Generally speaking, you should always consider legal, tax, business and cultural issues when entering into a joint venture. These may take the form of different legal structures and the implications could be significant depending on your financial situation.  If nothing else, be sure to consult your legal counsel to determine how this venture could impact you.

From a tax perspective, you need to consider tax issues and potential liabilities that come with a joint venture. Depending on your situation, you may find important concerns surrounding how your assets are contributed to the new joint venture and the amount of tax you will pay on income.

Besides legal and tax considerations, you should also be very aware of some additional issues and ensure you have fleshed out the answers to the following questions:

  • The purpose of the joint venture
  • What is the timeline for the venture (specific period of time or is it indefinite)
  • The resources supplied by both participants and the value associated to those resources
  • Is there a good fit between the participants
  • What is the share of responsibility
  • What are the goals of the venture
  • How you will handle cash calls and personal guarantees (if required)

Many of these questions/considerations can be handled with a good JV partnership agreement.  Maybe even more important though is to ensure that the fit with your joint venture partners is a good one since you will likely dealing with problems or disputes and the last thing you want to do is have a stormy joint venture relationship which can waste a lot of time, ruin your relationship and more importantly, ruin your reputation.