Joint Venture Agreement Texas
Of course, setting up a joint venture is not a decision that should be taken lightly. One of the most important things you need to evaluate is whether you are engaging with the right joint venture partners. Part of selecting joint venture partners is evaluating what they bring to the table. It`s a good idea to choose joint venture partners who have resources that your business doesn`t have. It can be money, intellectual property, available staff, experience, a pillar in a particular market or anything else. They also want joint venture partners you can trust to treat you fairly and transparently. A joint venture is a complex and evolving relationship. As with other business partnerships, it`s a kind of marriage. Choose wisely! One tax consideration to consider is that Uncle Sam and the IRS may require your joint venture to file a partnership tax return, even without the creation of a separate formal entity under a joint venture agreement. Each corporation has to report its own taxes, but the same goes for partnerships (which may seem strange because partnerships don`t even require a submission to the Secretary of State for their initial creation – they are created by what we used to call “a meeting of minds”).
The mere conclusion of a contractual agreement in which the parties share a combined profit does not automatically mean that the tax administration considers the relationship as a tax partnership. You should talk to CPAs about your particular tax situation. “A joint venture is an independent legal entity. This relationship is similar to a partnership, but the main difference is that a joint venture is usually limited to a specific company. A joint venture must be based on an explicit or implied agreement. Varosa Energy, Ltd.c. Tripplehorn, no. 01-12-00287-CV (Tex.App.—Houston [1st Dist.] 2014, no pets). The agreement must provide for the sharing of profits and losses. Arthur v. Grimmett, 319 P.W.3d 711 (Tex.App. – El Paso 2009, pet rejected).
“A joint venture has four elements: (1) a community of interest in the business; (2) a profit-sharing agreement; (3) a loss-sharing agreement; and (4) a reciprocal right to control or manage the business. Smith v. Deneve, id. ICTs are often written as general partnerships, but always focus on a specific transaction, often a larger project such as an apartment complex or strip center. Promoters are looking for investors, usually wealthy beginners wrapped in their personal skills. In other words, these entry-level investors do not form an LLC or corporation to act on their behalf in the business; They sign the ICT agreement individually and often personally guarantee a seven- or eight-digit note to a bank. If the value of the investment decreases (which is often initially inflated to provide upfront fees to project promoters), the results are usually unfortunate for investors. Promoters who have since taken their profits and moved on to other programs are the winners. A joint venture, like any partnership, requires at least two parties.
Some joint ventures will have many more. The parties may be: A partnership agreement consists of “any written or oral agreement of the partners on a partnership” (BOC §151.001 (5)). Unless a partnership agreement provides otherwise, the BOC regulates. Deere vs. Ingram, 198 pp.w.3d 96,101 (Tex.App–Dallas 2006). In principle, partnership agreements are contracts between the partners, and the law applicable to the drafting of contracts applies, unless otherwise provided by the BOC. Reasonable investors will insist on a clear and comprehensive written partnership agreement that does not require the intervention of a court to interpret and apply it. Exxon Corp v. Breezevale Ltd., 82 S.W.3d 429, 443 (Tex.App.—Dallas 2002, pet denied). Unfortunately, joint ventures are often carried out informally and without written agreement, so doubts may arise as to whether a legal partnership should be entered into.
Section 152.052 of the BOC sets out rules for determining whether a partnership has been formed (the so-called “five factors” often referred to in partnership cases): A full partnership agreement addresses all of these points and more, which does not mean that partnership agreements must be too complex, long or intimidating. Consult a lawyer who is familiar with the field to draft a partnership agreement and before signing one. Never use Internet forms for this purpose. A good partnership agreement should address the issue of dispute settlement. .