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Tips for Forming the California Joint Venture
A “joint venture” has been defined as, “[a] legal entity in the nature of a partnership engaged in the joint prosecution of a particular transaction for mutual profit…” A one-time grouping of two or more persons in a business undertaking. Unlike a partnership, a joint venture does not entail a continuing relationship among the parties.” Black’s Law Dictionary (5th Ed. West 1979), page 753. In many ways, forming a joint venture in California is like forming any other type of business where two or more people decide to engage in business for their mutual benefit. However, unlike the corporation or partnership, the members of the joint venture may, in many instances, be joining forces for a business purpose that is transitory in nature and the specific relationship may last only weeks or months, as opposed to years.
Because of the transitory nature of the relationship, when considering how to form a joint venture, special emphasis must be placed on the consideration of the following areas:
- First and foremost, one should take pain-staking care to make perfectly clear to any reader of the documents that the joint venture is exactly that – a joint venture, nothing more and nothing less, in order to avoid a court’s determination that some other form of entity has been created
- Next, describe exactly the purpose for which the joint venture is being formed and leave no detail to the imagination
- Specifically describe each of the joint venturers’ obligations to the joint venture – will the venturers be required to offer opportunities they become aware of outside the joint venture to the joint venture itself or other joint venturers
- Specifically describe what, if any, intellectual property owned by the individual venturers will be used by the joint venture, and specifically describe whether the individual ownership of that property will survive in- different wording the venturer who originally owned it
- Describe the management structure under which the joint venture is to be operated: who will manage the day-to-day operations and what each venturer’s role be in the organization
- Specify who will be responsible for the financial records of the joint venture and describe in detail when and how those records will be available for inspection to the other venturers
- Describe precisely what actions taken by the joint venture will require the consent of each of the venturers
No bullet pointEach business and business entity is unique. To understand the different options and which direction will be best for your situation, you need to consult with an experienced corporate attorney. Michael Leonard, Esq. of San Diego Corporate Law, named “Best of the Bar” by the San Diego Business Journal in 2016, has the expertise to guide you through everything from forming your business, to creating buy-sell agreements, to executing contracts, and anything in between. To schedule a consultation to discuss any business-related matter, please contact Mr. Leonard by visiting San Diego Corporate Law or by telephone at (858) 483‑9200.
