Avoid Legal Hassles By Putting Your Joint Venture In Writing

You've decided to enter into a joint venture (JV). That's great! If you think it through carefully and take the time to treat it like a brand new business, your JV could help your business grow exponentially.

The key to creating a truly successful JV is to take the time to thoroughly plan every aspect of the partnership. And, you need to get everything -- and I do mean everything -- in writing. Those written documents are essential to getting started on the right path to success, staying on the path, and safely stepping off it if necessary.

There are three written documents that are necessary for every joint venture: 1) a joint venture agreement; 2) a business plan; and, 3) an exit strategy.

The joint venture agreement is really a contract between you and your partner. It's the legal document that creates the entity formed by the venture. The agreement spells out the purpose of the JV, the responsibilities of each partner, the length of time the JV will last or the circumstances that signal its end, how the JV will be run, and how the revenues and expenses will be handled.

Because of its legal nature, some legal counsel is advisable for both parties. You and your partner may be able to draft the agreement together. However, it's a good idea for both partners to have independent legal counsel review the document before it's signed. This will help protect the interests of both partners.

If you decided to draft the agreement with your partner, look for a good template or checklist to help you. There's so much to cover that some important items could easily be missed. Templates and checklists may be available through your lawyer or local business organizations, or you can search for them on the Internet.

The business plan absolutely requires the participation of both partners. The plan is the document that spells out the goals of the JV, how you'll get there, and what both partners bring to the agreement, among many other important aspects. Your business plan will also be used to acquire funding, such as loans or investments, if they're necessary.

Even if you don't plan to look for funding, it's very important to develop a sound business plan. This is the document you and your partner will refer to when you're planning future moves and reviewing your business to see if you're on your way to reaching your goals. It also specifically states how many of the practical aspects of your business will be accomplished, such as your human resources strategy, marketing strategy, and communication.

Business plans can be fairly complicated and lengthy. If you've never written a business plan before, you may wish to hire a professional writer. Professionally written business plans have a greater chance of receiving funding.

Finally, you need a written exit strategy. Although it might seem a bit pessimistic to consider how the JV will end before it's even begun, the truth of the matter is that the average lifespan of a JV is about seven years. JVs end for any number of reasons. You may plan to end it after a certain length of time, or it may fail due to changes in the market. You need to be prepared for any situation.

A good exit strategy protects your investment in the JV. For example, if you bring a trademarked item into the partnership, you'll want to make sure you walk away from the JV still holding full rights to that item. Or, if the business that results from the JV is to be sold, you'll want to ensure you get your proper share of the profits.

Your exit strategy must specifically state who gets what when the JV ends. It also needs to include a list of events that might signal the end of the JV, like reaching specific goals, certain changes in the market, or selling the company. Again, this is a document with a lot of legal ramifications, so it's best to have your lawyer review it.

When you put your joint venture in writing, you prepare for your success and insure against losses in the event of failure. Having these written documents on hand from the start shows your commitment to the business, gives you a clear path to follow, and helps you and your partner remain on track. And, when the JV ends, you'll know exactly what each partner walks away with -- without a complicated, nasty legal hassle.

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How To Get Your 
Joint Venture In Writing