What is a contractual joint venture?

A contractual joint venture is an agreement in which two parties meet for a specific business project and sign a contract that states the conditions under which they will cooperate. The parties do not increase a separate legal entity for the project, but cooperate in partnership, share profits or losses of the company on the condition set out in the contract on the joint enterprise. The contractual joint venture is a different legal arrangement from the incorporated or joint -stock joint company in which two or more parties determined a separate legal person who would act as a means of carrying out the project. They would also agree on cash posts or buyers each of the parties to the contract with details of the valuation of contributions. The function of the parties within the project, including their technical contributions and communication obligations, would be defined in the contract. The arrangements would be made for the parties to meet to discuss progress in the project and appoint a management committee.

A joint enterprise Agreement would also cover an agreement on situations in which the new parties joined the contract or withdraw from the agreement, and for the payment or repayment of contributions if these events occur. There would also be a provision for the penalty of participants who violate the conditions of the agreement. Participants may want to protect the intellectual property they use in the project and would include measures to defend their rights. There would also be a mechanism of dispute resolution that would deal with disagreements arising from the contract and the termination of the contract after completing the project.

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choice to make business in the form of a contractual joint venture will have regulatory and tax consequences depending on the jurisdiction in which the project is carried out. Some countries may require foreign investors to work with a local partner either in their own capital or contractual joint business while other countriesThey may insist to create separate legal entities to perform a project work. In many jurisdictions, the contracting joint venture will be considered a partnership for tax purposes, which often means that it is not taxed as a separate entity, but that each participant is taxed from his share of profits or losses.