One option is to agree to co-operate with another business in a limited and specific way. For example, a small business with an exciting new product might want to sell it through a larger company's distribution network. The two partners could agree to a contract setting out the terms and conditions of how this would work. Alternatively, you might want to set up a separate joint venture business, possibly a new company, to handle a particular contract. A joint venture company like this can be a very flexible option. The partners each own shares in the company and agree on how it should be managed. In some circumstances, other options may work better than a business corporation. For example, you could form a business partnership. You might even decide to completely merge your two businesses. To help you decide what form of joint venture is best for you, you should consider whether you want to be involved in managing it. You should also think about what might happen if the venture goes wrong and how much risk you are prepared to accept. It's worth taking legal advice to help identify your best option. The way you set up your joint venture affects how you run it and how any profits are shared and taxed. It also affects your liability if the venture goes wrong. You need a clear legal agreement setting out how the joint venture will work and how any income will be shared. See the page in this guide on how to create a joint venture agreement. Joint venture - benefits and risks Businesses of any size can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects. A successful joint venture can offer: access to new markets and distribution networks increased capacity sharing of risks and costs with a partner access to greater resources, including specialised staff, technology and finance A joint venture can also be very flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting the commitment for both parties and the business' exposure. Joint ventures are especially popular with businesses in the transport and travel industries that operate in different countries. The risks of joint ventures Partnering with another business can be complex. It takes time and effort to build the right relationship. Problems are likely to arise if:
108 Contact: 0707 737 890 the objectives of the venture are not 100 per cent clear and communicated to everyone involved the partners have different objectives for the joint venture there is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners different cultures and management styles result in poor integration and cooperation the partners don't provide sufficient leadership and support in the early stages Success in a joint venture depends on thorough research and analysis of aims and objectives.
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