Joint ventures and business partnerships

Joint ventures can be risky, but if you use the right processes and carry out due diligence checks, you can increase your chances of success. This checklist can help you prepare for and plan a successful joint venture.

Are you ready for a joint venture?

The first step is to decide if your business is ready for a joint venture. To help you do that, you should:

• research the activities of other businesses in this area
• carry out a SWOT analysis of your business
• compare your working methods with those of potential partners
• consult your employees to find out their feelings about a joint venture

Find out if your business is ready for a joint venture.

Choose the right partner

When choosing a joint venture partner, you should consider:

• existing customers and suppliers, competitors and professional associates as partners
• if the culture of a proposed partner fits with that of your organisation
• if the finances of the proposed partner organisation are sound
• potential for overseas sales or activities

Read more about choosing the right joint venture partner.

Financing a joint venture

You should prepare the following documents for a joint venture:

• business plan
• marketing plan
• cashflow projection

Each partner should agree who is investing what, and in what form - eg cash, services or other assets. If your venture needs external funding, the partners should agree:

• sources of funding
• who will borrow the funds
• how the borrowing will be guaranteed

You should also agree arrangements for profit and loss, eg:

• how any profits or losses should be divided
• how capital gains or losses should be divided
• if either party will be paid an additional share of profits, eg for providing services

See how to plan your joint venture relationship.

Implementing a joint venture

When you are ready to implement a joint venture, you should set out the terms and conditions of the partnership arrangement in a written joint venture agreement. This should include:

• clear business objectives and trading principles
• communication arrangements between organisations/teams
• financial arrangements
• protection of your interests, eg trade secrets
• day-to-day and strategic decision making
• if either party can pursue other business during the joint venture
• dispute resolution procedures

The written agreement should also specify the legal structure for your joint venture, eg:

• contractual cooperation for a defined project
• partnership or unlimited partnership
• limited liability company
• a full merger of the two organisations

Bank account arrangements will depend on the legal model you choose, although you can set up a new account for a single project. You should agree:

• in whose name account(s) are set up
• arrangements for depositing or withdrawing funds, including co-signatories

See how to create a joint venture agreement.

Sourcing business together

You should agree in advance which organisation has responsibility for different types of activities, eg:

• sales activities
• marketing activities
• new business generation

As well as agreeing on responsibilities for day-to-day running, you should also discuss who will be responsible for tactical and strategic decision-making.

Don't forget to consider what happens if there is a difference in opinion. Will certain things require approval of both parties to happen or will one partner have full control to make the call?

Terminating the joint venture

The agreement needs to make provisions for ending the joint venture. This can be if one party wants to pull out or if both parties agree to terminate. In either case, these provisions should cover:

• termination procedure or an exit strategy
• ownership of assets in the joint venture
• allocation of any liabilities resulting from the joint venture

See more on ending a joint venture.