What's the best way to structure a joint venture agreement for your development project?

1 Joint venture types

When it comes to joint ventures, there are various types depending on the nature and scope of the project, as well as the roles and contributions of the parties. Equity joint ventures involve contributing equity capital and sharing ownership and control; profit-sharing joint ventures involve one party contributing land or property and the other contributing capital and/or expertise, with profits split according to a predetermined ratio; and development joint ventures involve one party contributing land or property while the other undertakes development and management, with profits or revenues shared based on a predetermined formula. Each type has its own advantages and disadvantages, so it's important to evaluate which one best suits your project goals and risk appetite.

2 Joint venture terms

No matter the type of joint venture, certain essential terms should be included in your joint venture agreement. These terms should encompass the purpose and objectives of the joint venture, as well as its scope and duration. Additionally, the roles and responsibilities of each party should be outlined, and the decision-making process and authority should be specified. Furthermore, the capital structure and financing sources of the joint venture must be determined, as well as the allocation of equity and debt. In addition, the distribution of profits, losses, and cash flows must be agreed upon along with the exit strategy and valuation method. Lastly, a dispute resolution mechanism and governing law should be established. It is important that these terms are clearly defined and agreed upon by all parties involved, reflecting their fair and reasonable expectations.

3 Joint venture negotiation

Negotiating a joint venture agreement can be a challenging process, as you need to balance your interests and objectives with those of your partners, and address any potential issues or conflicts that may arise during the project. Therefore, it is important to do your due diligence and research the background, reputation, and financial situation of your potential partners. Additionally, you should establish a clear and open communication channel, express your goals and concerns honestly and respectfully, be flexible and creative when looking at different options, and seek professional advice. By following these tips, you can structure a joint venture agreement that works for all parties involved and sets the foundation for a successful and profitable development project.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?