Joint Ventures for Entrepreneurs
A joint venture is everything from a formal to an informal collaboration between two businesses or business people.
Formally, the two contribute equal parts of assets and share the expenses and revenues.
The arrangement is made for a finite period of time, usually the length of a given project, at which point the business relationship is terminated.
But, which form should entrepreneurs use? Imagine that you have a business idea, but that you only have half of the expertise needed to make it work.
That is an ideal scenario for a joint venture.
It's an opportunity to two business entities to work together to a common end.
A formal arrangement gives the greatest protection for both parties; but an informal one affords the most flexibility.
How can you balance the two? In the words of entrepreneur and business champion, Bill Nelson: It ain't easy.
If the two businesses live in the same country, then the tax jurisdiction is less complicated than if they make their homes in separate ones.
One country, say the United States, may interpret the tax code either more narrowly or differently than another country.
If the business person lives in the US, then it could be that sales tax must be charged, depending on the state.
If he or she lives in Europe, than different sales taxes apply: Value-added tax in the UK, or IVA in Italy, for example.
And these tax rates are likely to be different as well.
An unincorporated arrangement can leave you open to joint and several liability, which carries with it at least some of the vagaries of a partnership.
That means whatever debts one of the parties incurs in the name of the business, the other shares.
Although that may be your intent at the beginning, if you fall out with your unofficial partner, you could be shackled with all manner of unforeseen expenses.
This is one reason why even the most informal joint ventures need to have the ground rules agreed upon and recorded.
Much as we would all like one's word to be one's bond, you never know who you can trust implicitly.
If the new business entity will transact across European borders, then that adds an other complications.
The European Economic Interest Group was set up precisely to deal with this.
Because business commonly tends to be transnational, it's essential for entrepreneurs to explore the implications of joint ventures before embarking on them.
Formally, the two contribute equal parts of assets and share the expenses and revenues.
The arrangement is made for a finite period of time, usually the length of a given project, at which point the business relationship is terminated.
But, which form should entrepreneurs use? Imagine that you have a business idea, but that you only have half of the expertise needed to make it work.
That is an ideal scenario for a joint venture.
It's an opportunity to two business entities to work together to a common end.
A formal arrangement gives the greatest protection for both parties; but an informal one affords the most flexibility.
How can you balance the two? In the words of entrepreneur and business champion, Bill Nelson: It ain't easy.
If the two businesses live in the same country, then the tax jurisdiction is less complicated than if they make their homes in separate ones.
One country, say the United States, may interpret the tax code either more narrowly or differently than another country.
If the business person lives in the US, then it could be that sales tax must be charged, depending on the state.
If he or she lives in Europe, than different sales taxes apply: Value-added tax in the UK, or IVA in Italy, for example.
And these tax rates are likely to be different as well.
An unincorporated arrangement can leave you open to joint and several liability, which carries with it at least some of the vagaries of a partnership.
That means whatever debts one of the parties incurs in the name of the business, the other shares.
Although that may be your intent at the beginning, if you fall out with your unofficial partner, you could be shackled with all manner of unforeseen expenses.
This is one reason why even the most informal joint ventures need to have the ground rules agreed upon and recorded.
Much as we would all like one's word to be one's bond, you never know who you can trust implicitly.
If the new business entity will transact across European borders, then that adds an other complications.
The European Economic Interest Group was set up precisely to deal with this.
Because business commonly tends to be transnational, it's essential for entrepreneurs to explore the implications of joint ventures before embarking on them.
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