Answer: A joint venture is a business arrangement between two or more parties to pool their resources to reach a common goal.
Joint ventures can be structured in two general ways, by forming a new joint venture entity, or by establishing a contractual joint venture arrangement.
Whether to structure a joint venture using a joint venture agreement (often referred to as a “contractual joint venture”), or forming a new entity to serve as the vehicle for your joint venture (often referred to as an “equity joint venture”) depends on a number of different considerations, which should be discussed with an attorney who is well versed in these types of business arrangements. If it is decided that setting up a new entity for the joint venture will best serve the interests of the co-venturers, selecting the proper entity type is one of the first and most important considerations. Often, use of a passthrough entity (an entity taxed as a partnership) like an LLC is the best choice of entity for doing so due to their flexibility. However, use of a corporation can also often be advantageous for tax purposes and other business considerations.
Regardless, if you are considering entering into a joint venture relationship, you should contact an attorney experienced in these matters to decide if such an arrangement is advisable, and if so, what type of joint venture should be selected to accomplish your goals. The Eastman Law Firm is experienced in setting up joint ventures, and would be happy to help you do so.