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Why I Avoid Partnerships and Prefer Joint Ventures.

Written by: Jerre Blodgett

Article Overview: Most partnership problems are caused by lack of a good Partnership Agreement and complex personality and business issues associated with the structure and function of the entity. A Joint Venture structure can be much more user-friendly.

Why I Avoid Partnerships and Prefer Joint Ventures.

Starting a partnership is simple. Two or more people agree to share their talents, efforts, knowledge and resources and operate a business together. Sounds good so far. While simple to form, partnerships are a minefield for potential problems. They're often short-lived due to unrealized expectations and unforeseen occurrences like cash flow problems, partner disputes, a partner's death or other legal challenges.

While partners should have a written partnership agreement, they rarely do. A good formal partnership agreement outlines the duties, responsibilities and investment of each partner, as well as how and when profits and losses are distributed. It covers how debts are incurred and who is responsible for paying such debts in the event the business doesn't have the funds. Generally, all partners are legally liable for the debts of the business. A proper agreement spells out how the business would be dissolved. It also covers issues like personal bankruptcy or insolvency of a partner.

If you must have a partner, consider a Joint Venture. A Joint Venture is an association between one or more entities formed for a purpose such as economic gain. This association or alliance (it could be with an Individual, Proprietorship, Partnership, Limited Liability Company or even a Corporation) usually exists for the time that the economic opportunity is pursued, and is dissolved when the purpose is fulfilled. This is a great format when you need the strengths of another entity whose skills, talents, resources and experiences complement yours, but you don't want to include them in your own business.

Like a partnership, the Joint Venture can be quick to form, requiring an agreement on purpose, activities, investment, profit and loss splits and dissolution. While some Joint Ventures have a short term life, or life for single purpose, other Joint Ventures I've known have lasted many years, and some have resulted in successful mergers or acquisitions. I did a JV with another firm that resulted in their purchase of my company. One key reason that a Joint Venture works is that the entities forming the alliance retain ownership in their own businesses.

My final recommendation: Proceed v-e-r-y carefully with Partnerships or Joint Ventures, always use a written agreement, and whenever possible, evaluate whether a Joint Venture structure might fit better than a Partnership for your proposed venture.

Related Articles
  Joint Venture and NonDisclosure Agreements
  Funding Resources
  Advantages and Disadvantages of Joint Venture
  The Importance of Joint Ventures
  How To Propose A Joint Venture

Article Tags: cash flow problems, debts, dissolution, economic gain, economic opportunity, formal partnership, insolvency, joint venture, joint ventures, legal challenges, limited liability company, occurrences, outlines, own business, partnership agreement, personal bankruptcy, profit and loss, proprietorship, splits, term life



Related Forum Posts
Joint Ventures?? - I read this following paragraph in another business forum. Has anyone used joint ventures and had successful results? How do you go about setting up joint ventures? [quote:3vnvuml9]Joint Ventures have been, and always will be one of the most powerful marketing tactics ever, and for good reason. They are easy to set up, and they cost you nothing and if set up correctly will allow you to have more customers than you can handle! So if you promote a great product or service and want to expose it to more prospects, or you you seek ways to increase your sales, but aren't quite sure how to go about it you should definitely consider harnessing the power of Joint Ventures And the best part is that anybody can start using joint ventures to skyrocket their profits. It doesn't matter what you sell, or where you sell it.[/quote:3vnvuml9]
Re: Marketing a company - Get their contacts from someone who had been marketing to them before and do Joint Ventures with the guy
Different types of funding - Business Relationship Funding This is another source of funds that can be overlooked. It may be possible to introduce potential alliances to add value to both parties. It may produce an ultimate exit route in the medium to long term. Joint Ventures: Requires a legal agreement embodying the deal and another company Partnerships: Two companies collaborate with possible funding. Joint working relationships: These are an informal partnership which may be more project specific where the parties can share resources. Agencies: These can be geographical or product specific and generally incorporates a payment for the right to the agency. Distributors: Very like an agency but may not necessarily involve up front payment. Alliances: These do not require a separate company and can be embodied by a legal agreement to work together. Trade investors: Otherwise known as Corporate Partnering. This can be a good way to involve a much larger company in the business with a view to possible trade sale further down the line. Associates: This can be a loose arrangement with no fundamental commitments either way, rather like a preferred supplier. Equity Swop: Two companies exchange shares to a similar value to develop both businesses. Franchises: This can allow the business to grow without further direct investment. Licensing: This involves licensing a product or service to enable others to sell it. This requires you to own the intellectual property.
Free Ebook on Joint Ventures - Julie, you might be interested in the free ebook offer through Dollarmakers.com on Joint Ventures that has upto 30 variations for a small business to create joint ventures. Once you've read it I'd be happy to share more advanced ideas based on the book.
Joint Venture - How did the seminar go yesterday? Joint ventures can open up so many possibilties and are a great way to promote your products and/or services to a whole new and with the right base, to a targeted audience. Chris


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