“Therefore, shall a man leave his father and his mother, and shall cleave unto his wife: and they shall be one flesh”[i] is a popular verse in the Bible used during marriage ceremonies. As to whether people take this verse seriously and become ‘one flesh’ with their spouses is a discussion for another day. Today’s discussion is on the marriage of two or more business entities in a unique way.

This ‘one flesh’ analogy can be translated into a business structure called a joint venture. A joint venture is a collaboration of two or more businesses to form a new business entity to achieve a common purpose. What this means is that Company A has left his father and mother’s house and has been joined with Company B and/or Company C to form ‘one flesh’ being Company ABC. This union allows the parties share some resource or service and split the profits created by the venture. Just like a marriage.

You may be wondering how different a joint venture is from a partnership. Well, the main difference is that joint ventures could consist of other companies or corporations, but partnerships are between two or more natural persons.[ii] Most importantly, with a joint venture the parties retain their individual identities and legal statuses but come together to set-up a new business with the parties typically being the shareholders. After the mutual goals are met, the joint venture may be dissolved.[iii]

As a start-up, presenting a new product or service to the market may be difficult due to capital, resource, or expertise constraints. Thus, entering into a joint venture may be particularly useful as the other party may be able to support your business idea with the needed capital, resources and expertise.

Joint ventures are usually formed between businesses of complementary strengths; such as a tech company joining with a marketing company to hit the market with their product, or a foreign company seeking to enter the local market and willing to collaborate with a local company to sell its products locally.[iv]

Joint ventures are not limited to any industry. They cut across from construction through to technology, farming, transportation, education, petroleum among others. Note however that each industry may have particular requirements for the setting-up of a joint venture, such as the percentage of foreign participation or local content requirements.

Joint ventures can help businesses enter new markets. This is particularly true for foreign businesses entering the Ghanaian market, as stated above. It may be difficult to enter a new market without drawing on a business which already has presence in that market. Start-ups are also not exempted. It may take years to build a brand that the target market trusts enough to patronise regularly. Thus, entering into a joint venture with a business that has developed some goodwill, or possesses some presence in the target market will be of great advantage to a start-up.

Moving on to the cons, one disadvantage with joint ventures is the possibility of losing control over your intellectual property. This is because knowledge sharing or expertise may be the subject matter of the venture. And even if it is not so, joint ventures generally involve some degree of information sharing. Thus, it may be prudent to have a non-disclosure agreement from the onset in order to avoid trade secrets and other sensitive information being divulged.[v][1]

A good joint venture is guided by a Joint Venture Agreement. If the parties do not have clear goals,[vi][2] or if each party is working towards a separate agenda, the venture will fall apart. Clear goals must be set from the onset, and these are provided for in the joint venture agreement. The agreement will also set out the rights, obligations and liabilities of each party, and outline how profits will be distributed.

Forming a joint venture is a matter of trust and teamwork. To make it work, each party must be committed to the venture, just like a marriage of convenience.

[1] Supra note 3

[2] Magazine.startus.cc

[i] Genesis 2:24

[ii] www.tonyrobbins.com

[iii] Ibid

[iv] www.startuploans.co.uk

[v] Supra note 3

[vi] Magazine.startus.cc