Joint Venture Agreements: Working Together on One Project Without Merging

A joint venture is a business arrangement where two or more parties combine resources for a specific project, while staying separate businesses otherwise. A written agreement defines the rules.

Key terms

• The project purpose and duration.
• Each party's contributions of money, property or services.
• Profit, loss and expense sharing.
• Management, decision-making and control.
• Intellectual property ownership.
• Confidentiality and non-compete scope.
• Exit, dissolution and dispute resolution.

Structure options

A joint venture can be purely contractual or run through a new LLC or other entity. The structure affects liability, taxes and how disputes are resolved. Without clear terms, a venture may be treated as a general partnership, with shared personal liability.

Common risks

• Unclear roles and unequal work.
• Disagreements about profit and credit.
• Liability for a partner's acts.
• Trade secrets shared and misused.

Steps

1. Agree on goals and metrics.
2. Choose a structure with a lawyer and accountant.
3. Sign a written agreement before work starts.
4. Review progress and keep records.

Contributions and valuation

Parties contribute different things: cash, equipment, technology, customers or know-how. The agreement should state each contribution, how it is valued and what happens if more money is needed later. Disputes often arise when one side believes its contribution was worth more than the other's, so agree on valuation at the start.

Governance and decision-making

• Form a management committee with equal or weighted votes.
• List decisions that need unanimous consent.
• Appoint a day-to-day manager.
• Set reporting and meeting requirements.
• Include deadlock procedures.

Profits, losses and taxes

1. Decide how profits and losses are shared.
2. Set distribution timing.
3. Consider whether to form an LLC or partnership for tax purposes.
4. Assign responsibility for tax filings.
5. Ask an accountant about tax consequences.

Intellectual property and confidentiality

• Who owns pre-existing IP and new IP created by the venture.
• License terms for use during the venture.
• What happens to IP after the venture ends.
• Protect trade secrets with NDAs.

Ending the venture

Define the completion event or term, buyout rights, dissolution steps and who pays remaining liabilities. Include dispute resolution, such as mediation. See our guides to partnership dissolution and contract termination agreements.

Frequently asked questions