Joint Venture

Joint ventures are business agreements where the parties involved agree to develop a new entity with new assets and often, but not necessarily, contribute equity to it. The parties involved maintain joint control over the new enterprise and subsequently share in any profits, as well as supporting the business initially by paying expenses and funding assets. The purpose behind a joint venture is to bring together complementary capabilities, to share risk between contracting parties, or to ensure a degree of local ownership. Joint ventures are part of a continuum of potential relationships between organisations and, while they are one form of strategic alliance, they are unique in the sense that a third legal entity is created. It is a more formal arrangement than a partnership or an alliance where two or more parties agree to cooperate, generally, but not necessarily, without creating a new legal entity. See also Partnership and Strategic Alliance.