WHAT IS A JOINT VENTURE ?

When two or more persons join together to carry out a specific business venture and share the profits on an agreed basis, it is called a ‘joint venture’. Each one of them who join as a party to the joint venture is called ‘Co-venturer’. No firm name is normally used for the joint venture business because its duration is limited to a short period. During this period, the - co-venturers are free to carry on their own business as usual, unless agreed otherwise. The Business relationship amongst the co-venturers comes to an end as soon as the venture is completed. Thus a joint venture is 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 construction business, consignment, sale and purchase of property, underwriting of shares and debentures, etc. For example, A and B agreed to construct a college building for which they pooled their resources and skill. A provided Rs. 6 lakh and B Rs. 4 lakh as capital. They completed the building and shared the profits in the ratio of their contributions to capital. In this example, joining hands by A and B to construct a building is a joint venture. A and B are co-venturers. They will share the profits in the ratio of 6 and 4 (same as the ratio of their capitals). This venture will be closed once the construction of the college bulding is completed.

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

1.    It is formed by two or more persons.

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

3.    No specific firm name is used for the joint venture business.

4.    It is of a temporary nature. Hence, the agreement regarding the venture automatically stands terminated as soon as the venture is completed.

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

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

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