A Joint Venture is a business deal where there is more than one entity involved. They are normally attractive because they enable companies to share both risks and costs, for a better position of a gain which is usually monetary. Joint ventures are not business organizations in the sense of proprietorships, partner-ships or corporations. Most are formed for the ultimate purpose of saving money. Usually, joint ventures involve only two parties, but there are some that may involve three or even more parties. To keep things simple, I will mainly be making reference to joint ventures involving two parties in the article.
First things first, with any business deal there should be some type of written contract of agreement. Corporate law, partnership law, and the law of sole proprietorship do not govern joint ventures; contract law governs joint ventures. This makes everything clear and understood to both parties about what exactly they are involved in. The contract should specifically include the duties of both parties; the benefits of both parties; when the alliance will be executed; the specifications on an expiration of the venture; can there be an option to continue; the specifics on what each party can or cannot do while involved in the venture; what consequences can be faced if the contract is breeched; etc. This is obviously for legal reasons and for the records of each entity. A proper contract of agreement is very important in any business deal, especially a joint venture simply because it offers protection to both parties involved, on a few levels. A word of mouth agreement is powerful, but a written agreement is an entity in its own.
A good joint venture is always a win-win situation. This is where both entities involved benefit from the deal. These benefits may range from monetary gains, to mere publicity, but the key to every successful joint venture is to have both parties benefit from the deal.
Joint ventures are also a good source of leverage in certain situations for the parties involved. For example: a home improvement company is about to go out of business. A realtor is catching a lot of heat from clients that are stuck with homes they have just bought, that are in desperate need of repairs. If these two entities ventured together, (in short) the construction company will be able to stay in business by fixing up the realtors clients homes, and the realtor will gain more business due to being able to satisfy his clients better. Leverage is made when one entity is doing something for another entity beneficially. In joint ventures, both entities gain leverage.
As I stated earlier, joint ventures are commonly made between two parties, but innovation has built joint ventures with three or more parties as well. A key to the life of any business is creativity. For example: if a Home Improvement magazine is just starting up, and decides to joint venture with that same realtor and construction company, that is a potential win-win-win situation. (In short) The realtor and construction company get great deals and discounts on ads, and the magazine gets its first material exclusively. All entities will be benefited on all levels. Be creative with your joint ventures, and growth is almost guaranteed.
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