What Is A JV Agreement?
A Joint Venture Agreement (JV Agreement) is a binding legal agreement between two or more business entities. It establishes a new entity for the purpose of pursuing a specific business or project. A JV Agreement sets forth the terms and conditions of the JV and lays out the respective responsibilities and contributions of each party involved.
There are several purposes for which businesses typically use JV agreements: They form a new business entity, such as an LLC, partnership, or corporation, in order to pool resources and expertise with another company or individual. They structure the joint venture itself to take advantage of synergies in terms of achieving a business objective or completing a project . They govern the conduct of the participants within their business objectives, to protect and promote mutual interests and to ensure that the relationship and obligations are predictable and enforceable in a court of law.
JV Agreements are typically used by parties to pool their collective financial or non-financial resources for the purpose of mutual benefit. The parties may share capital or expertise by agreeing to provide funds, intellectual property, human resources, or some other form or experience to the new entity or purpose. In the case of structuring a joint venture, the parties may most often create a company for a specific business purpose, i.e., implementing a new technology. The parties will take care to consider applicable laws, particularly if the venture crosses international borders.
Why Is A JV Agreement In PDF Format Important?
The format of the JV Agreement is very vital in the sense that it must contain the following;
A. The Names of all parties must be included in the document
B. The acronym and description of the agreement must be used across the document
C. The proposed deal must contain the following:
- a detailed description of the business opportunity and/or project for which the joint venture agreement is being formed
- specify how the new legal entity will be formed
- specify and describe all contributions made by all parties to the joint venture agreement
- stipulate what liabilities and/or advantage(s) that may arise each party is taking on as part of this deal
- details needs when signing off on a joint venture agreement with another party
- timeline of the entire deal
- the composition of the joint venture’s general and limited partners
- the criteria constituting a joint venture
- requirements for a joint venture to be formed and become legally binding on all parties involved
- a clear plan of action including all the roles, tasks, and responsibilities of each party
- all costs involved such as losses and profit-sharing agreement
- it is also important to stipulate where the judiciary is to be attempted, if it goes to law
Use of the joint venture agreement pdf format is important to standardize the document.
Signing off on a joint venture agreement is the final step in a long process, which may take some time to reach. Writing down each of the terms is important for both parties to agree on.
Using the joint venture agreement pdf format is the most beneficial option for both parties as they will be entrusting information to the other as well as protecting the information from outside sources.
Creating and sharing these documents online can help to keep the content standardized and secure.
JV Agreement Essential Clauses
The purpose of a joint venture agreement is to delineate the rights and obligations of the parties entering into the relationship. Whether in plain English or using legal jargon, a good fund-raising, fund-lending, or licensed patent agreement should include the following clauses:
Capital Contribution
The capital contribution clause specifies how much capital each party will contribute to the fund and whether any party can "opt-out." When forming a joint venture, having a solid clause on capital contribution is important because without an agreed to amount of risk, the venture is not a true "joint venture" but a lumping together of interests to achieve a mutual goal.
Management
The management clause details how the parties to the joint venture will operate the business. The management clause can include the day-to-day process of conducting the business, such as how the company will manage negative cash flow, how disputes will be resolved, etc. The management clause can also include the management team, such as how many people will manage the company and how many votes will it take to let a person on the management team go.
Profit-Sharing Terms
One of the most important elements of a good joint venture agreement is how the profits of the business will be shared. This clause is important because shared profits will often encourage better performance by the parties in achieving the joint venture objectives. The profit-sharing clause can be defined several ways, such as a percentage or a margin with a floor.
Creating A JV Agreement
When approaching the creation of a joint venture very prudent partners will first negotiate an all crucial term sheet. This is a very important document because it sets down the key terms of the deal. It will usually be a fairly simple two to four page document that sets out the intention of the joint venture partners. When executed this can be signed in pdf format and save both time and money. The next stage will be for the lawyers for the joint venturers to come together and draft a formal document that sets out the intentions of both of the parties. This can be more than 50 pages long when all the provisions are taken into account and becomes legally binding once it is signed. With regards to the equity participation by both partners the listing terms is also documented in full and joints venture capital agreements are often signed in pdf format. Many international documents with reference to joint ventures are drafted in both English and the language of the other partner. JV contracts in pdf format are also sometimes prepared after that stage. The joint venture agreement is a contract that sets out the arrangement between the partners and may or may not include a business plan and while there may be a separate business plan that is reference in the agreement that does not form part of it. It is common that the partners will have to agree on a business plan to be followed through. In this case a business plan that is referenced but does not form part of the agreement is viewable in bracket. The document will also typically contain recitals which will outline the status of the joint venture agreement and how it was made. Once a team of lawyers has been assembled to coordinate and draft the agreement it is then ready for execution. As with many commercial documents joint venture agreements are usually signed by duly authorised signatories. That is people who have authority from their company’s board to agree on the material outlined in the document.
