Advantages & Disadvantage of a Joint Venture
There are many good business and accounting reasons to participate in a Joint Venture (often shortened JV). Partnering with a business that has complementary abilities and resources, such as finance, distribution channels, or technology, makes good sense. These are just some of the reasons partnerships formed by joint venture are becoming increasingly popular. A joint venture is a strategic alliance between two or more individuals or entities to engage in a specific project or undertaking. Partnerships and joint ventures can be similar but in fact can have significantly different implications for those involved. A partnership usually involves a continuing, long-term business relationship, whereas a joint venture is based on a single business project. Parties enter Joint Ventures to gain individual benefits, usually a share of the project objective. This may be to develop a product or intellectual property rather than joint or collective profits, as is the case with a general or limited partnership. A joint venture, like a general partnership is not a separate legal entity. Revenues, expenses and asset ownership usually flow through the joint venture to the participants, since the joint venture itself has no legal status. Once the Joint venture has met it’s goals the entity ceases to exist. What are the Advantages of forming a Joint Venture?
* Provide companies with the opportunity to gain new capacity and expertise * Allow companies to enter related businesses or new geographic markets or gain new technological knowledge * access to greater resources, including specialised staff and technology * sharing of risks with a venture partner
* Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure. * In the era of divestiture and consolidation, JV’s offer a creative...
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