There are also more resources available in a joint venture. There is increased access to technical expertise and greater overall capacity than a single business entity might have. It grants business entities access to established distribution channels under an existing distribution agreement and established markets. However, that being said, a joint venture has several benefits that must also be acknowledged. A joint venture relationship can be difficult. A successful joint venture is rare if not managed by a legal team. The nature thereof tends to be volatile, ownerships can change unexpectedly, and the parent company structure of most joint ventures can cause serious problems, even in a country like Thailand, where a joint venture depends only on a contract and is not a recognized legal entity on its own. One company cannot entirely merge with another to form a new organization therefore, there will always be two parties that are intrinsically separate and who must co-operate in a limited liability capacity.įoreigners In Thailand and Joint VenturesĪ joint venture can be an extremely risky kind of business or general partnership. In places like Thailand, a legal entity is only attainable through contracting. The other business will gain access to some of your capital, to some of your records, etc. You are placing trust in some other party from some other business in its own right to share in your gains and risks. Attempting a joint venture of any nature is a major decision. This constitutes some risk to the company involved in a joint venture, whether in an existing or new market. A joint venture will always this involve a limited partnership and never unlimited liability. This is important to understand for tax purposes because how those companies pay taxes will depend on what kind of joint venture they are in. There is an option for participant companies to remain separate, but sometimes the parties involved can decide to make two companies into a new business. It is unlikely to come from a separate entity merging with another. In rare cases, a business arrangement for joint venture work can be made long-term, usually when a new entity is formed from new partners. Sometimes a joint venture only involves a particular project or venture into new markets for a limited time. Some major joint ventures include Dow Corning, MillerCoors, Sony Ericsson, Penske Truck Leasing, Norampac, and Owens-Corning.Joint Venture Agreement: Separate Business Entity or Not The JV is dissolved when that goal is reached. Ultimately, short term and long term successes are both important.To achieve this success, honesty, integrity and communication within the joint venture are necessary.Ī consortium JV (also known as a cooperative agreement) is formed when one party seeks technological expertise, franchise and brand-use agreements, management contracts, and rental agreements for one-time contracts. In short, both parties must be committed to focusing on the future of the partnership rather than just the immediate returns. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project as well as the resulting profits.Since money is involved in a joint venture, it is necessary to have a strategic plan in place. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. While joint ventures are generally small projects, major corporations use this method to diversify. In this scenario, both parties are equally invested in the project in terms of money, time and effort to build on the original concept. When two or more persons come together to form a partnership for the purpose of carrying out a project, this is called a joint venture.
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