A joint venture is an entity that takes the form of a finite term partnership in which the persons jointly undertake a transaction for mutual profit. Generally, each person contributes assets and share risks. Like a partnership, joint ventures can involve any type of business transaction and the “persons” involved can be individuals, groups of individuals, companies, or corporations.
The joint venture could be motivated by strategic financial reasons, to pool resources, divide risk, or exploit joint assets.
In the United States, joint ventures are governed by state partnership, contracts, and commercial transactions law. A joint venture is also treated like a partnership for federal income tax purposes. Similarly, a joint venture is not typically subject to securities laws. Under California law, joint ventures are nearly identical to general partnerships. No filing with the secretary of state is required for their formation, nor are any written documents necessary.
The parties involved in a joint venture are subject to personal liability for the debts incurred in the venture. Each of them is jointly and severally liable, meaning that each is responsible for the entire amount of the debts until the entire debt is satisfied. If the persons involved in the joint venture are business entities, the assets of those business entities would be subject to satisfy debts of the venture.
A joint venture is generally governed by what is called a joint venture agreement, which is similar to a partnership agreement in a lot of aspects, but also has clauses specific to a joint venture only.