In the realm of business relationship creation, there are all kinds of options out there. We hear terms like General Partnerships, Corporations, LLCs, and Joint Ventures. But, what do they all mean? Here, we are going to dive into perhaps the most basic agreement between two people or businesses: The Joint Venture.
What is a Joint Venture?
Joint Ventures may sound complicated because the name is not one we are familiar with. However, a Joint Venture is nothing more than a formal agreement by two parties to come together for a joint purpose. That’s it. If you’ve ever sat down over a basket of wings and agreed to get together with your friend over the weekend to do something like build a fence, you’ve created a Joint Venture.
How Do You Create One?
Anyone and anything can create a Joint Venture. It could be between two or more individuals, LLCs, Partnerships, Corporations, or a combination of any or all of them. Sometimes Joint Ventures are super informal. We call these an agreement to do something together for a common goal. Alternatively, they can be super formal, like a car company creating a Joint Venture with an AI firm to create a self-driving vehicle.
Joint Ventures do have certain characteristics that separate them from Partnerships. For example, people create Joint Ventures as a short term arrangement. The parties to a Joint Venture may specify very specific start and stop dates. Additionally, those who create Joint Ventures do so in hopes of accomplishing a specific purpose. You might create a Joint Venture with another gym in your area to host a city-wide competition.
What Else Do You Need to Know?
When we help gym owners create Joint Ventures, we always suggest some kind of written agreement between the parties to the Venture. Putting agreements in writing always helps to set and maintain expectations. We also have to explain liability to the gym owners so they understand that a Joint Venture does not limit liability like a Limited Liability Company or Limited Liability Partnership might.
Generally speaking, Joint Ventures are not common in the micro gym atmosphere. However, they can be useful in specific situations. If you think you might have one of these situations, and want some advice, let us know. We’d love to help you figure out what kind of business relationship would be best for you and your goals.