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I have been asked to consider a strategic alliance with a business partner. What is a Joint Venture?

The term joint venture has no specific meaning in English law. It describes a commercial arrangement between two or more economically independent entities which can effectively be slotted into one of four basic legal pigeonholes.

In practice, the legal form of a joint venture is likely to be determined by:

  • The nature and size of the enterprise.
  • The identity and location of the participants.
  • The commercial and financial objectives of the participants.

In this context, a distinction should be made between a conventional business joint venture and a joint venture formed to carry out a single purpose project. In any complex business venture, particularly a cross-border venture, tax and competition law considerations are likely to be key factors in deciding the structure.

In almost all joint ventures, the first choice to be made is whether or not a separate legal entity will be established as a vehicle for the joint venture. As far as English law is concerned, it is currently a question of forming a company (almost certainly a limited liability company) or proceeding with an unincorporated structure. In the latter case, the arrangement will either constitute a legal partnership (or a limited partnership) or a non-statutory contractual arrangement between the participants. In suitable cases, there is also the further option of forming a limited liability partnership under the Limited Liability Partnerships Act 2000.  Therefore, the four basic legal forms are:

  • A limited liability company.
  • A limited liability partnership (LLP).
  • A partnership (or limited partnership).
  • A purely contractual co-operation agreement.
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