Teaming up with another business on a project or new venture can be a powerful way to share risk, pool expertise and move faster than you could alone. One common way to do this is through a joint venture (JV).

This article looks at what a JV is, the main types of JV structure in the UK, the pros and cons, and the key issues to think about if you’re planning to set one up.

What is a joint venture (JV)?

A joint venture is a business arrangement where two or more parties agree to work together on a specific project or business activity, while remaining separate legal entities.

Often, the parties set up a separate Limited Company - commonly called a JV company or JVCo - to run the venture. Each party holds shares in the JVCo and usually appoints one or more directors.

A JVCo can be used for:

Teaming up with another business on a project or new venture can be a powerful way to share risk, pool expertise and move faster than you could alone. One common way to do this is through a joint venture (JV).

This article looks at what a JV is, the main types of JV structure in the UK, the pros and cons, and the key issues to think about if you’re planning to set one up.
‍

Why set up a JV?

Businesses choose joint ventures for many reasons, including:

• Working on a new idea with a partner: You want to collaborate closely on a project, product or service, but don’t want to give the other party shares in your existing company.
• Separating a project from your current business: Spinning a project into a JVCo can help ring-fence risk, make it cleaner for investors, or prepare for an eventual sale.
• Pooling resources and expertise: Your JV partner may bring capital, technology, IP, licences, premises, people or local relationships that you don’t have in-house.
• Accessing investment: Investors often prefer to back a dedicated JV vehicle with a clear purpose and governance.
• Sharing costs and risk: If you don’t want to fund the venture alone, a JV lets you split the financial and commercial risk.‍
• Entering new markets: A local JV partner can make it easier to enter a new region or country, especially where they understand local law, regulation and culture.
  ‍

JV legal structures and key documents

A “joint venture” isn’t a single legal structure under UK law. It’s a commercial concept that can be wrapped in different legal forms, depending on how you want to allocate control, liability and tax.

Common options include:

1. Limited Company JV (JVCo)

The most common JV structure is a private Limited Company (often in the UK, but sometimes overseas if the project is based there). The parties are shareholders in the company.

2. Partnership JV

A JV can also be set up as a general partnership (an unincorporated JV). Here, there is no separate legal entity: the partners are usually jointly and severally liable for the debts and obligations of the partnership under the Partnership Act 1890.

3. Limited Partnership

A limited partnership (under the Limited Partnerships Act 1907) is used more often for property and investment structures. It must have at least:

4. Contractual / collaboration / R&D JV

Not all JVs involve a new entity. The parties can simply keep their own companies and sign a contractual joint venture or collaboration / R&D agreement to govern how they work together.

This is common where:

• The project is limited in scope or time;
  
• You’re testing a market or product; or
  
• You need to clarify ownership and use of intellectual property and data, but don’t need a new company.

In many modern UK JVs, a limited liability partnership (LLP) is also used as an alternative limited-liability vehicle, particularly in professional or investment contexts.

Pros and cons of a JV

Key takeaways

A well-structured joint venture can be a powerful way to grow, innovate and enter new markets – but it needs clear thinking up front.

Before you commit, make sure you:

• Carry out due diligence on potential JV partners;
• Check that your aims, values and risk appetite are aligned; and
• Put clear contractual arrangements in place so everyone understands their roles, contributions, decision-making rights and exit options.

If you’re exploring a joint venture for your business, Sprintlaw’s expert lawyers can help you navigate your options and stay compliant. As a Crunch customer, you’re also eligible for complimentary 12-month access to Sprintlaw’s Plus Membership - including unlimited lawyer consults and other benefits (normally £399/year, now £0 for your first year).

Disclaimer: All content contained in this publication is intended to provide general information in summary form on legal and other topics, current at the time of first publication. The content does not constitute legal (or other) advice and should not be relied upon as such. You should obtain specific legal or other professional advice before relying on any content contained on this website.