Tips for Creating a Successful Joint Venture
Previously on our blog, we discussed what a joint venture actually is and how to create one. Now we will share a few tips for making a joint venture relationship more successful.
Have a Written Agreement
By its very nature, a joint venture is a commitment by two or more different individuals or entities to work together on one single goal. Much like any relationship, this set up leaves a joint venture vulnerable to management and financial problems. Having a written agreement that anticipates potential disputes and controls how they will be handled is critical, and it is always best for parties to a joint venture to agree and sign a written agreement at the outset of the joint venture. This agreement should especially cover matters of asset control, asset valuation methods, how disputes will be handled, and how the winding-up process will work.
Protect the Joint Venture from Liability
Unless a joint venture is otherwise characterized as a separate legal entity, its members are vulnerable to personal liability. Members should therefore consider forming a corporation or limited liability company or corporation to protect themselves from potential liability. Additionally, if the venture is unsuccessful, the parties will not be personally liable for the resulting debts, as long as the entity was properly funded and properly formed.
If the parties to a joint venture do not have a solid financial plan, they can find their financial resources evaporating too quickly. Prudent joint venturers will anticipate the need for additional capital and determine acceptable sources of funding in the initial joint venture agreement.
If you have any questions about creating a joint venture, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.