It is appealing to some firms to maintain contact with each other. This way, both parts can achieve their goals more easily. This collaboration can occur through a Joint Venture.
A Joint Venture is a strategic alliance between companies created to introduce themselves into new markets and expand internationally. In this collaboration, partners share the risks and benefits, but maintain their individuality and legal independence by working under the same norms.
A Joint Venture contract is temporary and may be for the short, medium, or long-term. Companies offer their resources, which may include raw material, capital, technology, labor, distribution channels, among others.
For this type of associations to succeed, there should be compatibility between all parties involved.
What are the benefits of a Joint Venture?
● Risk diversification: Risks are shared.
● Shared responsibilities: Failures are shared.
● Shared resources: These may be human, financial, or technological. ● Openness to new markets: Mainly occurs when the companies are from different countries.
● Increase in operations: Companies have the possibility of introducing themselves into new sectors without abandoning their original activities.
What are the types of Joint Venture?
● Project-based: A project is developed with a specific deadline.
● Concentrative: The parties involved centralize the headquarters and elements of the companies in the new firm.
● Co-investment: Receive a monetary contribution or resources from each of the companies. This way they increase utility in comparison to what they would have had individually.
● Strategic alliance: Does not require a contribution of capital, but only resources from each company.
● Horizontal: Firms participate in the same economic stage.
● Vertical: Companies focus on different economic stages.
● Conglomerate: Carry out different activities.
● Equity Joint Venture (EJV): A new company is created with a separate legal personality.
● Contractual or Non-Equity Joint Venture (CJV): Collaboration contracts are established to define the role of each of the companies.
Some of the main characteristics of Joint Ventures is that they may be formed by two or more companies, share resources, specify the rights and obligations of each of the parties and can occur through a contract or through the creation of a new company.
Now that you know the basis of a Joint Venture, you can incorporate this strategy into your growth plan. Do not forget to resort to professionals on the matter to receive the proper financial advice and comply with tax laws correctly.
Legal and Accounting Consulting in Playa del Carmen
