Joint Ventures

WHAT IS A JOINT VENTURE?

In Ontario, a joint venture is not a legally defined business entity. This means there is no legislation defining a joint venture, resulting in joint ventures being created by contract through the use of a joint venture agreement. A joint venture refers to a situation in which two or more individuals or entities pool their resources to accomplish a common goal. An example of when a joint venture may be used includes two or more construction companies entering into a joint venture agreement to construct a new sub-division, where one company builds the houses on the left side of the street, while the other company builds the houses on the right side of the street. Each of the parties entering into a joint venture is responsible for their own profits, losses, and liabilities associated with carrying forward the business of the joint venture. Joint ventures can be useful in scenarios where the entities involved do not have the resources to carry out the venture on their own.

WHAT ARE THE BENEFITS OF A JOINT VENTURE?

Joint ventures may enable businesses to come together and pool their resources to take on larger projects than any one business alone would otherwise be capable of. Other benefits of a joint venture may include:

• The parties to the joint venture may be able to negotiate more favorable terms from contractors, suppliers, and vendors as a joint venture allows for the execution of a larger project.
• A joint venture may provide access to individuals or entities with specialized knowledge without the need to hire them as full-time employees or the need to form partnerships with them.
• The risk associated with the venture is distributed between the parties to the joint venture agreement.
• Each party maintains responsibility for its own losses and liabilities.

HOW WE CAN HELP

At Jahanshahi Law Firm, our business law team has the experience and knowledge to draft a detailed joint venture agreement to ensure the rights and interests of all parties are protected. When you work with us, we will begin by conducting an initial consultation where we will evaluate your business situation and personal situation. We will also ask you questions about the joint venture to better understand the goals of the joint venture and the relationship of the parties involved. Upon completion of the initial consultation and with your help, we will draft and negotiate the joint venture agreement for you as necessary.  If you decide to use a corporation as the vehicle for carrying out the business of the joint venture, we will structure the corporation, compile the minute book, and ensure corporate compliance with Ontario and federal legislation.

FAQ

What is a Joint Venture Agreement?

The joint venture agreement sets out the terms and conditions of the relationship between the parties involved and outlines the goals or objectives of the parties. A well-drafted joint venture agreement will typically include the following terms:

• It will identify the parties of the joint venture;
• It will define the scope of the joint venture;
• It will set out the goal(s) or objective(s) of the joint venture;
• It will outline the financial contribution of the parties;
• It will set out the roles and authority of the parties;
• It will provide details on how profits, losses, and taxes are to be split among the parties;
• It will set out intellectual property agreements, if applicable;
• It may contain confidentiality, non-compete, and non-solicitation clauses;
• It will set out procedures for making decisions;
• It will set out procedures for dispute resolution; and
• Details on the term of the joint venture agreement.

What is the Difference Between a Joint Venture and a Partnership?

Parties wishing to enter into a joint venture need to be aware that the courts may interpret the contractual relationship between the parties as a partnership instead of a joint venture. For this reason, it is important to know the difference between a joint venture and a partnership. The most important difference between a joint venture and a partnership is that a partnership is a recognized legal entity in Canada, which is governed by the Partnerships Act whereas joint ventures are not recognized legal entities in Ontario or in Canada. Another difference is that a joint venture is typically a temporary relationship between two or more individuals or entities coming together to complete a common goal or objective. Once that goal or objective has been completed, the joint venture will typically dissolve. A joint venture does not need to be created with the intention to profit, instead, the parties may come together for the purpose of completing a common goal whereas a partnership must have a view to profit. A partnership may also be eligible for certain tax advantages, whereas the Income Tax Act does not recognize joint ventures as separate legal entities.

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