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When Should I Consider a Joint Venture for My Business?

Although often confused with a business partnership, a joint venture agreement looks very different. Unlike a partnership, your joint business venture will allow both parties to maintain a distinct and separate business identity, rather than merging both parties together under the same broad umbrella.

At Purdy & Bailey, LLP, we have decades of combined experience helping business owners throughout the San Diego area. From resolving major business disputes to guiding clients through complex high-level mergers, our business law attorneys can act as a “one-stop-shop” for all your legal needs.

In this post, we’ll share a few of the legal advantages to embarking on a joint venture, as well as the potential disadvantages.

Key Advantages of a Joint Venture Agreement

Because a joint venture is really more like a strategic alliance than a true partnership, it can empower you to seek out new opportunities, all without sacrificing creative and financial control over your business. Much like the adage “two heads are better than one,” a joint business venture allows both parties to gain new technical expertise, resources, and markets that they may never have accessed otherwise. It also has a definite end date and clearly-defined terms, which are spelled out in the agreement itself.

Here are a few of the biggest advantages to starting a joint venture:

  • You can build your credibility, by working with a more experienced or recognizable brand.
  • You can greatly extend the reach of any marketing campaigns and initiatives.
  • You’ll gain access to markets, personnel, and knowledge that you wouldn’t normally have.
  • You’ll split the risks for your project with another party.
  • Any shares accrued during the joint venture will have value, even after the agreement ends.
  • You won’t have to file information returns.

Downsides to Joint Venture Agreements

Of course, in spite of the benefits, there are some situations where your joint venture could cause more problems than it solves. Because each business maintains their distinct identity in a joint venture, you may experience a true clash of cultures that leaves your employees demoralized, and your monetary gains at a stand-still.

These are the biggest potential downsides to a joint venture:

  • You’ll have to share any profits equally with another business.
  • If communication breaks down, it can be expensive and painful to re-align on your goals.
  • In the face of major cultural differences, your joint venture may turn into a battle of wills between employees.
  • Your hard-won intellectual property and resources may be used against you later on, especially if the relationship sours.

50+ Years of Experience in Business Law

Still not sure whether a joint venture agreement may be right for your business? No matter the nature of your project, our experienced San Diego business lawyers can help you decide on the ownership model that works for you. At Purdy & Bailey, LLP, we pride ourselves on securing real results for local entrepreneurs, and giving them the comprehensive legal service they need to succeed and grow.

Contact us at (858) 360-7080 for a free evaluation, or contact us online!

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