When entering into a brand new business project, there are numerous options at your disposal. All business projects are risky, and you may want to share this risk with another party.
Two possible routes to go down include a joint venture and co-ownership. What is the difference between the two?
Joint ventures involve two distinct entities joining together to achieve a common business goal. For example, a construction company and real estate developer may embark on a joint venture to build a property. Once the project is completed and sold, they split the profits and remain separate business entities afterward.
While this type of business relationship is temporary, it should still be backed up by a contract, usually referred to as a joint venture agreement. This establishes the roles and responsibilities of each party as well the divisions of profits and dissolution of the temporary working relationship.
Joint venture agreements can also outline how disputes should be resolved if they occur.
Co-ownership takes on a much more permanent structure. Generally, it involves two or more business partners joining together to make a new business entity. This type of arrangement suits business partners who are looking to drive a new company forwards on a much more permanent basis.
With co-ownership, each party shares the liabilities for the new company. Again, this type of agreement should be backed up by a contract. Partnership agreements can outline the precise terms of the ownership structure.
It’s important to seek legal guidance before entering into either a joint venture or co-ownership. We help business owners with key decisions, feel free to contact us for a consultation.