Small entrepreneurs who stay on the fence to pursue what kind of agreement are wise to consult their lawyer. Hopefully, you`ll ask what you want to accomplish by writing your fortune with another company. Your answer could lead to the right trajectory for you, because it is important to review your business strategy before embarking on a joint venture. This should help you define what you can realistically expect. In fact, you may decide that there are better ways to achieve your business goals. Check out our guide to evaluating your growth options. A joint venture may lead to the creation of a new independent entity or it may operate exclusively on the basis of an agreement between existing companies, without the formation of a new legal entity. The latter is called a non-communal joint venture. Small businesses often want access to a larger partner`s resources, such as a strong distribution network, specialized employees and financial resources. The larger company could benefit from collaboration with a more flexible, innovative partner, or simply from access to new products or intellectual property. The term “consortium” can be used to describe a joint venture.

However, a consortium is a more informal agreement between a number of different companies than to create a new one. A consortium of travel agencies can negotiate and grant members special rates for hotels and airfares, but it does not create a whole new unit. No one wants to think of a failure if two parties start discussing the details of what a joint venture would look like and how it would work. Like small businesses, joint ventures are generally created with great optimism of success. If you are thinking about starting a joint venture between your company and another entity, it is important to think about how it might work, particularly in terms of management and taxation. A Qualified Joint Venture (QJV) is a kind of federal income tax system for spouses who run a partnership business. The couple filed a less complicated joint tax return than if their business was treated as a partnership for federal tax purposes. Partnering with another company can be complex.

It takes time and effort to build the right relationship. Problems are likely if: Any business in the joint venture that could be individuals, groups of individuals, companies or companies retains its own legal status. A joint venture can be created through a contract that identifies the resources such as money, real estate and other assets that each company brings to the business.