A joint venture is a commercial arrangement between two or more independent entities. The parties to the joint venture will need to address a number of di erent issues when setting up a joint venture. These issues will generally include how the joint venture will be structured and whether it will operate through a separate legal entity and what the tax implications will be for the parties and for the venture itself.

It is a good idea to enter into a con dentiality agreement before you begin negotiations. This will help protect each party in relation to the information they disclose to the other about their business.

Let’s take a look at these points of consideration more carefully….

1. Structure

The Parties will need to decide whether to establish a separate legal entity. By having a separate legal entity the joint venture can own its assets and contracts in its own right.

The four basic legal forms are a Limited Liability Company, Limited Liability Partnership, Partnership (or limited partnership) or a purely contractual co-operation agreement.

Whichever way the joint venture is set up the parties will need to consider a number of other key issues at the outset. For example, the protection of the parties intellectual property rights and any intellectual property rights that may be created by the joint venture itself.

Employment considerations will need to be addressed and thoughts on whether employees will be seconded from the individual parties business to the joint venture or whether they will be transferred to the joint venture.

2. Due Diligence

It is wise to carry out some form of due diligence before entering into a joint venture as it is especially important to ensure that there are no surprises for either party.

3. Documents

In the case of a corporate joint venture, the principal documents required in order to establish a joint venture will be the Articles of Association of the joint venture company and a Shareholders’ Agreement.

The main reason for these documents is to set out the rights and obligations of the parties in relation to the joint venture, so as to ensure that the joint venture company is operated as originally intended by the parties.

There will be other documents that may be required such as Business and Asset Transfer Agreements, Distribution and Marketing Agreements, Contracts for the supply of goods and services and maybe Service and Secondment Agreements.

4. Termination

Of course both parties, when entering into a joint venture, have every hope that the venture will be a success, however, it is important to consider at an early stage how the arrangements may terminate and to deal with the possibility that a party may wish to leave the joint venture.