Joint Venture (JV): What Is It and Why Do Companies Form One?
A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for a specific task. JVs can take on any legal structure and can be formed for a variety of purposes. Companies form JVs to leverage resources, reduce costs, combine expertise, and enter foreign markets. The most important document for a JV is the agreement that sets out all of the rights and obligations of each party to the venture. There are pros and cons to forming a JV, and taxes on a JV depend on the business structure. JVs are different from partnerships and consortiums, and there are examples of successful JVs. Firms may enter into a JV for purposes of expansion, development of new products, or entering new markets, particularly overseas. The primary advantages of forming a JV include access to resources and shared risk, but there are also disadvantages and the need for an exit strategy to consider.
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