What is a Joint Venture? Definition and Overview
A joint venture is any business arrangement where two or more parties come together to develop a business enterprise.
The parties involved in a joint venture share control over business activities. They also share revenue and expenses.
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Creating a joint venture can take many forms.
- Two major corporations entering into a joint venture agreement in order to manufacture and market a specific product, or undertake a specific project. A new business entity is not created, and the agreement expires after a certain time period, or once certain conditions have been met.
- Two companies cooperating to form a separate company and sharing ownership. In this case, a separate business entity is created and controlled by the founding companies.
- Two corporations forming a business partnership and eventually merging into a single corporation. In this case, the joint venture results in a new combined identity.
Are There Any Disadvantages to a Joint Venture?
The joint venture is a common and effective way to grow a business or create access to new markets.
The combined resources of two or more established business entities often implies greater reach and more profitable prospects.
However, many joint ventures end unfavorably due to mismatched expectations or unequal contributions to the enterprise.
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