Joint venture partnerships undoubtedly carry a significant level of risk, but they can also be an effective way to rapidly expand and diversify your portfolio. Fortunately, there are ways to deal with the risks that joint venture partnerships bring and tips to follow when considering entering into such an arrangement.
Why the Reluctance?
Particularly with joint venture partnerships based on business ownership and property transactions, investors are often reticent to get involved. This stands to reason – many of us have been exposed to dreadful stories of partnerships going awry, ending badly and resulting in significant financial loss.
Then, there are people who do not have a full and complete understanding of how joint venture partnerships can be used, and in what circumstances. As a result, they decide not to explore this option any further.
Be Informed
In some situations, a joint venture partnership can be incredibly successful. It is evident that successful partnerships tend to result when adequate research precedes the arrangement and comprehensive agreements exist in which the conditions that underpin the arrangement are clearly explained.
Perhaps you are considering a joint venture partnership that will make you, together with partner(s), an owner of a business. Before entering into such a partnership, it is advisable to search company extracts, available from credible providers such as GlobalX. These will provide you with relevant insight into the company and equip you with the information you need to decide whether this is likely to be a successful and lucrative arrangement for you.
So, what do you need to consider when finding a joint venture partner?
Tip 1. Your Joint Venture Partner must be Willing to Sign a Written
An overwhelmingly common reason for joint venture partnerships failing is that no written agreement between the parties ever existed. Without a clear, tangible agreement in place, there is typically confusion and dispute about roles and responsibilities.
Tip 2. Be Clear about the Structure of the Arrangement
The benefit of a joint venture partnership for many is that this arrangement can be the vehicle that sees you enter into a deal that you otherwise could not financially accommodate. Of course, this also means that the proceeds of the deal will need to be split and shared.
Have a sound understanding of what your financial and other responsibilities will be in the partnership, as well as those of your partners. For example, your partnership may be structured so that you provide the deposit and on costs for the business, while your partner covers a loan arrangement with a financial provider.
From the outset, it’s well worth taking the time to decide who will put what into a joint venture partnership, and equally, what they will draw from it.
Tip 3. Ensure Goals and Aspirations are Compatible
When choosing a joint venture partner, it is very important that they share goals, desires and intentions that are similar to yours. When a similar approach and understanding of investment characteristics the arrangement, a joint venture partnership is positioned to run much more effectively and smoothly.
While they carry a definite element of risk, joint venture partnerships offer a good way to boost your portfolio. When preliminary steps are taken to set up the partnership and a comprehensive agreement is in place, many joint venture partnerships have the potential to be successful and lucrative for all parties involved.
