A joint venture is a type of teaming arrangement where two or more parties join for the completion of a business venture. They are then known as single-entity partnership. This arrangement allows a project to be completed more efficiently since participants will combine capabilities. Because contracts are complex, it is always wise to seek the help of a Sarasota construction attorney. A legal representative with expert contract reviewing and drafting experience can execute a well-written joint venture agreement for your next business venture. Following are common provisions that contribute to a successful joint venture contract.
The agreement should identify the following:
- The names, addresses, and business forms of each member
- The fictitious business name parties will do business under
- A full description of the business venture
- A statement declaring the parties as joint venturers
- The signing of all venture related documents
- How long the agreement will be in effect
This portion of the agreement should address how the financing of the project will be handled. This will include the following:
- Who will contribute what
- A designated bank for contributed funds, other incomes, and payments
- How additional funds will be contributed when necessary
- Shared profits and losses broken down by percentages
- A clause addressing equipment
The success of a venture depends on establishing a hierarchy of management. Designate managerial authority to handle potential legal disputes. Courts will look to those named as representatives to address and resolve disputes between parties.
Costs and Compensation
Many expenses accompany joint ventures. It’s important to hire a Certified Public Accountant (CPA) to handle the financial matters of the joint venture. Your agreement should address the cost of compensation, insurance, and labor. The purchasing of equipment and materials, and licensing and permits, just to name a few.
Profits and Losses
Parties should address how profits and losses will be handled. Will profits be distributed based on the percentage a party has contributed? Who will be liable for losses and at what percentage?
Contracts may end abruptly for a number of reasons. A termination provision will address this. How will insurance, defects, and defaults be handled? Some reasons for termination include a member’s death, incapacitation, or a bankruptcy.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.