Joint Venture or joint venture (what it is, how it works, objectives)

Companies when opening new markets can cross numerous legal barriers, therefore that alternative options and more expeditious action arise than the procedures of the structures internal. The joint ventureor joint venture It offers advantages in cross-border situations, thanks to its flexible formula.

What is a joint venture?

Is a partnership or strategic agreementtemporary between two or more companies, individuals or groups of companies to carry out a business.

In this sense, the participants retain their legal individuality, despite the fact that they act together under the same guidelines and rules. In other words, it is understood as a joint business or investment, or a business collaboration.

In simpler words, the Joint venture is a cooperative company in which two or more independent companies enter together in search of a business.

How does a Joint Venture work?

It is based on the spirit of cooperation, it works under a society system based on the autonomy of the participating companies, considering that the parties are independent in economic and legal aspects, but on the other hand they are controlled and supervised in their activity solidarity.

Investments, expenses, responsibilities, control, personnel, risks, benefits, etc.

In the creation of a joint venture, the participants can form an independent company association, it may also happen that companies They maintain their individuality, while the joint venture and its arrangement is operated as a separate company.

Joint Venture Features

• The participating companies retain their own individuals, that is, there is no image of the business merger.
• It is a contract where the parties pursue a common utility.
• There is a burden on investment, profits, losses, etc.
• The purpose of each joint venture is defined by the needs that led to the business collaboration.
• The contributions of the contracting parties vary and can be in money, goods, services, technology, among others.
• They are temporary in nature, destined for a specific project.
• The agreement consists of a declaration of will of the parties, intended to ensure their rights in this agreement.
• The common goal must be clearly stated in the collaboration agreement.

Advantages and disadvantages of the joint venture or joint venture

In general, this type of association brings many benefits, although sometimes it has some disadvantages, among them the following stand out:

Advantage:

• It allows the combination of technologies.
• It can be used to reduce costs and make quality improvements.
• It allows the union of human talent, which facilitates increased efficiency.
• There is financial support and the risk is shared.
• Greater resources are available to enable expansion into unexplored markets.
• Resources are shared, whether financial, technological or human.
• Responsibilities are also shared.
• Operations increase as each company maintains its own activity in addition to the activities of thejoint venture. In this sense, companies can expand and enter new sectors.
• Greater competitiveness, each participant is competitive in his own field, with this agreement it is possible to create a much more competitive company.

Disadvantages:

• The capital contributed can be high.
• It generates conflicts of interest, unforeseen situations may arise that can generate conflict thanks to interests specific to each party, while slowing down the decision-making process causing delays in planning planned.
• Differences in prioritizing, so it is important to set participation early.

Types of joint venture

exist multiple joint venture models, then the best known:

• Of projects: Created exclusively for the development of a project, with a certain time limitation.
• Investment: Seeks the creation of a company extended over time, in order to develop certain commercial activities.
• Co-investment: Characterized by the monetary contribution or in goods, with the purpose of obtaining greater benefits.
• Of strategic alliances: Characterized by the contribution of unique characteristics of each company.
• Equity Joint Ventures: Involves the creation of a new entity or company with its own legal personality.
• Contractual or Non-Equity Joint Ventures: Participating companies collaborate without creating that merits the creation of a new entity or company, that is, the activities are carried out in common, establishing contracts or agreements of collaboration.

Finally, it is worth emphasizing the fact that, both in the personal and business aspects, as things are going today, it is necessary to have the support of others to achieve our own objectives, sometimes complicating the triumph in lonely. For this reason, it is important to always surround yourself with the best and form cooperation agreements to achieve the objectives set.

Large companies and new entrepreneurs see in the joint venture the opportunity to establish good contacts and work together to achieve easier success.