When two or more parties agree to fund a project and work together to complete it, the business agreement is known as a joint venture. This agreement outlines each party’s rights and obligations, including their initial contributions, level of participation and profit shares. Once the project is complete, the joint venture can be sold or liquidated.
It’s common for businesses who wish to enter the business market of a foreign country to form joint ventures with businesses in that country. This is particularly beneficial if the target country has restrictions on foreign companies doing businesses locally. For example, a Canadian company that wants to sell its products in China may form a joint venture with a Chinese company.