A joint venture is any type of business agreement in which two entities decide to enter into a relationship in pursuit of some kind of common goal.
A joint venture is any type of business agreement in which two entities decide to enter into a relationship in pursuit of some kind of common goal. The process may involve sharing certain resources or creating some kind of joint project that will ultimately benefit both parties. A joint venture can be ongoing or exist for only a short period of time, depending on the reasons for the partnership.
A joint venture typically develops when two or more entities determine that working together will produce significant rewards for all involved. Often the idea is to share certain resources while pursuing the goal, jointly absorb the costs involved in the effort, and ultimately share the rewards that follow. When successful, this approach can enable partners to accomplish goals that would never have been possible on their own, potentially enhancing reputation and generating additional revenue.
The idea of a joint venture can be applied to all kinds of business deals. For example, a decorator, landscaper, and contractor may decide to buy a house together, with the idea of restoring it and selling it for a profit. The contractor brings to the table the ability to improve the integrity of the structure by updating the plumbing and wiring to current codes. At the same time, the decorator can make changes to the rooms in the house that help make it more attractive for today’s market. The landscaper brings the exterior of the home to life, creating an environment that helps increase the curb appeal of the property.
With this type of joint venture, each of the three partners dedicates time, talent, and financial resources to making improvements to the property. Records of all expenses are kept so that they can know how much investment they have in the project. Once the renovations are completed and the house is sold, each of the three is reimbursed for the expenses incurred and the remaining profits are divided among them, according to the terms of the legal agreement that governs the joint venture. At this juncture, the three partners can choose to consider the company’s objective fulfilled, break the relationship and move on to other projects. If the business is profitable enough, they may choose to keep the partnership, find new ownership to revitalize, and try to repeat the success.