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A joint venture agreement is a contract that legally ties two or more parties together to form a single-entity partnership. Because there is a lot at stake with any joint venture, having an iron-clad contract is critical. The following are key elements every joint venture contract should have, according to contract lawyers.
Getting a joint venture off the ground means each party needs to contribute something. This can mean start-up capital, services, advising, and more. Explain this within the contract in detail. For example, if each party must contribute capital, exactly how much is each contributing. If one party is offering a service, what is the scope of this service and how often will it be rendered? Word this in a way that removes ambiguity.
It is tempting to say that each party owns equal shares of the business and gets equal parts of the revenue, but a better idea is ensuring that the percentage of ownership and profit reflects what each party is contributing. It is important to look at this in terms of more than capital. Sometimes, offering services and functioning as a consultant can have more authentic value than just investing money into a business.
With most business ventures, there will be numerous day-today responsibilities that keep the company operational. Your joint venture agreement should outline what these operations responsibilities are and who is in charge of them. In many cases, these will be delegated to employees or outsourced to someone like an accountant. However, even if it isn’t one of the parties of the venture completing the work, your contract should still specify who is.
Every contract should specify the date it goes into effect as this determines at what point the parties are being held to the other terms in the agreement. In some cases, an exact end date may also be beneficial. If you see your agreement as open-ended, you could specify a review or renewal date rather than an end.
Because each party has ownership of the venture, they are likely to assume they have the right to use branding elements and intellectual property as they please. However, misuse of these items can negatively impact the joint venture. Clearly outline any restrictions on the use of branding and intellectual property in the joint venture to prevent disagreements and protect the business.
When outlining this, consider two distinct possibilities: a party not being able to perform their duties due to something such as an illness, and a party being unable to perform their duties due to their own choice. In the first case, you might want to give the party a chance to recover and make up for their lacking contributions, while in the other, it is best to default to consequences.
Your joint venture agreement may need to end abruptly for any number of reasons, including one or more parties wanting out of the agreement or the failure of the business. Your termination clause needs to specify how this will be handled, including who must cover what expenses and if a party must pay a specific amount to leave the agreement.
Creating a joint venture agreement can be stressful, as you do not want to leave any loopholes in the language you use. Instead of attempting to craft an agreement on your own, turn to ContractsCounsel. Through our boutique marketplace, you can receive quotes from vetted attorneys who not only create joint venture agreements but also understand the nuance of your industry. Work with ContractsCounsel to get the help you need at a price that works for you.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.
Dual Qualified New York Attorney & Enrolled NZ Barrister & Solicitor
Fabian graduated with honors from the University of Miami School of law, where he served as the articles and comments editor for the law school's Race and Social Justice Law Review. He received the John F. Evans Memorial Scholarship Award for excellence in the university's Litigation Skills Program and the HOPE Pro Bono award for completing more than one hundred (100) pro bono hours. Additionally, he received the CALI Excellence for the future award in Sports Law. He focuses his practice on corporate, real estate and immigration matters. Fabian has experience representing luxury hotel owners and operators in connection with the drafting of hotel management agreements, restaurant license agreements, and complex restaurant leases for domestic and international projects including: Nobu Tulum, Nobu Punta Cana, Nobu Orlando, Nobu Chicago and the Nickelodeon Hotel in Riviera Maya, Mexico, among others. He has represented clients in the commercial real estate industry in connection with the drafting of purchase and sale agreements, promissory notes, and mortgages. Lastly, Fabian routinely counsels corporate clients in connection with the drafting of articles of organization, operating agreements, and other documents related to acquisitions, restructurings and investments.
Josh Bernstein has been serving real estate and corporate transactional clients since 2002. His experience is varied, and he enjoys working on and puzzling out novel and complex corporate and real estate matters. Josh’s experience includes, among other things, the following: representation of public companies in connection with SEC reporting and compliance work (proxies, 10-K’s; 10-Q’s; 8-K’s, etc.); representation of public and private company securities issuances (including private placements, and other similar offerings); assistance in structuring and drafting joint ventures, both for investors and operating partners, and including both real estate and corporate ventures; handling public and private company mergers and acquisitions; and asset sales and dispositions; assisting clients, big and small, with real estate acquisitions, sales and financings; managing large-scale and multi-state real estate portfolio acquisitions, dispositions and financings; complex condominium creation, structuring and governance work, including: commercial condominiums, use of condominiums as a land planning tool, wholesale condominium property acquisitions and dispositions, and rehabilitating failed or faulty condominium legal structures to make ready for sale; development of restrictive covenants and owners’ association documents for master-planned communities; compliance with federal statutes governing real estate sale and development (including, without limitation, the Interstate Land Sales Full Disclosure Act, the Housing for Older Persons Act, and the Americans with Disabilities Act); representation of real estate lenders, for both improved and unimproved property, and including numerous construction financings secured by real estate; assistance with commercial leasing; from both the landlord and tenant side, and including condominium leasing; training residential home and condominium sales staff for compliance with applicable local and federal law; and workouts of all kinds. When he’s not busy lawyering, Josh may be found watching 80’s commercials, flying a single-engine plane, playing poker, or trying to be a good dad.
