Joint ventures can be said to be a bridge for the parties to close a deal. The crux behind why parties get into a joint venture is to get something from the other party which they require to close a deal. It could be anything such as cash, experience, technology, assets or skill etc. Whereas at the same time they bring something.
A joint venture is formed when two or more parties join hands together to work on a specific project or enterprise for a defined period of time. Throughout the course of the venture, the parties agree to share the risks, liabilities and responsibilities of the project in order to gain profits from the same.
For a joint venture to be valid, there must be a purpose associated with it. There must also be an agreement, whether written or oral defining the terms of the venture. The agreement must mention the contributions each party shall make towards the project. And finally, it must be created with an intention to share the profits and the losses of the venture.
Joint ventures in real estate sectors are formed when two or more investors agree to pool their resources for the sake of developing a property together. Irrespective of the venture, neither of the parties loses their identity in the course of the said development. They continue to maintain their own unique identity and might even be responsible for completely different tasks on the project.
A joint venture must not be confused with a partnership firm. In a partnership, multiple people join hands to run a business as a single entity. They do not have a separate identity within the partnership whereas, in a joint venture, the businesses prefer to maintain their separate identity.
A limited Liability Company is the most common form of a Joint Venture in real estate businesses. It is an inexpensive venture and incorporates all the features of a joint venture.
LLC is also more popular because it provides the members of LLC with liability protection. Every member is liable only up to the amount they undertook to compensate.
Corporations are another form of Joint venture common amongst realtors. They are formed for larger investments and complex projects. They are long-term ventures and are governed by the bylaws of the corporation.
