A joint venture (JV) is a temporary cooperation of two+ unaffiliated companies for any business purpose. An international joint venture with U.S. business partner may be used to distribute goods to the U.S. The U.S. joint venturer can share its network of U.S. contacts, sales force and marketing skills, assist with necessary U.S. permits and licenses. The foreign joint venturer can provide the products, appropriate IP licenses and capital. A joint venture is typically formed for a defined purpose or specified project. Therefore, a JV is typically limited in scope and duration. The expected responsibilities, contributions and liability of each joint venturer shall be specified in organizational documents.
1 ) To form a joint venture as a legal entity, a corporation, LLC or a partnership is formed where one stockholder/participant is a foreign entity and the other stockholder is a U.S. entity. A choice of legal entity type will be dictated, in large part, by the parties’ tax considerations. Legal entity’s organizational documents (bylaws, shareholder agreement) will stipulate the parties’ % ownership, profit sharing, voting and management rights, as well as duties within the joint venture.
– Difficult to capitalize. JVs (especially contractual ones) are not treated as something permanent because they are not. This risk can be addresses by setting up a JV as an entity such as an LLC or a corporation.
– Potential for loss of IP, trademark hijacking by one of the partners, conflicts over IP developed during the course of JV.
Issues to address: