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A joint venture is the formation of a single entity, by two or more separate businesses, control of which is shared by the parties involved. The ¡§parent¡¨ companies get to keep their own interests outside of the venture but within it, everything is shared. A successful joint venture can be a very lucrative business proposition. An alliance created with an eye on strategy, your joint venture partners should complement your business activities. They should capable of providing a complementary service like distribution, finance, technology or personnel. For example, you could form a venture with a company with distribution capabilities if you need one and offer your finance capabilities in return. The idea behind joint ventures is mutual benefit. Everyone involved should walk away with something desirable. However, a joint venture can quickly go sour if the companies have different ideas. So, before forming a joint venture, there are a few things that you should hammer out before the papers are signed. Do a background check Before entering into any business relationship, it is important to know whom it is you are dealing with. This is especially in joint ventures, as your reputation becomes entwined with that of your partners in the venture. Verify information with third parties, and make sure that there is a strong basis for trust. Also, ensure that the company is capable of holding up its end of the deal. Build a Business Plan The business plan for your joint venture should be drawn up by all parties involved. The plan should include clearly defined goals for the venture as well as benchmarks for defining success. An exit strategy that is acceptable to all parties as well as terms for winding up the venture should also be incorporated. There should be a contingency plan in case for some reason the venture is dissolved before the specified date. Registering the company You can register your joint venture in a variety of different ways. A Limited Liability Corporation is one option as are other types of new businesses. Many fast growing companies choose to register their joint ventures as strategic corporate partnerships. Investigate all your options before making a decision. Availability of Property and Resources The resources and property (appreciated or depreciated) that will be made available by each partner of the joint venture need to be clearly understood in advance. The types of resources to be provided or details of any specific use of a party's property should be discussed beforehand. In this way, you will avoid any sudden financial hiccups in the future. Special Allocations If you need to make special allocations such as special gain or loss, income and deductions, they should be identified in advance and provisions made. For example, in case of a loss situation, some of it will have to be divided amongst the partners. If a partner will be providing his expertise or any specific services, his compensation must be worked out beforehand. If these issues cannot be worked out, maybe it is time to partner with someone else. If you can work out all of these issues satisfactorily before you form a joint venture, then you will likely find success in a profitable partnership.
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About the author: Vlad Ehrsam is the chief writer at Full Info on Business, visit there today for the latest Business advice, and their free newsletter is well worth signing up for too. You can get a unique content version of this article.
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