Solicitation: The attached documents have been prepared for general information purposes only and do not constitute legal advice. Regardless of the legal structure used for the joint venture, the most important document will be the joint venture agreement, which defines all the rights and obligations of the partners. The objectives of the joint venture, the initial contributions of the members, the day-to-day management and the right to profits, as well as the liability for losses of the joint venture are set out in this document. It is important to formulate it carefully to avoid disputes on the road. The only way to eliminate this joint liability is to form a legally separate entity for the joint venture (which we will explain below). While a joint venture does not require you to form a separate entity, many companies choose this route. When setting up a joint venture, the most common thing both parties can do is form a new entity. However, since the joint venture itself is not recognized by the Internal Revenue Service (IRS), the form of business between the two parties helps determine how taxes are paid. If the joint venture is a separate entity, it pays taxes like any other corporation or corporation. So if it operates as an LLC, the profits and losses would be passed on to the owners` personal tax returns, just like any other LLC. In addition, joint ventures take time to develop and document, and they cost money. If you are a separate legal entity and each party to the joint venture has its own legal counsel, the fees may be higher than nominal.

On an ongoing basis, the joint venture may need its own staff and have annual registration and review requirements. No matter how you divide contributions and profits, each party is fully responsible for anything that could go wrong with the joint venture. Before proceeding with a joint venture, managers of participating companies should clearly define how their joint venture will operate and what each will contribute. The structure of a joint venture can vary depending on the partner and the project and has legal and tax implications. Important questions that companies should ask themselves when considering a joint venture include: A joint venture is a business run by two or more people or organizations to share the cost and (hopefully) profit of a particular business project. A joint venture is not a business organization in the sense of a corporation, partnership or enterprise. It is an agreement between the parties for a specific purpose and usually within a defined time frame. Joint ventures can be very informal, such as a handshake and an agreement for two companies to share a booth at a trade show. Other deals can be extremely complex, such as a consortium of large electronics companies joining forces to develop new microchips.

The key factor in a joint venture partnership is its unique and definable purpose. Joint ventures have grown in popularity in recent years, despite the relatively high failure rate of these efforts for one reason or another. Creative small business owners have been able to use this business strategy to a good advantage over the years, although the practice is mostly associated with larger companies. Until recently, there were no guidelines on how foreign investment should be treated due to China`s restrictive nature vis-à-vis foreign investors. After Mao Zedong`s death in 1976, foreign trade initiatives were implemented, and in 1979, the law applicable to foreign direct investment was clarified, while the first Sino-foreign enterprise took place in 2001. [13] The body of law has improved since then. Starting a joint venture offers a number of benefits that may be difficult to achieve through a contractual joint venture. For example, a joint venture may facilitate the division of assets to be used by the parties in the venture capital firm, manage the liability risks associated with the business, and establish a management team focused solely on the business. However, starting a joint venture can also be much more complex than setting up a contractual joint venture. This complexity may make a joint venture more costly and burdensome for at-risk parties than a contractual joint venture. As an example, let`s say two real estate developers form a joint venture to build an apartment building.