Do I Need a Legal Agreement for a Joint Venture?

Do I Need a Legal Agreement for a Joint Venture?

The short answer to this question is yes. However, few things in life are so cut and dry. Joint venture partnerships can be entered into with anyone. It can be with your neighbor next door who has an affiliate business, or with a person youíve only read about who lives in another country. Due to the variety of joint venture partnership possibilities a legal agreement many not always be needed.

Here are a few pros and cons to signing a JV partnership legal agreement.

Pros:

-Everything is spelled out. A joint venture partnership legal agreement will leave no room for interpretation, miscommunication, errors or frustration. Absolutely everything from who handles what task, to how profits are tracked, to how each partner gets paid can be detailed explicitly. This means there will be no questions halfway through the project about who handles the next step or what profit percentages were originally agreed to.

-Less stress. When everything is clearly detailed and written down, it can take the stress off of the relationship and allow the partners to work together more amicably, and to be more productive. This can be particularly important when youíre working with someone for the first time or you have concerns about the partnership.

-Checks and balances are outlined. A legal agreement makes it possible for checks and balances to be put into place and to be followed through on. For example, if one partner is handling the marketing of a joint venture product and the payment of the profits, the other partner should have a system that enables them to keep track of the sales. That way there is no uncertainty about whether each partner is getting paid fairly.

-Payments are defined. People tend to get caught up in the money. A legal agreement will define who gets paid what, when and how, so that there is no uncertainty, resentment or questions.

- In the event of a disagreement, a legal agreement gives you recourse.

Cons:

-Trust. A legal agreement can start things off on the right foot, but in some circumstances it can start things off on the wrong foot. It can create a sense of mistrust.

-Not always necessary. A legal agreement isnít always necessary. If youíre working with someone whom you are comfortable with, whom you have worked with before, or whom youíre friends with, then a legal agreement may not be necessary. It is fine to simply write down what each person will take care of and how youíll split the profits and go from there.

If you choose to use a joint venture agreement, you can find many legal forms online. Simply type ìJoint venture agreementî into your favorite search engine and youíll have plenty to choose from. Some of the forms are even free.