What’s a joint venture and why should you care?

Have you ever had an awesome idea that you couldn’t implement on your own? Sometimes it’s because you lack a particular skill, sometimes it’s because you’re short on cash, or sometimes you just need someone else to help get it done in time. Heck, it could be worth it to do a project with someone because of their connections and how much easier that will make the project. I think we’ve all had those ideas. How do you set up something where you can complete that project without forever tying yourself to a potential partner? Your answer may be a joint venture.

Fine, what’s a joint venture?

A joint venture is a business you create to do a specific project. Usually, a joint venture is an agreement between two businesses. This is what makes it different than a partnership which is one business entity formed and owned by two or more people (not businesses). It’s possible that this is a one-time project but it can also be an ongoing cooperation.

We’ve already mentioned some of the advantages of a joint venture. There are projects where it’s just not feasible to do it alone. Someone else will have access to the resources, skill, or connections that you need to get it done.

It’s better with examples

Fair point. Examples do make things easier to understand.

After TwitchCon, I’ve had some people mention that they’d love access to a way to learn more about what we talked about on my panel. I offer a professional service (financial planning) which is kind of expensive. I also am not an attorney nor do I have the same expertise that the other panelists developed while living the full-time content creator life. So if I wanted to make a paid webinar or video series going into more detail on setting up a streaming business I’d need their help. We all own our own businesses and this likely wouldn’t become our main source of income. A joint venture could make a lot of sense.

Additionally, imagine you had an idea for a phenomenal show on Twitch. You just know it would draw in tons of viewers if it were you + another streamer with whom you have great chemistry. You could just wing it with the two of you and then figure out what to do once you’ve earned some income. Instead, you could actually plan it ahead of time, make the show its own entity, and put in the work and resources you committed in the written agreement.

Finally, Google is partnering with Fiat to develop self-driving efficient cars. Each has expertise the other doesn’t have so working together could make sense. Together, they’ll be much more effective at making a smart car.

Legal/Tax/Planning issues

I’m not an attorney or a CPA, you should talk with one of them if you’re interested in learning more than the basics of what you need to know.

You should absolutely have a written agreement for your joint venture. It should lay out responsibilities, resources needed, timelines, and goals. Contracts help friends stay friends and you don’t want to be friends with someone who won’t sign a contract. You need to pay very close attention to the type of business entity you use as well. You could find yourself with more liability than you expected if you’re not careful!

The business you form for the joint venture is owned in proportion to the agreement you initially signed. This is another reason to HAVE A WRITTEN AGREEMENT. The proportion of the business you own determines what portion of the net revenue you receive. That revenue is taxed based on the type of entity you used when forming the business.

Finally, a joint venture absolutely leads to some business planning issues. After all, you’re inviting someone else in and sharing control with them. Some joint ventures can give you the thing you were lacking and push your business to new heights. Some can blow up in your face. It’s harder to plan when you’re not in sole control so therefore you should err on the side of caution with your projections. It also takes away from your focus on what you’re working on in your main business. That could be a good thing, if the joint venture turns out better, but it also could hinder you. Make sure that the written agreement sets appropriate boundaries.

Conclusion

A joint venture can be a great way to complete a project you couldn’t do alone. You could get access to more resources, different expertise, or even more hands to help you. However, it also comes with some of the difficulties of working with a partner. Make sure you’ve planned through the entire process and consulted the appropriate professionals before entering in to a joint venture.

You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.