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An unincorporated joint venture is a business arrangement where multiple entities come together using a contract to govern the collective relationship without creating a partnership agreement. The agreement outlines the amount of resources and benefits each participant contributes and addresses liability and provisions for withdrawal. The advantages include ease of setup and minimal effort to dissolve the venture.
An unincorporated joint venture is a type of business arrangement where multiple entities come together using a contract as the basis for governing the collective relationship, but without creating some sort of partnership agreement in order to pursue the joint venture. This kind of approach is common in a number or applications, especially when the venture in question is only for short term purpose. In many nations around the world, there are little or no regulations that apply specifically to an unincorporated joint venture, making it necessary to cover as many contingencies in the joint venture agreement as possible.
Since the relationship is governed by the agreement adopted by each of the participants, the main task is to determine the amount of resources that each contributes to the enterprise and, in turn, the amount of benefits that each can reasonably expect to derive from the enterprise. disposition. Typically, the agreement will also address the limit of liability assumed by each participant, as well as outline provisions for any participant who elects to withdraw from the unincorporated joint venture by selling its interest in the business. By developing terms that are agreeable to all entities involved in the project, the chances of adequate funding and eventually earning some kind of profit from the venture are increased, although there is always the risk that the project will not produce the expected results.
One of the advantages of an unincorporated joint venture is the relative ease of setting up the working relationship between each of the participants. Since there is no incorporation of a new entity jointly held by all of the participants, there is no need to create a corporate structure that complies with the company laws in the jurisdiction where the unincorporated joint venture takes place. While the venture members will normally create some sort of steering committee that helps move the venture, the exact organization of that committee or group is left up to the members and can be defined in the joint venture agreement itself.
Another benefit is that once the project is complete, dissolving the unincorporated joint venture requires minimal effort. For example, if the purpose of the venture was to build a new housing development, participants would see the project through to the completion of the development. At that point, the finished development could be sold at a profit to a new investor, and each venture participant would offset the proceeds from the sale. Once the fee is distributed, the venture would be considered complete and participants could move on to other projects or initiatives.
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