MOU for Joint Venture Agreement: Everything You Need to Know
An MOU for joint venture agreement is a non-binding document that is used in the early stages of negotiation between two parties.2 min read
2. Why Create a Join Venture Agreement?
3. Disadvantages to a Joint Venture Agreement
4. What Is Included in a Joint Venture Agreement?
An MOU for joint venture agreement is a non-binding document that is used in the early stages of negotiation between two parties. It stands for "memorandum of understanding" and can be written by either party involved in the agreement. However, it's usually composed by the party that is leading the negotiation.
What Is a Joint Venture Agreement?
Also referred to as a co-venture agreement, a joint venture agreement is a temporary business contract between two or more parties to help them achieve a common goal. The joint venture agreement defines all of the obligations and terms for the members involved in the agreement. There are two main types of joint ventures:
- Contractual joint ventures, which is when two entities wish to team up on a specific project but don't want to form a separate legal entity to do so. Instead, each entity will keep their own records of profits and losses.
- General partnerships, which is when two entities decide to share their profits and losses from a specific project. Each partner in the agreement will have unlimited liability when it comes to the obligations of the agreement. Usually, this type of agreement is reserved for real estate endeavors rather than business ventures.
Why Create a Join Venture Agreement?
There are a few reasons why two parties might decide on a joint venture agreement:
- It allows them to share the reward and risk, which is ideal for minimizing losses.
- It helps them each grow as a separate company without seeking capital from other sources.
- It gives them access to wider markets.
- It permits them to share resources with each other.
- It allows them to develop new products.
- It provides them with greater skills and expertise.
- It helps them diversify their interests and products.
- It offers more flexible control over a relationship as opposed to stricter agreements.
Disadvantages to a Joint Venture Agreement
While a joint venture agreement is mostly beneficial, it does have some downsides:
- It exposes the company to different leadership styles or workplace cultures, which could cause a clash.
- It creates an imbalance of investments, expertise, or resources between the two entities.
- It could cause a failure if there is poor planning or decision making between the two entities.
What Is Included in a Joint Venture Agreement?
There are a few specific details you'll need to include in any joint venture agreement you create:
- The place of business.
- The type of joint venture (contractual or partnership).
- Specific details of the venture, including its purpose, address, and name.
- The date the venture begins and ends.
- The members of the venture and any contributions they're making.
- The obligations and duties of each member.
- The details of any votes or meetings.
- Information on how you will manage, dissolve, and assign interest in the venture.
- Any relevant clauses, such as dispute resolution, confidentiality, and non-compete clauses.
If you need help with an MOU for your joint venture agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.