Joint ventures

A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance.

Most joint ventures are incorporated, although some, as in the oil and gas industry, are "unincorporated" joint ventures that mimic a corporate entity. Key elements of a joint venture's design include: 1) the number of parties; 2) the geographic, product, technology and value-chain scope within which the JV will operate; 3) the contributions of the parties; 4) the structural form (each country has specific options, e.g. in the U.S. the main options are a C Corporation or an LLC/partnership structure); 5) the valuation of initial contributions and ownership split among the parties; 6) the economic arrangements, post-deal (e.g. Is the joint venture intended to general profits vs. operate as a cost-sharing or production-sharing venture; if a for-profit entity, will the parties share profits in proportion to ownership, or some other way?); 7) governance and control; 8) Talent/HR model (will the Jv have its own staff on own payroll vs. second staff from the parent companies; 9) contractual arrangements with the parent companies for inputs, outputs or services; 10) exit and evolution provisions?

Companies typically pursue joint ventures for one of four reasons: to access a new market, particularly emerging markets; to gain scale efficiencies by combining assets and operations; to share risk for major investments or projects; or to access skills and capabilities.

In European law, the term "joint venture" (or joint undertaking) is an elusive legal concept, better defined under the rules of company law. In France, the term "joint venture" is variously translated "association d'entreprises", "entreprise conjointe", "coentreprise" or "entreprise commune". In Germany, "joint venture" is better represented as a "combination of companies" (Konzern).

With individuals, when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are "co-venturers".

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