Joint Ventures typically consist of two or more individuals or two or more entities, which combine together to form a new entity which is called a joint venture. Typically, each joint venturer has an ownership interest in the joint venture, which includes the obligation of sharing not only profits, but losses. There is also typically a shared element of control in managing the joint venture's affairs. Joint ventures can be either partnerships, limited liability companies or other types of entities, including corporations. The reasons for forming a joint venture include finding a joint venture partner with greater or different resources than the U.S. company brings to the table, a desire to share risks, or a desire to combine knowledge of either markets or technology that one party possesses with the manufacturing capacity of another party.
Joint ventures do have drawbacks.
These include the fact that foreign laws may limit the ability of the U.S. exporter to control the joint venture and also limit the U.S. exporter's ownership rights. The joint venture will typically be required to be governed by the laws of the foreign country in which it operates, and the exit strategy from a joint venture can be a complicated item to negotiate as well as implement. The form of the contract will vary depending on the business relationship and objectives. These are international rules for the interpretation of 13 trade terms. They determine the responsibilities of parties, including who pays transportation, when title passes, who pays insurance and who is responsible for export licenses, duties and taxes.