Joint Venture Agreements in Florida are a very useful and unique type of business relationship, allowing you to collaborate and benefit from another party’s key strengths.
They’re especially useful for small businesses looking, but that also poses the risk of liability so any agreement should be drafted carefully and without overlooking any areas.
In this blog, we’ll explain what joint venture agreements are, how they are and how you can draft one in Florida.
Table of Contents
What Is a Joint Venture Agreement?
- A Joint Venture Agreement is a type of contract used between two or more parties when agreeing to pool their resources with the aim of completing an objective.
- The purpose of a Joint Venture Agreement is to set out the terms and obligations of the involved parties and their shared goal.
- They can be thought of as partnerships, but with the difference that the agreement focuses on the collaboration of a specific goal or project.
- The agreement must be drafted with care to avoid one party misinterpreting a requirement, leading to litigation later.
How to Draft a Joint Venture Agreement in Florida
Hire a Business Contract Lawyer
Writing any business contract is rife with potential liability issues. Working with a reputable and experienced business contract lawyer will ensure your collaboration mitigates the risk of liability and is set up for success. Our lawyers can draft, review and oversee your joint venture agreement.
Create a Written Agreement
A written agreement may be legally necessary but it’s also highly advised.
By having the terms and stipulations in writing, you can mitigate the risk of litigation and protect each party in the event of a dispute. It generally increases the chances of success too, as each party has a defined expectation from the start.
You must include each party’s covenants and attached exhibits that they have the authority to enter the partnership. For example, an LLC would likely need consent from its members.
Joint Venture Term Sheet
Joint venture term sheets are documents that detail the deal points of each party involved. It allows you to gain a general understanding of the joint venture arrangement before putting your money, resources and other expenses at play via a signed contract.
Establish a Holding Company
Joint venture partnerships hold the involved parties jointly responsible for their liabilities and obligations. Therefore, you could face a lawsuit because of one of the other party’s actions.
To minimize these risks, you can consider setting up a limited liability company (LLC) or other business entity that acts as a holding company for your interest in the joint venture. The entity will provide liability protection. This is, however, complex as it must still meet the corporate formalities and not breach the corporate veil law. Please contact our Florida business lawyers for an expert opinion.
Read Related: How to Start a LLC in Florida
Determine Each Party’s Capital Contribution and Profit Interest
- Determine the initial investment of each party is.
- This may include funding, skill, labor, connections or other resources,
- Determine the profit interest each party will receive.
- This may be a percentage of the venture’s profit, in relation to their investment or effort levels.
- What happens if additional capital is required?
Include Each Party’s Covenants
Covenants are promises that each party will make about their obligations to make the project a success. These often include:
- Fiduciary obligations (duty of care, good faith, duty of loyalty).
- The delivery of resources on defined dates
- Non-disclosure or confidentiality agreements.
- Non-competition agreements
Include Representations
Similarly, each party should include statements of fact about their skills, abilities and knowledge. This includes:
- Their legal status as an entity in Florida.
- Their skills, licenses, qualifications and abilities to complete their part of the project.
- Their knowledge of any ongoing or potential litigation.
Include Terms for Dispute Resolution and Termination
Joint venture agreements in Florida should include terms for what happens if you need to terminate the partnership. This may include:
- How to terminate the agreement
- Liquidating the venture
- Paying creditors
- Final distributions
- Right of first refusal
- Terms that restrict the assignability of interests
- How are disputes resolved: voting, arbitration or agreements?
Read Related: How a Business Litigation Lawyer Can Resolve Partnership Conflicts
Types of Joint Venture Agreements in Florida:
Joint ventures provide a lot of flexibility for businesses and individuals to approach collaboration. In Florida, we regularly see the following types of joint venture agreements:
Simple Joint Venture Agreement
- Simple Joint Ventures are the ‘standard’ type of these agreements.
- They can be used to meet the different needs of the involved parties.
Common examples:
- Creating a special event
- Selling products to a new market
- Collaborating with designers or manufacturers
Real Estate Joint Venture Agreements
- Real estate joint venture agreements are used to buy, develop, sell and manage real estate transactions.
- The primary purpose is usually to address:
- The sharing of connections and capital when purchasing real estate.
- Working with skilled parties assisting in a real estate project.
- Providing funds to finance a real estate project.
Joint Venture Profit-Sharing Agreement
- Profit-sharing joint venture agreements set each party’s right to profits into a legally binding contract.
- It allows you to mitigate the risk of conflict later, via a predetermined profit allocation.
- Can aid the motivation to join a collaboration, as you can negotiate the share of profits.
- The party providing financing, capital, labor or resources often has increased power to a greater share of profit as they’re most at risk.
Why Use a Joint Venture Agreement?
- Potentially experience better growth and profitability than you could alone.
- Access new markets and distribution channels.
- Gain new business connections.
- Gain specialized expertise and resources
- Increased financing and purchasing power.
- Use another business’s licenses.
Hire a Business Contract Lawyer in Pinellas County and Hillsborough County
If you need to draft a Joint Venture Agreement in Florida, then our Florida business contract lawyers can help you write a watertight and optimized document that mitigates liability risk and keeps your options open.
We regularly help businesses and individuals create joint ventures so they can grow and utilize each other’s skills and resources.
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Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning experienced estate planning attorneys, they can help you create a will or trust.
