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In a typical joint venture, two or more businesses agree to contribute capital and resources for a common project.  Most often, that project produces something that earns revenue.  For example, in the oil industry, developers, drilling companies and service providers could agree to form a joint venture to drill an oil well.  If the oil well is successful, those parties split the profit based on the value of their respective contributions to the joint venture. 

Most often, especially among sophisticated corporations, the joint venture is governed by a joint venture agreement.  The agreement delineates specifics – how much each party will contribute and how the proceeds, if any, will be divided. 

One important U.S. federal tax consideration is that some joint ventures are not considered a taxable entity.  This is specifically the case for joint ventures set up to merely share expenses, like a research and development joint venture.  This means the joint venture does not have to obtain a Federal Employment Identification Number or file annual tax returns.

Finally, joint ventures are common in countries like India and China where foreign ownership is difficult or even prohibited.  A foreign company that wants to establish a business in India or China can form a joint venture with a domestic company, bringing in outside technology and resources, while utilizing the Indian or Chinese company’s established relationships and government licenses, which are normally difficult for a foreign company to acquire.

Some notable joint ventures include Nokia Siemens Networks & Sony-Ericsson.  

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