JV Agreement Legal Aspects
Before creating a joint venture agreement, businesses should keep certain considerations in mind. When forming a new entity, business owners often overlook the local laws and regulations that apply to them. Not carefully reviewing these can result in significant trouble down the road. As a business’s primary representative, a business lawyer can be indispensable. For instance, they can find out whether a business has to register with local tax authorities, determine intellectual property protections, including any trade secrets, that need to be safeguarded given the disclosure of sensitive company information, and help businesses create contracts with other businesses involved.
Furthermore, given the potential for fraud , businesses should be familiar with what licenses and permits are required for their industry. Members should research those who will be a part of the venture, including partners and contractors. Businesses should make sure to protect their confidentiality.
Far too many people neglect this last item. It’s something that JV agreement PDFs can and should mention. When businesses share too much information too quickly, they run the risk of losing that information to someone who may not have the same concern about its security as the business does. A joint venture agreement can be useful for managing the information that partners in the business have to share with one another, and can go further than the general terms of normal operation that these contracts often set out.
Editing A JV Agreement PDF Template
Creating an effective Joint Venture Partnership Agreement (JV Agreement) can be a straightforward process with the right creative approach. We have been posting templates we use in real life to help businesses save precious time and money that might otherwise be squandered on "template writing" or "form letter writing". The understanding is that it will take time and effort to have a complete understanding of what you as the business owner need in print to formalize relationships with others in a way that will be seen by a legal court of law to be enforceable. We also post templates because we have found that many business owners, even those in otherwise regulated areas, have not created formal legal agreements and rely instead on a handshake or a poorly worded email to document big dollar deals. This leads to problems later on when one party feels slighted and tries to take advantage of the lack of formalization in the relationship. So we post our templates with the warning that you should hire a legal professional in your area to review any contract before you actually sign it. Just note, we are not giving you legal advice here, and we are not providing a substitute for having a lawyer write for you a customized agreement that fits your unique needs.
Being that said, once you have talked and then consulted with a lawyer, you can’t help but be creative yourself and reconstruct a good template for your needs. For example, the above template includes too many elements to really fit just one situation. When drafting (or revising) a JV Agreement, some useful tips for customization are:
- Take a second look at your business position! How do you do business? What business issues or concerns are you trying to address here? What other factors may affect the parties or the partnership?
- You want to see to it that the following elements are covered in the agreement: parties, purpose of the partnership, contribution of assets and liability, how profits and losses will be shared, ownership of property, decision-making procedures, legalities of the business, and the length of the JV.
- Any major concerns you have must be listed and addressed in the agreement.
- Eliminate redundant and unnecessary clauses; add new clauses as needed to cover any specific business details or notices. Too many clauses or poorly drafted clauses just makes it hard to read, understand, and remember what was agreed to.
- Edit for grammatical errors and spelling mistakes.
- Reread what you have drafted and apply the common understanding that a reasonable person would have given the terms used in the Agreement. What do you think about your new template? Does it still make sense? Does everyone understand it?
We hope these little tips will help you draft a better agreement through customizing a general template. Again, at the end of the day, this disclaimer needs to be repeated, if you have concerns about a point of law that you think could be effected by language (which is often the case in the law), or you want to discuss the details of your contract, you should consult a legal professional.
Free Download Of A JV Agreement PDF Template
In addition to creating your own JV agreement from scratch, you can also find and download templates of free JV agreements in PDF format. These templates may be found on websites that offer resources for entrepreneurs, business owners, or those looking for legal documents. By following a simple internet search, you can usually find your way to an appropriate place to download the template.
If you can find a reliable and useful free template online, it is worth downloading. For example, many companies that help people to start their own businesses or become self-employed will have JV agreements available to download in PDF form. Depending upon the content of the agreement, these could be tailored specifically for their services or products or more generic in nature.
Another option for finding JV agreement PDFs is legal blogs and sites (such as by the Nolo) that specialize in providing these for free to the public. Sometimes they are sponsored by a law firm for advertising purposes, while other times they are simply a part of the site’s broader offerings to help individuals with their DIY legal needs .
When downloading any free template PDF agreement from the internet, you want to make sure that it is as close to your requirements and the specific situation you would like to use it for as possible. If the template seems uneven in terms of its formatting or organization it probably is not worth downloading. Of course, you could still download it if you would like to explain to us what went wrong in the template so it could be fixed.
While these free PDF JV agreement templates could be used as is, it is likely that you will need to customize them in order to address the particular circumstances of your situation. If your joint venture is only meant to last for a short time, for example, you will need to ensure that the agreement reflects that. In many cases, it is best to work with a lawyer to draft or update JV agreements to ensure that the document you end up with has all of the necessary elements and is customized appropriately to mitigate potential risk.