Loading the player...

What is a 'Joint Venture - JV'

A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it. However, the venture is its own entity, separate and apart from the participants' other business interests.

BREAKING DOWN 'Joint Venture - JV'

Although they are a partnership in the colloquial sense of the word, JVs can take on any legal structure. Corporations, partnerships, limited liability companies and other business entities can all be used to form a JV.

JV Agreement

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 and the right to the profits (and responsibility for losses) of the JV are all set out in this document. It is important to draft it with care, to avoid litigation down the road.

Using a JV to Enter Foreign Markets

A 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 into the country.

Winding Up of a JV

Once the JV has reached its goal, it can be liquidated like any other business or sold. For example, in 2016, Microsoft Corporation sold its 50% stake in Caradigm, a JV it had created in 2011 with General Electric Company (GE) to integrate Microsoft’s Amalga enterprise healthcare data and intelligence system, along with a variety of technologies from GE Healthcare. Microsoft has now sold its stake to GE, effectively ending the JV. GE is now the sole owner of the company and is free to carry on the business as it pleases.

Sony Ericsson is another famous example of a JV between two large companies. In this case, they partnered in the early 2000s with the aim of being a world leader in mobile phones. After several years of operating as a JV, the venture eventually became solely owned by Sony.

  1. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  2. Partnership

    A partnership is a formal arrangement in which two or more parties ...
  3. Joint Liability

    An obligation, including an obligation to repay a debt between ...
  4. Jointly and Severally

    1. A legal term describing a partnership in which individual ...
  5. Limited Partner

    A partner in a partnership whose liability is limited to the ...
  6. Company

    An entity formed to engage in a business. A company may be organized ...
Related Articles
  1. Insights

    Virtual Joint Venture: A New Model For US Businesses to Enter China?

    Learn about virtual joint ventures and how these agreements may promote the entrance of American companies into China's vast markets.
  2. Investing

    A Look Into The Secrets Of Venture Capitalism

    Venture capitalists own an equity stake in the start-up and have a say in the functioning of the company. Investments are generally made in early stages of a company with long term high growth ...
  3. Financial Advisor

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  4. Small Business

    Does Your Startup Need Venture Capital Money?

    Venture capital funding provides capital to grow a business. However, entrepreneurs will also lose some control over business decisions.
  5. Insights

    Lights Out! GE Considering Sale of Consumer Lighting Business

    Company thinking of pulling the plug on lightbulbs - its oldest business
  6. Investing

    The Biggest Risks of Investing in General Electric Stock

    Read about the biggest risks facing General Electric Company, an international conglomerate that is undergoing unprecedented restructuring.
  7. Financial Advisor

    What's Behind GE's $32 Billion Deal With Wells Fargo

    GE is a 123-year-old blue chip mainstay, with some radical plans for the future--as evidenced by Wells Fargo's $32 billion purchase of several of GE's finance-related businesses.
  8. Investing

    General Electric Adds to Its Leadership Team (GE)

    General Electric Co (GE) has announced the appointment of four officers, a move that may help the company achieve its earnings goals.
  9. Investing

    General Electric Stock Could Rise More Than 30%

    GE stock has underperformed for nearly 10 years but may be poised to rise soon.
  10. Investing

    Why The GE Stock Is Falling Today (GE)

    GE reported positive earnings this morning. But its stock is down. Why?
  1. What is the difference between the equity method and the proportional consolidation ...

    Discover the differences between the equity method and the proportional consolidation method of joint venture accounting, ... Read Answer >>
  2. How is venture capital different from other kinds of equity financing?

    Learn how venture capital equity financing differs from other funding options and what companies need to be aware of prior ... Read Answer >>
  3. What are the different equity financing options available to companies in the United ...

    Learn what equity financing options are available to small, mid-sized and large companies within the United States and understand ... Read Answer >>
  4. What's the difference between a financial plan and a financial forecast?

    Learn which types of business structures present the greatest amount of risk through unlimited liability to the owner or ... Read Answer >>
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center