How to Start a Joint Venture Agreement

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What is Joint Venture Agreement?

A Joint Venture Agreement is an arrangement where two companies develop a new entity to their mutual benefit. It normally involves a sharing of resources, which could include capital, personnel, physical equipment, facilities or intellectual property such as patents. The motive behind forming a joint venture comprise business expansion, development of new products or moving into new markets, mainly overseas.

Since the joint venture is not a legal entity, it does not enter into contracts, hire employees, or have its own tax liabilities. These activities and obligations are controlled through the co-ventures directly and are governed by contract law.

Advantages of Joint Venture Agreement

  • A joint venture agreement provides a company with expertise it may not have or may not be willing to invest in acquiring itself.
  • It will give you access to better resources, such as specialized staff and technology. All the equipment and capital that you needed for your project can now be used.
  • Joint ventures can be flexible.
  • You get to save money by sharing advertising and marketing costs.
  • Despite having little to no money at your disposal, you can create more venture deals in the process.
  • International joint venture eradicates the risk of discrimination.
  • It is only a temporary arrangement between two parties.
  • Your chances of success will become higher as you are already riding with a renowned brand. As a result of this, your credibility will also vastly improve.
  • Access to greater resources, including specialized staff and technology.
  • Provide companies with the opportunity to gain new capacity and expertise.

Two main types of Joint Venture Agreement

  • Contractual Joint Venture

    It includes

  • Equity based Joint Venture

    It Includes Company, Partnership Firm, LLP, Venture Capital Fund, Trusts, and Other Entities.

Prohibited Segments for Equity-based JV

Foreign companies are prohibited to enter into joint ventures in the following areas:

  • Lottery Business carried on
  • Gambling and Betting business
  • Chit Funds
  • If it’s Nidhi Company
  • Trading in Transferable Development Rights
  • Real Estate business or construction of farm houses
  • Any Manufacture of tobacco products and substitutes
  • Sectors that are not open to private sector investment e.g. Atomic Energy
  • Railway Operations (it excludes permitted areas of Railway Infrastructure)

Time is taken to form Joint Venture Agreement

It takes approximately 3 to 4 working days to deliver the joint venture agreement and if any modification required later on then a day or two working days more for such modification.

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