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What is a joint venture and why would I want to enter one?

A joint venture is a type of business association. It is a little bit different, though, from other business structures, like corporations or conventional partnerships, since it is for a limited purpose and may also be limited in time and in scope.

Basically, a joint venture is a contractual arrangement between two or more businesses that are committed to engaging in a common project. The businesses have every intention of maintaining their independence in all other respects and may even wind up competing against each other in different markets.

The agreement to form the joint venture should set out what each business’s rights and obligations are during the joint venture. It should also specify the length and scope of the common project and should describe how any business risks and profits will get distributed.

The biggest advantage to a joint venture is that it allows a business to engage in new opportunities without having to merge or expand. For example, a software development company may want to enter in to a joint venture with another business that can market and distribute the software instead of having to come up with those resources on its own.

Another advantage is that a joint venture is almost inevitably a temporary thing. It allows businesses more opportunity to move on to other things if their temporary association with the other business does not go as planned.

While a joint venture may be a good opportunity for many businesses in the Blacksburg, Virginia, area, it is not right for every situation. A lawyer with an experience in business formation and planning can help a business owner evaluate this and other options.


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