How Do I Set Up a Joint Venture in the UK?

If you are interested in starting a new commercial project with another business in the UK, consider setting up a joint venture. A joint venture involves a contractual arrangement between your business and at least one other party for a specific goal, such as entering new markets, new products or another specific project. This article explores how you can set up a joint venture in the UK and the benefits of this type of agreement.

What is a Joint Venture?

A joint venture is a contractual agreement between two or more parties to agree to collaborate their resources or expertise to achieve a shared business goal. Both businesses will share the profit or loss associated with the project, and consequently, both will share the associated risks. 

You can choose to incorporate your joint venture in the UK. A joint venture can take many forms, including: 

• unincorporated contractual agreement;
• joint venture business/new joint venture company;
• limited liability partnership;
• limited company; or
• corporation.

How to Set Up a Joint Venture

Setting up a joint venture is fairly straightforward, provided you have the right professional support and guidance. 

You must first identify a suitable partner and decide what the purpose of your joint venture will be. Next, you can obtain professional advice to decide what type of joint venture to enter. As mentioned, you may incorporate your business to receive the protection of limited liability. 

Additionally, you should draft and sign a joint venture agreement. This contract will govern the project and contain all information establishing the joint venture. Likewise, it should be the principal document to refer to on all important matters. It should contain provisions on areas such as:

• the roles and responsibilities of each party;
• financial contributions from each party;
• day-to-day operations of the joint venture;
• profit shares of the venture;
• the type of business or project the joint venture is involved within;
• how decisions will be made throughout the project; and
• how a party can terminate the joint venture. 

It is strongly advised to obtain professional legal advice when drafting your joint venture agreement. Depending on the type of joint venture that is set up, there may be a requirement to issue shares to the parties if you wish to create a company. Additionally, there may be a requirement to register with Companies House.

 Benefits of a Joint Venture

Joint ventures are a useful way for two or more businesses to pool their resources to enhance both business’ goals. A joint venture involves sharing the risk of a new project and its costs. This can greatly benefit both companies eager to start a new or unfamiliar project. 

For example, two product-focused businesses may join together, one with greater manufacturing power and the other with greater distribution channels. As a result, both companies will benefit from greater operational capacity and efficiency, resulting in higher profits.

Joint ventures are also popular where one company wishes to enter a foreign market. By partnering with a local business, there is potential to tap into a number of different resources, including:

• distribution channels; 
• marketing expertise; and 
• branding and goodwill. 

Combining expertise in this way increases the chances of success for the joint venture.

Key Takeaways

Joint ventures are a popular option for UK businesses as they allow you to tap into another business’ expertise or resources and pool your skills together. If you are a small business, you can also benefit from sharing the financial risk of a new project.

If you need help setting up a joint venture in the UK, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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