotiate the terms? How do you protect yourself against possible breaches and litigation.
You want to be certain your joint venture does not leave you and your company vulnerable to trouble down the road or leave you stuck in a untenable position. For these reasons it’s crucial your joint venture agreement be negotiated and prepared by an attorney well versed in contract and commercial business law.
The law firm of Joseph H. Ostad can help. We've been negotiating and executing joint venture agreements for businesses in the Baltimore Washington area for more than 20 years.
There are three main areas to consider when putting together a successful joint venture:Financial Arrangements
The most important aspect of your joint venture will pertain to the financial arrangements made between the parties. How much capital will be introduced in the joint venture? What percentage will each party contribute? If more funds are needed down the road, who will be responsible? Is there an operating budget? Who will manage the operating expenses. A good business attorney well versed in successful joint venture agreements can help you answer these questions while building a plan of action that benefits both parties.Allocation of Resources
When it comes to allocating resources, it is important to determine which party will carry the burdens of day to day operations. Who will be responsible for each part of the agreement? It’s likely that the joint venture will require shared resources. But you'll still need to determine who does what. The most important thing to avoid is conflict -- and potential litigation. All of the day to day operating decisions should be clearly outlined, mapped out and delineated to protect your company in case something goes wrong down the road. Again an experienced business attorney will incorporate these crucial allocation decisions into your final joint venture agreement.Employee Commitments
Lastly, your joint venture agreement should consider the workload required for each side. For example, if your joint venture requires a sales force, whose sales people will be given the task? How many hours will personnel agree to work? Will these employees work exclusively for the joint venture -- or will they continue to work on their regular duties. This is an area where disagreements between the various parties can become contentious. Typically, one side feels like the other isn’t carrying their end of the bargain. Here again, the devil is in the details. A properly executed joint venture agreement will minimize these problems by detailing the terms.
The bottom line is that a joint venture can be extremely beneficial, creating massive opportunities for all sides. However, it is best to thoroughly document any planned joint venture with specific contracts and agreements that clearly spell out the details.Let Us Help You Today
When it comes to executing joint venture agreements and protecting your assets, experience matters most. The law offices of Joseph H. Ostad will look out for your interest while advising you of each step of the process. We’ll perform the task professionally and quickly. Please contact us today for a free consultation. You can call 800-320-0080 and talk to us directly or click here to contact us online to schedule an appointment in our Rockville or Baltimore offices.