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What Is a Joint Venture Agreement?
Before we discuss the definition of a joint venture agreement, please download a free sample joint venture agreement found in our Media Gallery. A joint venture agreement is an important document should problems or issues arise. In a joint venture agreement, the date of the agreement and all parties involved is listed first. This includes the physical address of the partners and their contact information. You also want to include the type of corporate formation of each (sole proprietor, partnership, corporation, LLC or S-Corp.). This is followed by the summary of the business operations. The summary lists the purpose of the joint venture; this can be a list of items or a general statement outlining the purpose or mission of the venture.
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Definitions and Allocations
The definitions and allocations must be presented up front so that there are no questions as to their meaning further down the road. Wording such as “affiliate," “contribution," “responsible party," and others, are often included here. Allocations are items such as books, ledgers and records relating to the joint venture. The agreement lists what items will be kept and where they will be kept, as well as the percentage of the costs and profits each partner will share.
A second paragraph can be added to the document outlining the rights and responsibilities of each partner. In our sample joint venture agreement, this defines who is finally responsible for any actions or causes of the joint venture. If there is a person or group that cannot make any decisions on the behalf of the venture, that too is stated here.
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Third Parties and Affiliates
This part of the agreement lists how the joint venture handles actions and agreements with outside parties (called third parties). This also covers affiliates to the joint venture such as subsidiaries, franchises or cooperative ventures entered into by the joint venture itself.
This section has two subsections. The first subsections should list the determination if an action is valid between the joint venture and a third party or affiliate. The second subsection defines what portion of income or interest the joint venture is allowed from or in affiliates or franchises.
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Expenses and Invoices
You should include a section explaining who pays for what expenses or invoices. Include the determination for the payment designation and when the expense or invoice is to be paid.
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This is the section where each party to the joint venture is shielded against litigation arising from actions in good faith from either the joint venture or other parties involved within the joint venture that adversely affect the joint venture. Our sample joint venture agreement provides a possible wording for this section.
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Dissolution is when one or both parties deem the joint venture as no longer viable. This is the separation agreement between parties. Various factors can cause dissolution such as bankruptcy, sale or mutual agreement.
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In this section, the agreement outlines everything that isn’t included in any other section. Again in our sample joint venture agreement these explain notices, assignments and any legal language such as what state or county law will be used in legal disputes.
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This is often the section included at the end. This section stipulates the legality of the entire agreement and its sections. Often this section will state that if one section becomes void by law, the remaining agreement remains in force. This is also the area where changes are stated in writing as well as additions and exhibits. In this section of the joint venture agreement, there is also a subsection for “Notices" which guides you when notifications must be sent according to law.