Joint Ventures: 10 Things You Should Consider Beforehand

02 Oct Joint Ventures: 10 Things You Should Consider Beforehand

A joint venture is a term most often used in business when two partners or companies decide to merge their resources into one common business model. This can give smaller businesses an advantage by allowing them to pool their resources and meet goals they would not be able to meet on their own. From a legal standpoint, the term ‘joint venture’ has no legal meaning in Canada but should instead be considered as a type of business structure.

Joint ventures may be created through a contract between two or more entities or formed through corporate or partnership relationships. The type of joint venture is often decided by matters such as:

– Tax

– Liability

– Governance

Additionally, the parties who form a joint venture may be individuals, corporations, partnerships, trusts, or a pairing of any of those.

Real Estate Joint Ventures

Real estate is one common example of where joint ventures commonly exist. Most often, a real estate joint venture is made up of a real estate developer and another source such as an investor. This combination benefits both parties – one side as funding, and the other as expertise – to create a profitable project and return of investment. 

Before you begin to consider a joint venture, there are a few things you should know beforehand so you’re able to make a careful, informed decision.

Top 10 Considerations Before Starting A Joint Venture

– How well do you know your new partner? Think ahead to any cultural issues, differing opinions and expectations. How will you handle these issues when they come up?

– What type of experience or financial contribution will each party bring to the table? It’s important to hash out these details before signing any contracts.

– Create a Joint Venture Agreement that details the purpose of your business, how you will share profits, and how joint decisions will be handled.

– What will your limitations be in terms of money or hours? Will you have restrictions in place against self-promotion or access to client lists, etc?

– Do you have a specific time frame in mind when it comes to completing projects, meeting financial or work goals? Speak with your potential partner about your expectations.

– Create performance indicators that will track the timeframe of projects, growth of the business, and business objectives. How will you know you’re on track in these areas?

– Do a little detective work – find out what kind of reputation your potential partner has with past partners and their client base. This is something you don’t want to find out after you’ve signed a contract.

– How will you and your new partner handle business disputes and disagreements? The most common business disagreements are monetary or operational, such as the division of responsibilities. It’s always a good idea to have a plan in place before these issues arise.

– How will you and your partner divide business property such as office space, use of computers, etc? Will the property be strictly used for business use or personal use also?

– Will this joint venture be a long-term plan or do you have an exit strategy? From the outset, it’s a good idea to know the approximate length of the term you’re signing on for.

Stewart Esten Joint Ventures

Stewart Esten has the skills and experience to guide clients through the set-up of real-estate joint ventures. We ensure that each partnership agreement, joint venture, or shareholder agreement will accurately reflect the needs, goals, and obligations of each party to the investment and will reflect your project goals. 

Stewart Esten can also guide you through successful real estate ownership aspects, upon request, such as:

– Management arrangements

– Taxes and financing issues

– Referral to other experts such as engineers, accountants, mortgage professionals, insurance firms, and others.

Whatever your needs may be, we can assist you with due diligence in order to protect your business investment.

Let us take the guesswork out of your next investment project – contact us today.