Put it in Writing: Your Joint Venture

So you're going to take the plunge and start a joint venture. Excellent! As long as you consider the details and think it through as if it's a whole new business, your new venture could mean exponentially greater profits for you!

The most important thing to remember when entering into a JV, as with any new business venture, is to think through and carefully lay out every part of the effort. The No. 1 most important thing -- and this is absolutely vital -- is to make sure that every single detail is in writing. Keep in mind that if it's not in writing, you will not have a road map to getting started on the right foot, keeping to the straight and narrow, reaching your goals for success and eventually dissolving the partnership if necessary.

There are three written documents that are necessary for every joint venture: 1) a joint venture agreement; 2) a business plan; and, 3) an exit strategy.

The joint venture agreement serves as your contract between your business and your partner's. In order to create the separate entity you're forming through the JV, you must have this legal document. Its purpose is to explain the reasons you're entering the joint venture, each parties' varied responsibilities, the length of the agreement, an outline of management, how expenses and profits will be divided and when and how the JV is to be dissolved (or under what specific circumstances it would be terminated.)

Because this is supposed to be a binding legal document, each party will want to have his or her lawyer review the final copy before anyone signs. You might even want to enlist legal help in writing the documents. Ensuring it is legally viable will protect everyone's interests.

If you do decide to go it alone and create your own original contract, it's a good idea to consult the Web for templates and tips and hints. The vast amount of information you will need to cover, plus all the foresight you must have into any eventuality makes it easy to miss some things.

Both parties absolutely must be involved in creating the business plan. This will be the map that shows how to reach your goals, what you and your partner are bringing into the agreement, how and where the JV will be set up, etc. The business plan will also outline how you will get loans and other funding if necessary.

Even if you don't need a loan, you do need a solid business plan. You will refer back to this plan when you're planning new ventures, and you will look to this original plan to see how well you're meeting the goals you set out in the beginning. The plan also lays out many of the practical aspects of your business: marketing, human resources, communication, etc.

When they're done right, business plans can be long -- and often complicated. If this is your first time creating a business plan, it is advisable that you do plenty of research or hire a professional writer. There are writers who do nothing but write business plans for people just like you, and they are easy to find on the Web. Plus, a professional-sounding business plan has a greater chance of getting funded, if that's what you're after.

Sadly but truly, you will also need an exit strategy. Don't worry, you aren't condemning yourself to failure by thinking about how it might end. The average joint venture lasts about seven years, and they end for a myriad of reasons. Your JV might have an expiration date when you write your initial contract, or someone's circumstances may change -- you might win the lottery! You just never know.

A good exit strategy protects your investment in the JV. For example, if you bring a trademarked item into the partnership, you'll want to make sure you walk away from the JV still holding full rights to that item. Or, if the business that results from the JV is to be sold, you'll want to ensure you get your proper share of the profits.

Basically, the exit strategy simply assures that each party gets what he or she is owed when the partnership ends. It will list a specific set of circumstances as well, which, if they were to occur, would result in the end of the JV. Due to the legal nature of the document, and the possibility of someone getting upset over a misunderstanding, it is advisable to have legal council take a look before you sign.

When you prepare for your new partnership by putting all your plans in writing, not only do you prepare for your great success, but you and your partner can be assured that you are truly committed to doing business together. These documents are irreplaceable for following your goals, seeing your JV reach milestones and looking back at where you started from a vantage point of success. Plus, they can keep you out of a lot of legal hot water if anything goes wrong.