A joint venture, sometimes abbreviated “JV,” is an agreement between two businesses to share the profit and expenses of a common business activity. The businesses involved effectively form a partnership typically governed under a unique joint venture agreement. They also agree to share a portion of their current knowledge, assets, and other resources in effort to achieve their shared goal or goals.
A joint venture is often useful for two companies that wish to work on common efforts without the expense and complications of merging. A joint venture is not always limited two businesses. Non-profits, individuals, and government entities can also become JV partners.
A joint venture is often used to bring together two companies that are skilled in different areas. A joint venture allows two parties to cooperate and share specialties, but there are also inherent risks and liabilities to be considered. Taxation on joint ventures is regulated by federal and applicable law and their income tax is typically determined in the same way it is for partnerships.