What is a “joint venture”?

A joint venture is formed when two or more people or entities join forces to undertake a common and defined business opportunity.  Illinois courts consider the following things in determining if a joint venture exists:  (a) whether the business owners have a common purpose in the joint association; (b) whether they each have the ability to direct and govern the policy or conduct of the others; (c) whether they each have a right to joint control and management of the property used in the association; and (d) how profits and losses are shared.  

While joint ventures can be intentionally created, oftentimes business owners find themselves in “accidental” joint ventures as a result of not properly making it clear to the public what the relationship is between the individuals and entities that are doing business together.  And although the absence of any of the four elements listed above means there is no joint venture, defending against a claim that a joint venture exists can be very expensive.  So it is better business practice to make sure that your marketing is clear regarding what your proper business relationships are so as to avoid the appearance of a joint venture.

Finally, all the venturers are held to equally own the joint property.  But they are also obligated (sometimes personally if individuals are the joint venturers) to pay joint debts and obligations.  In other words, there may not be any corporate shield or protection for joint venturers. 

Click here to read a story of some people who fell into that bear trap.  And call us to see if your business relationships are properly shielded from your personal assets. 

 

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Charles Wentworth
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Charles Wentworth
Charles Wentworth
Charles is an attorney in Glen Ellyn, Illinois. After graduating from the University of Utah, he clerked for Chief Justice John T. Broderick of the New Hampshire Supreme Court. He then became a litigation associate at Kirkland & Ellis LLP before opening his own office and partnering with Rick Lofgren. He lives just outside of Chicago, where he participates in community activities, including Boy Scouts and little-league baseball.