Joint Ventures & Partnerships

5 min readMar 27, 2022

Running a business can sometimes be synonymous with raising a child. It does take a village. Deciding what that village is for you proposes what your business operation will look like.

Of all the business operations models that exist, only a minority of them do not involve two or more persons owning and running operations of the business. Asides the creativity, versatility, productivity, improvements etc. teamwork & collaboration offers, partnerships offer frameworks that will be discussed later in this article.

When looking at partnerships in business, it can be simply defined as the legal relationship, materialized in written agreement, between two or more individuals or companies embarking on a journey with the aim of achieving similar goals.

Each partner has something they offer to the business; resources, expertise etc. and the partnership agreement indicates in detail what each partner brings to the table; roles and responsibilities, business operations, allocation of profits and distribution of losses amongst other things.

Types of Partnerships

Partnerships are common in the following frameworks, namely;

General Partnership
Limited Partnership
Limited Liability Partnership and
Limited Liability Limited Partnership

The partnerships above share some similarities between them, like the kind of partners that participate in them, avoidance of double-taxation and the fact that they are not seen as a separate entity from the owners.

Generally, we have just two types of partners. The general partners who have a more hands on approach with the company, their responsibilities involve managerial tasks and they are fully liable for the debts of the business. Limited partners on the other hand, have only financial stakes in the business, they are not personally liable for the debts of the business.

General Partnership (GP)

This framework is commonly referred to as the simplest form of a partnership and is also the most common framework adopted. Unlike other partnership frameworks, GPs don’t require state registrations. A GP is formed when partners begin business operations. Because official state filings are not required, GPs don’t have filing-related costs or the costs of holding an annual general meeting.

All partners in this type of partnership are General Partners, each partner is involved in the daily operations of the business and each partner also faces unlimited liability and responsibility for each partner’s actions.

A business operating in this framework faces potential dissolution if a partner declares bankruptcy or passes away unless a partnership agreement has been created and states the mode of action when such cases occur.

Limited Partnership (LP)

This type of partnership offers more protection for its partners by accepting a mixture of the types of partners. For the framework to function, at least one partner has to be a General Partner and take on the managerial role for the business while facing unlimited liability. The remaining partners just hold financial stakes in the business. Limited partnerships require state registrations.

Limited Liability Partnership (LLP)

This type of partnership is restricted to certain professions, such as lawyers, doctors, architects, and accountants in certain areas. It is seen as synonymous to LLCs, owners are viewed as a separate entity from the business and this offers more protection to the partners involved, and each type of partner is protected from the actions of another partner.

Limited Liability Limited Partnership (LLLP)

This type of partnership is a recently modified form of an LP, like an LLP, this partnership offers more protection to all partners involved by limiting the liability of the General Partner. This partnership is authorized and recognized in certain areas and is open to all professions.

What goes into a Partnership Agreement?

This agreement is the most important part of this business operation mode. It highlights all the activities involved in the successful run of the business.

It is important a Partnership Agreement addresses the goal of the business, the roles & responsibility of each partner and the “what if” questions. Involving a lawyer at the beginning of this agreement ensures all important issues are addressed before the commencement of business operations.

Here is a list of some issues that need to be addressed in a partnership agreement

Type of partnership
Purpose of partnership
Partners and their contact information
Distribution of ownership
Transfer of shares
Financial contribution of partners
Allocation of profits
Roles and responsibilities
Business operations
Decision making framework
Resolution of disputes
Distribution of losses
Buyout process
Dissolution process
Partner initiation

If none of these issues are addressed in the agreement, state law will apply to them.

*Illustration 1: One doesn’t have to be a large corporation to benefit from the advantages of volume. This can also be achieved through joint ventures — Norbert Reithofer*

So, what then is a Joint Venture?

Like a project, Joint Ventures are created with the aim of achieving a unique goal different from the daily operations of the venturer that partakes in it. As with partnerships, this kind of operation is initiated because of what each venture partner has to offer.

This time-bound operation offers venturer advantages like;

Access to greater resources
Access to domain knowledge and expertise
Access to new markets and distribution networks
Cost reduction
Increased capacity amongst others

Unlike other partnerships or mergers or simple contractual arrangements, Joint Ventures occur between two businesses or organizations and partners in this venture remain separate legal entities but are bound by their Joint Venture Agreement. Joint Ventures often help in the discovery of new markets and aid research & development without the need to constantly raise funds from outside investors. Regulation of business operations also differs for joint ventures.

When public and private companies engage in a Joint Venture it is called a public-private partnership. Even though this form of venture draws in a large amount of skepticism and criticism, it is usually geared towards socio-economic projects like the construction of hospitals or development of mass transit systems. The public sector usually funds the project while the private sector provides expertise and experience.

As with partnerships, it is important to have an agreement drafted out before business operations commence. All possible issues must be highlighted and modes of actions should be drafted. It is expected for a Joint Venture to come to an end when its goal is achieved or after its designated timeframe but it is essential for exit strategies to be put in place for certain circumstances and to dictate in detail how the dissolution of assets will occur.

It goes without saying, because every business offers its own amount of risks, before embarking on any form of partnership, it is important to vet all interested parties to ensure parties share desired core values and mode of business operations. To enhance success ensure there is good communication between all partners to avoid unresolvable disputes that would end up with all parties facing liabilities.

Grace

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