Determining If a Joint Venture is Right for You Part 2
There are many new and exciting large-scale projects and even mega-projects available to bid on, but each will have specific requirements that may require specialized technology, greater staffing capacity, or industry-specific expertise. Contractors must ensure they can address all of the unique requirements of the bid or lose out on a lucrative opportunity. Joint ventures are a promising solution for contractors because not only do they allow contractors to partake in larger projects, joint ventures also expose them to new markets, innovations, and resources.
In part one, we discussed the advantages and disadvantages of joint ventures. In this last section, our Ft. Myers contractor lawyers will discuss critical issues and considerations that contractors need to address before entering this type of agreement.
Critical Issues to Address When Setting Up a Joint Venture
Joint venture agreements will outline the duties and responsibilities of each party. However, on the front-end, parties need to address important matters such as profit sharing and loss, risk, resource allocation, participation, control, taxes, liability. The following areas should be addressed extensively:
Corporate structure: Determines if the business structure will be a partnership, limited partnership, or limited liability corporation.
Operational issues: Establishes who will manage the joint venture, roles and responsibilities, ownership shares, and amount of control each party has over the operations.
Financial management: Establishes capital contributions, financial authority, policies, procedures, billing rates, and any other financial-related matters.
Risk management: Ensures the joint venture has adequate coverage for all liabilities, standard operating procedures, contract administration, contract review, and dispute resolution.
Considerations for Success
A successful joint venture requires strong leadership and continuous collaboration in the early stages of the venture. The success of a joint venture is also dependent upon picking the right partner, which involves accessing a business’ financial strengths, records, and project history. It is also important to evaluate liability to ensure that you do not take on unwanted liability. Defining the dispute resolution process is also critical to prevent issues from quickly escalating to costly and time-consuming litigation. Be sure that all parties understand project objectives, management styles, and each party’s level of expertise and investment.
Consult an Attorney
If you believe a joint venture is right for you, connect with Ft. Myers contractor lawyers from Cotney Attorneys & Consultants to ensure your contracts are drafted properly and that your risks are balanced. A lawyer can help you understand your contractual rights, duties, and other legal issues such as tax laws that pertain to the joint venture agreement.
If you would like to speak with a Ft. Myers contractor lawyer, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.