What is the risk associated with a joint venture and why should San Diego businesses approach these opportunities with caution and due diligence? A joint venture is usually a temporary entity combining the interests of two or more separate companies with harmonious business interests. It sounds good on the surface, but why do so many joint ventures fail?
In many cases one party may have a product or service and the other provides access to a geographical or vertical market. The joint venture provides an opportunity for those with control over a product or service to take it to market without the expense or time of constructing their own sales and distribution capacity and market expertise. The very nature of these relationships often hinges on a timely entry into a market. The downside of time pressures is the constraints it may place upon due diligence and effective contract negotiation.
Joint ventures should lead to success for both parties. The roles of each party to a joint venture should be clearly defined, and the mechanisms for tracking monetary revenue and the distribution or reinvestment of that income should be clearly defined in advance of going to market. What resources will each contribute to the joint venture? What form of corporate entity will provide a foundation for success?
The joint venture also requires the disclosure and mutual exchange of valuable business information. How can the business relationship be structured to ensure effective communications and access to critical business information related to the joint venture? Will each partner experience enough benefit to continue in the relationship?
The Watkins Firm has decades of experience with the formation of joint ventures and representing clients as they consider a new venture with a business partner. We provide sound counsel to craft corporate documents and bylaws as well as shareholder or operating agreements which facilitate a transparent business experience for both parties. We protect our client’s interest and ensure extensive due diligence is completed while working to facilitate the essence of the deal so that business may move forward.
What is the risk associated with a joint venture for your San Diego business? How can you use this business strategy to increase the sales and profitability of your company? We invite you to contact the Watkins Firm or call 858-535-1511 for a free consultation.