An introduction to the joint venture as a vehicle to conduct business in BC

A party considering entering into business with others should get comprehensive legal advice about the pros and cons of each available business structure.

One of the first and most important decisions that a person must make when kicking off a new commercial enterprise is to choose the kind of legal structure within which to operate. The choices in British Columbia are distinct mainly because of differences in taxation, personal liability, control and decision-making powers.

The main options include sole proprietorships, general or limited partnerships, and public or private corporations, but today we will look at the basic concepts involved in a joint venture. The joint venture is a business structure that is generally more informal than others. The arrangement is often perceived as temporary – created to accomplish a particular business goal or endeavor and then likely disband.

Joint venture agreement

Two or more people (or companies) form a joint venture when they execute an enforceable written (preferred), oral or implied contract to create together a commercial endeavor with each party contributing money, expertise, services or property. The co-venturers normally still hold title to property they allow the joint venture to use.

Co-venturers share profits as well as expenses according to their contract. Each participant handles their own taxes related to the venture and joint ventures do not file informational returns.

Canadian courts have emphasized that a joint venture cannot exist without a valid, binding contract between the venturers. The agreement should spell out with precision and detail all essential terms such as the purpose, timeline, resources each co-venturer will contribute, duties of each participant, division of profits and debt, and others.

In addition, there must be a “right of mutual control or management,” according to the British Columbia Supreme Court in Blue Line Hockey Acquisition Co. v. Orca Bay Hockey Ltd. Partnership.

Joint venturers should be compatible

According to the Business Development Bank of Canada (BDC), parties considering a joint venture should also consider whether they would be a good fit for working together toward the shared goal. Drafting a detailed agreement that spells out how the co-venturers will address problems as well as whether there will be a dispute resolution method for disagreements can help the joint venturers progress toward their goals without serious dissension.

The lawyers at Pryke Lambert Leathley Russell LLP, also known as PLLR Lawyers, in Richmond advise entrepreneurs and business owners in Greater Vancouver, the Lower Mainland, throughout British Columbia and across Canada about joint ventures. They also represent clients in the creation of joint ventures and other legal structures, including negotiating, drafting and reviewing joint venture and similar agreements.

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