Three Options for Setting Up Business Ventures

Posted 30-09-2020
Written by admin 101

When two or more people or companies want to come together to create a new business venture, the question of how to structure it is important. RMB Commercial Lawyer PAUL BARTHOLOMEW explains some options:

A partnership is defined as where a relationship exists between persons or legal entities who carry on a business in common with the view to profit. Partnerships may be formed by written agreement, but may also be implied from the actions of the partners.

In Australia, the concept of a joint venture does not have formal legal recognition. Broadly speaking though, it refers to the collaboration between two or more parties for a particular undertaking. Joint ventures can be defined as either Incorporated or Unincorporated.

An Unincorporated Joint Venture is where two or more parties enter into a contractual relationship to jointly undertake a specific project without the creation of a new entity.

An Unincorporated Joint Venture is a great option as they are quick and inexpensive to set up however, they can be limited in their usefulness. Unincorporated Joint Ventures are structured around who owns the product at the end.  They are usually only used for specific projects that have a pre-determined date for termination such as upon the completion of a project, and it is usually pre-determined as to what each party will retain. 

An example would be of where a developer and a builder come together to develop a lot of six apartments. The Unincorporated Joint Venture Agreement would state that on completion of the build, the developer would take say take three apartments and the builder would take the other three. If the builder and developer were in partnership, they would share the profits from all the sale of all the apartments.

An Incorporated Joint Venture is where two or more people or companies come together and form a new company for the purpose of the joint venture.

Incorporated Joint Ventures are a great vehicle to operate a new business as the creation of a new company clearly defines what the new venture is and what its assets and liabilities are.

The benefit of using an Incorporated Joint Venture is that the newly created entity can own property, operate a business, invoice clients, and offer an extra layer of protection between the activities of the joint venture business and the two people and/or companies that came together to form it.

If you are needing some assistance in setting up a business venture, RMB Lawyers has skilled lawyers who can help you setup correctly from the beginning. Contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.