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Another common use of JVs is to partner up with a local business to enter a foreign market.

A company that wants to expand its distribution network to new countries can usefully enter into a JV agreement to supply products to a local business, thus benefiting from an already existing distribution network.

Some countries also have restrictions on foreigners entering their market, making a JV with a local entity almost the only way to do business in the country.

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Two companies or parties might each have unique backgrounds, skillsets, and expertise.

Regardless of the legal structure used for the JV, the most important document will be the JV agreement that sets out all of the partners' rights and obligations.

The objectives of the JV

the initial contributions of the partners

the day-to-day operations

the right to the profits, and the responsibility for losses of the JV

It is important to draft it with care, to avoid litigation down the road.

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By using economies of scale, both companies in the JV can leverage their production at a lower per-unit cost than they would separately.

This is particularly appropriate with technology advances that are costly to implement.

Other cost savings as a result of a JV can include sharing advertising or labor costs.

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There are many reasons to join forces with another company on a temporary basis:

for purposes of expansion

development of new products

entering new markets (particularly overseas).

JVs are a common method to combine the business prowess, industry expertise, and personnel of two otherwise unrelated companies.

allows each participating company an opportunity to scale its resources

to complete a specific project or goal

reducing total cost

spreading out the risk and liabilities inherent to the task.

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A joint venture affords each party access to the resources of the other participant(s) without having to spend excessive amounts of capital.

Each company is able to maintain its own identity and can easily return to normal business operations once the joint venture is complete.

Joint ventures also provide the benefit of shared risk.

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Joint venture contracts commonly limit the outside activities of participant companies while the project is in progress.

Each company may be required to sign exclusivity agreements or a non-compete agreement that affects current relationships with vendors or other business contacts.

The contract may also expose each company to liability inherent to a partnership unless a separate business entity is established for the joint venture.

companies participating in a joint venture share control, work activities, and use of resources are not always divided equally.

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intended to meet a particular project with specific goals

the venture ends when the project is complete.

An exit strategy provides a clear path on how to dissolve the joint business, avoiding:

any drawn-out discussions

costly legal battles

unfair practices

negative impacts on customers

any possible financial loss

In most joint ventures, an exit strategy can come in three different forms:

sale of the new business

a spinoff of operations

employee ownership.

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can take advantage of the combined resources of both companies

e.g: a well-established manufacturing process + superior distribution channels.

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ADQ

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cooporative business arrangement

two or more parties agree to pool their resources

accomplishing a specific task (new project or any other business activity)

Each entity contributes assets and agrees on how to divide up income and expenses.

each of the participants is responsible for profits, losses, and costs

a partnership in the colloquial sense can be formed between any legal structure.

Corporations, partnerships, limited liability companies (LLCs), and other business entities can all be used to form a JV.

Despite the fact that the purpose of JVs is typically for production or for research, they can also be formed for a continuing purpose.

Joint ventures can combine large and smaller companies to take on one or several big, or little, projects and deals.