What is a joint venture agreement?
Partnership agreements are legal documents that explicitly detail the relationship between the business partners and set out their individual obligations and commitments.
A proper partnership agreement should cover all possible business solutions that may arise in the course of partnership.
One of the most important clauses to be included in a partnership agreement is the buy-sell agreement.
A buy-sell agreement sets out the terms of a buyout in the event death, divorce, disability or resignation.
There are two primary structures for buy-sell agreements.
The first one is cross-purchase agreement, in which the remaining share owners buy the stock of the departing owners or his partnership interest.
The other key structure is stock-redemption agreement, in which the company buys the stock of the departing partner.
What is involved to create a Joint Venture Agreement in BC?
The purpose of a joint venture agreement is to outline the financial contribution and obligations of each member, the duration of the joint venture as well as the distribution of revenues and expenses.
A joint venture shares great similarity to partnership. However, there are still differences between these two types of business organization.
- Joint ventures are typically short-term partnerships between two or more individuals, groups, organizations or companies.
- Unlike partnerships which is a legal entity (where partners can essentially act on behalf of each other when conducting the business), a joint venture is merely an agreement between parties and pool resources. Participants are legally bound and therefore cannot act on behalf of each other.
- A joint venture agreement is usually very flexible. There are a number of ways to address and accommodate the needs of the participants.
- A joint venture is usually not permanent, but is renewable every few years.
- In terms of liability, partners in a partnership are jointly liable for all debts of the partnership, whereas participants in a joint venture are only responsible for issues related directly to the project.
Overall, both partnership agreement and joint venture agreement are relatively complex legal documents that require careful consideration.
How can joint venture partnership lawyers help?
If you wish to enter into a joint venture, it is highly recommended that you put a joint venture agreement in place first. This agreement will set out the rights and obligations of each party, protecting your position and limiting the chance of disputes occurring. Every joint venture is different, but an agreement can allow you to set out the following:
- The aims and limitations of your working relationship;
- The decision-making abilities of each person or organization;
- When the joint venture is to end;
- The financial obligations of each person or organization;
- How debts, profits and other assets (such as intellectual property) are to be split; and
- What should happen in the event of a dispute.
With a joint venture agreement in place, everyone will know the parameters of their business working relationship. It is much better to decide this at the start of the joint venture, or the relationship can quickly become complicated, potentially putting your personal and business assets at risk. Ideally, a business lawyer should draft the agreement, to ensure all relevant concerns are addressed.
Contact Herr Law Group’s joint venture agreement lawyers today!
If you would like to know more about joint venture agreements, please do not hesitate to contact Herr Law Group.