Joint ventures, Salient features and its Explanation

In a typical manner when two or more persons join together to carry out a specific business venture and share the profits onto the agreed basis, it is called as a ‘joint venture’. Each one of them who used to join in as a party to the joint venture is called ‘Co-venturer’. No firm name is used normally as a specific for the joint venture business because its duration is limited to a short period. During this period, the - co-venturers are in a free state to carry on their own business as usual, unless agreed otherwise. The Business relationship amongst the co-venturers shall come to an end as soon as the venture is completed. Thus a joint venture is said to be some kind of a temporary partnership between two or more persons who have agreed to jointly carry out a specific venture. The joint ventures are quite common in the construction business, consignment, sale and purchase of property, underwriting of shares and debentures, etc. 

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As an example, assume as A and B agreed to construct a college building for which they pooled out their resources and skill. A provided Rs. 6 lakh and B Rs. 4 lakh as per their capital. They completed the building and shared their profits into the ratio as of their contributions to capital. Here in this example, joining hands by persons A and B to construct a specific building is considered as a joint venture. A and B are co-venturers. They will share out the profits as per the ratio of 6 and 4 (same as the ratio of their capitals). This venture will be closed once the construction of the college building will get completed.

From the discussion above, the essential features of a joint venture can be listed as follows:

1. It can be formed by two or more persons.

2. The purpose is to execute a specific venture or project.

3. No specific firm name is used (in most of the cases) for the joint venture business.

4. It is of a temporary nature only. Hence, the agreement regarding that venture will automatically stand out to be terminated as soon as the venture is completed.

5. The co-venturers share their profit and loss in the agreed ratio. However, in the absence of any other agreement required between the co-venturers, the profits and losses are to be shared equally.

6. During the tenure of a joint venture, the co-venturers are set free to continue with their own business unless agreed otherwise. 

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Joint ventures, Salient features and its Explanation Joint ventures, Salient features and its Explanation Reviewed by on February 29, 2020 Rating: 5

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