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What are some pros and cons of forming a joint venture?

As with most endeavors that involve business law, a joint venture comes with an array of risks and rewards. Doing your due diligence in investigating the pros and cons of such an arrangement is definitely a good idea. This is especially important if you are new to the business world or have never entered into a business partnership before.

For those in Arizona who do not know, a joint venture is a business alliance or partnership between two or more entities. Coming together on a business venture allows all involved to pool their abilities and their resources in the hopes of being more successful than they would be on their own.

When the parties involved are able to work together, joint ventures can be highly successful. However, there are some downsides to this business approach. The following section contains a brief list of joint venture pros and cons for all parties to consider.

Pros:

  • Blends the staff and expertise of two companies into one
  • Joint ventures are typically easy to create
  • Reduces expenses by sharing costs
  • Offers potential tax benefits to companies

Cons:

  • High risk of partner disputes or conflicts
  • Increased risks and liability for all involved parties
  • Poorly defined or misunderstood business objectives
  • Differing business visions and management styles

While it can be difficult to predict whether a joint venture will fail or succeed, there are ways to increase the chance of success. One way is to arrange for all parties to attend a consultation with a business law attorney. This can help reduce misunderstandings and ensure all documentation related to the venture is drafted in accordance with the law.

Source: The Huffington Post, "Joint Ventures: Risks And Rewards," David B. Nast, accessed Oct. 30, 2017

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