Joint Venture Formation

The joint venture is a vehicle for the development of a business opportunity by two or more entities acting together, and will exist if the parties have: (1) a community of interest in the venture, (2) an agreement to share profits; (3) an agreement to share losses, and (4) a mutual right of control or management of the venture.  A joint venture may be structured as a corporation, partnership, limited liability company (“LLC”), trust, contractual arrangement, or any combination of such entities and arrangements.  Structure decisions for a particular joint venture will be driven by the venturers’ tax situation, accounting goals, business objectives and financial needs, as well as the venturers’ planned capital and other contributions to the venture, and antitrust and other regulatory considerations.  Regardless of the structure chosen, certain elements must be considered in structuring every joint venture.  This article considers those elements as well as alternatives for transferring assets to the joint venture.