Joint ventures

The term “joint venture” is more a term of commercial convenience than a term of art. Broadly, the term is often used in a business context to refer to a collaboration between two or more parties for a particular undertaking.

Key features of a joint venture include:

• • the relationship lacks the key indicia of a partnership;
• • property of the joint venture is owned by the joint venture parties as tenants in common;
• • management and operation of the joint venture undertaking is conferred on an operator;
• • the joint undertaking is commonly (though not always) directed at generating a product, rather than a profit;
• • the joint undertaking is a single venture, rather than a repetitious business activity;
• • a party's exposure is often limited to its several interest in the joint venture;
• • the joint venturers are not each others' agent; and
• • the parties' interests are transferable without the technical consequence of the joint venture dissolving.

Joint ventures can be unincorporated and incorporated. In an unincorporated joint venture the contract between the parties determines their rights and obligations. No separate legal structure is created which is distinct from the participants. An incorporated joint venture involves the parties collaborating for the relevant undertaking via a separate legal entity. Often this is a company established under the Corporations Act 2001 (Cth).

The terms of the joint venture should be set out in an agreement between the parties.

The taxation implications of a joint venture structure will be complex and depend largely on how the venture is structured and the parties' agreement regarding sharing of expenses and division of venture assets and product.

See Joint ventures.