Joint Venture Agreement
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This joint venture agreement is a must-have legal tool for parties who want to collaborate on various business projects across the U.S.
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What is a joint venture agreement?
A joint venture agreement is a formal legal contract between two or more parties who agree to collaborate on a specific business activity or project. It outlines the terms of cooperation, shared responsibilities, contributions, and the goals of the joint venture (the ‘JV’), ensuring all parties have a clear understanding of their rights and obligations.
JV agreements are quite popular in the U.S. and could be used in various industries and economy sectors, including real estate, startups, retail, etc. You can create a joint venture contracts either in written or oral form. However, there are a number of reasons why parties should have a written contractual joint venture agreement template:
- First, it eliminates potential disputes along the road.
- Second, it clarifies rules regarding the division of profits between the parties.
- Third, it defines the roles, duties, and responsibilities of each party.
- Fourth, it acts as a road map in case of dispute resolution or termination of the JV.
All in all, having a JV agreement template helps prevent costly misunderstandings, as well as protect all the parties involved.
What does the joint venture agreement template include?
The law does not define a joint venture agreement format. At the same time, without certain provisions, a document may not be complete or enforceable in the court. A strong and legally sound joint venture agreement template must cover the following:
- JV’s Description. Any joint venture agreement sample shall record the name of a project, its purpose and goal, and a business address.
- JV’s Parties. Solid joint venture agreement examples usually provide the full name, address, and contact email of each party. At the end of the document, all parties should put their signatures. Without either party’s signature, a document cannot become legally valid.
- JV’s Capital Formation. The text of a contract must cover each party’s contribution in U.S. dollar equivalent. Apart from that, the text of a JV agreement template shall define the percentage amount of ownership interest in a joint venture for each party (e.g., Party A owns 10%). The amount of an ownership interest is crucial since it may directly affect the allocation of profit and losses between parties.
- Division of IP Rights. In the course of the joint venture’s business activity, new intellectual property rights could be created. Therefore, a solid JV agreement template must define allocation of those rights between the parties. Allocation of IP rights may have various forms, including equal shares, shares pro rata to the amount of financial contribution, etc.
- Termination. Another must-have clause for every joint venture agreement sample is rules for the JV’s termination. Those rules should include allocation of profits in case of termination, exit strategy for members, and grounds for immediate termination.
- Decision-making Process. Joint venture agreements must define the decision-making process inside the JV. Parties may choose to manage daily operations by themselves or elect a board of directors.
- Non-Compete. Some business joint venture agreement templates may limit the right of their parties to participate in other similar projects. This is necessary to limit the competition and prevent unfair play at the market.
Who should use this joint venture agreement?
Our joint venture agreement template could be suitable for various life cases, including:
- Investors. A business joint venture agreement template is a powerful legal tool to merge investments for new ventures and projects to achieve better results.
- Startups. This template provides all must-have legal clauses to form a reliable and strategic partnership.
- Real estate. A real estate joint venture agreement template could be a first step in developing or managing real estate projects together.
- Small businesses. In a striving market economy some businesses may need to form a sort of legal alliance to compete and win markets of goods and services.
Difference between Joint Venture and Partnership Agreement
A contractual joint venture agreement template could appear similar to a general partnership agreement. Indeed, both a general partnership and a joint venture are special forms of business cooperation between individuals and businesses. They do not require undergoing any specific state registration, as in the case of corporations or limited liability companies. Their general corporate and tax regulation is simpler if to compare with LLCs, corporations, etc.
However, those legal structures have nothing in common and differ as follows:
- Purpose. A joint venture agreement sample must define the purpose for the creation of the JV. Once this purpose is achieved, the JV should be dissolved. Contrary to that, general partnerships are formed for ongoing business purposes.
- Liability. The main con of a general partnership is that all partners are personally liable for all debts and losses of their general partnership. While in a joint venture, each party’s liability could be limited to the amount of their contribution to the JV.
- Management. The daily activity and operations of a general partnership are run together by both partners. However, a JV agreement template may vest management powers and duties into the hand of one member or of a specially elected board of directors.
Is this agreement valid in all U.S. states?
Yes, our customizable joint venture agreement is suitable for all states across the U.S., including the District of Columbia. Simply select a state you need in the questionnaire, and the document will be adjusted considering a state-specific regulation for a joint venture in this state.
When choosing a state, think about where your future JV will operate or perform its activities. If there are several states, in that case select a state where the joint venture’s main place of business will be—i.e., a place where most of the members are based.
How to customize this Joint Venture Agreement template?
To get a fully customized legal document, follow the instructions given below:
- Click the “Create Document” button.
- Answer simple questions in the form.
- Select a template’s format—joint venture agreement PDF or Word.
- Make a payment.
- Download, print, and sign the document.
Table of content
Frequently Asked Questions (FAQ)
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1. What should be included in a Joint Venture Agreement in the U.S.?
Neither federal nor state laws provide any specific requirements a joint venture agreement US should have. At the same time, state-by-state legislation may provide specific rules for accounting and taxation of the JV’s business operations and its members.
Joint venture agreements belong to so-called “free contracts,” where parties can express their intentions and record arrangements as freely as possible. However, the most necessary elements a solid joint venture agreement should have are the following:
- information about the parties signing the document;
- name, purpose, and business address of a joint venture;
- rules for distribution of profits and losses between parties;
- capital
- of a joint venture and parties’ contributions;
- duration and termination;
- confidentiality; and
- non-complete requirement for all joint venture parties.
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2. How do you structure ownership percentages in a joint venture?
There are no specific rules regarding the division of ownership interest between the parties. However, the most common options for a joint venture agreement template are the following:
- all parties have an equal percentage in a joint venture’s ownership; or
- each party’s percentage depends on a number of factors (e.g., amount of a contribution).
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3. Can a joint venture agreement be between individuals rather than companies?
Yes, a contractual joint venture agreement template could be signed between
- organizations, including non-profits;
- individuals or independent contractors; and
- businesses (e.g., limited liability companies, general partnerships, etc.).
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4. How are profits distributed in a joint venture?
Every joint venture agreement template should define the allocation of profits between its parties. There are different allocation methods to choose from:
- allocation in equal shares;
- allocation pro rata to a party’s interest in a joint venture’s ownership;
- allocation pro rata to a party’s contribution to a joint venture; or
- allocation in a specific percentage belonging to each party.
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5. Can a joint venture be dissolved early?
Yes, parties can define in the text of the contract template the list of circumstances for the earlier joint venture’s dissolution. The parties are free to list any circumstances that may cause an early termination. There is, however, one important requirement—the wording should be clear to avoid any doubts regarding the nature of the circumstances involved.
This is especially important in a customizable joint venture contract for startup partner. For instance, parties may agree to end their joint venture earlier provided things “are not going well.” This is a vague wording that may be interpreted by different parties in a different manner. Therefore, instead of this wording, it is better to insert specific numbers indicating that things are really not going well.
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6. What happens if one party wants to exit the JV?
A joint venture agreement contract template can be valid if at least two parties sign it. Therefore, if one party decides to exit the JV, it means that the JV is being terminated automatically. However, this is not the case if the JV has three or more members. In that case the exit of one member does not trigger automatic termination of the JV.
Once a party wishes to exit, the contract must define the way of paying back a party’s contribution, as well as any JV’s profit generated and not yet distributed.
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7. Do you need a lawyer to review a Joint Venture Agreement?
Yes, a review of joint venture agreements by a lawyer is a good decision. This is because a joint venture involves significant cash or material contributions, as well as sharing potential debts and losses.
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