Types of Joint ventures

By | 30th July 2020

Joint ventures

Types of Joint Ventures

Pros and Cons of Different Joint Ventures
Pros Cons
Company Limited by Shares
• Business and personal finances are separate • Need to provide disclosures and hence less privacy
• Legally own the business name • More legal responsibilities
• Raising investment is easier • Complex accounting and more taxes
• Low personal taxes • Cannot withdraw money from the business bank account without creating additional personal tax liabilities

General Partnership
• minimising the risk of disputes between the parties later down the track • each party is jointly and severally liable for the other parties debts
• setting out the expectations for the parties regarding the operation and management of the business • each party is responsible for the actions of the other parties;
• low start-up costs • the parties have unlimited liability
• the business will usually have access to more capital and can borrow more money due to the number of parties involved • profits must be shared with the other partners under the terms of the partnership agreement
• there are opportunities for income splitting • there is a risk of disagreement between the parties
• there are limited external regulations • if a partner joins or leaves the partnership, the partnership’s assets will most likely need to be valued and this can be costly
Limited Liability Partnership
• Limited liability protects the member’s personal assets from the liabilities of the business. LLP’s are a separate legal entity to the members • Public disclosure is the main disadvantage of an LLP. Financial accounts have to be submitted to Companies House for the public record. The accounts may declare income of the members which they may not wish to be made public
• Flexibility. The operation of the partnership and distribution of profits is determined by written agreement between the members. This may allow for greater flexibility in the management of the business • Income is personal income and is taxed accordingly. There may be tax advantages in registering as a company, but this will depend on your personal circumstances
• The LLP is deemed to be a legal person. It can buy, rent, lease, own property, employ staff, enter into contracts, and be held accountable if necessary • Profit cannot be retained in the same way as a company limited by shares. This means all earned profit is effectively distributed with no flexibility to hold over profit to a future tax year
• Corporate ownership. LLP’s can appoint two companies as members of the LLP. In an LTD company at least one director must be a real person • An LLP must have at least two members. If one member chooses to leave the partnership the LLP may have to be dissolved
• Designate and non-designate members. You can operate the LLP with different levels of membership • Residential addresses were historically recorded at Companies House. Whilst the use of ‘service addresses’ now allows for home addresses to be kept out of public view, any address previously supplied to Companies House is still part of the public record unless you pay for the records to be suppressed. For many businesses this is not a problem. However, there are some examples where this may not be desired. Consider solicitors and partners of law firms that may not want their home address so freely available if their work involves sensitive cases
• Protecting the partnership name. By registering the LLP at Companies House you prevent another partnership or company from registering the same name • Public disclosure is the main disadvantage of an LLP. Financial accounts have to be submitted to Companies House for the public record. The accounts may declare income of the members which they may not wish to be made public
Joint Contractual Venture
• are only bound by a temporary arrangement • dealing with different working arrangements, workplace cultures and management styles between the parties
• gain access to additional resources as they come together to pursue a mutual and specific goal • either of the parties making poor tactical decisions which may affect the desired outcome of the project
• may complete a project which they may not have had the finances or staff to complete on their own • the joint venture parties may have a lack of commitment to the project
• can share risks and costs
• can access increasing opportunities for growth, including financial growth

Pros and Cons of Collaboration Agreement
Pros Cons
• New or improved services • Outcomes do not justify the time and resources invested
• Wider geographical reach or access to new beneficiary groups • Loss of flexibility in working practices
• More integrated or co-ordinated approach to beneficiary needs • Complexity in decision-making and loss of autonomy
• Financial savings and better use of existing resources • Diverting energy and resources away from core aims – mission drift
• Knowledge, good practice and information sharing • Damage to or dilution of your brand and reputation
• Sharing the risk in new and untested projects • Damage to organisation and waste of resources if collaboration is unsuccessful
• Capacity to replicate success • Lack of awareness of legal obligations
• Stronger, united voice • Stakeholder confusion
• Better co-ordination of organisation’s activities
• Competitive advantage
• Mutual support between organisations

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