What Is A Joint Venture Agreement?

September 7, 20226 min read
What Is A Joint Venture Agreement?
Share on facebookShare on TwitterShare on Linkedin

Key Takeaways

•  Joint ventures bring multiple parties together to combine their resources in pursuit of a specific business goal.

•  There are some fundamental differences between joint ventures and partnerships.

• Joint venture agreement details the goal of the venture, the financial responsibilities of each of the partners and how profits will be distributed.

Joint ventures bring the resources and expertise of multiple parties together to combine their resources in pursuit of a specific business goal. Although composed of two or more business entities, joint ventures function independently of other business interests that partners in the joint venture may have. Each associate in the venture is entitled to a share of the profits, just as each is responsible for losses and costs — in accordance with the terms of the joint venture agreement they sign.

This, then, raises the question, what is a joint venture agreement?

What is a Joint Venture Agreement?

Also referred to as JV agreements, these agreements are usually structured as either limited liability companies, or limited partnerships. The agreement details the goal of the venture, the financial responsibilities of each of the partners, and how profits will be distributed. The management structure, ownership percentages and exit strategy are included as well.  Ownership percentages can be in any proportion agreed upon by the participants in the venture. 

In most joint ventures there is a general partner and limited partner(s). While all entities contribute capital, the general partner is usually tasked with managing the project, as well as implementing the plan. General partners are usually required to provide a capital investment as well. In exchange, this individual can be compensated through fees and a share of the profits as spelled out in the JV agreement. 

Key elements of a JV agreement include:

•    Purpose of the venture

  • Division of responsibilities
  • Voting rights and meeting requirements
  • Ownership percentages
  • Allocation of profits and responsibilities for losses
  • Exit strategy
  • Confidentiality agreements

Additional elements may be included, depending upon the specific nature of the agreement. 

Why Joint Ventures are Formed

There are several strategic advantages to be gained from forming a joint venture

Most importantly, combining resources can bring disparate means together to make a goal more readily accomplished. For example, one partner might be well-versed in production, while the other might have a particularly robust distribution apparatus. 

Cost savings can often be achieved through JV agreements as well. Taking advantage of economies of scale could broaden a profit margin more than each entity functioning separately could manage. JVs also help minimize risk, as one party needn’t bear it alone. Flexibility is increased, while both commitment and exposure are decreased. Each entity maintains its own identity and can easily transition back to individual operation when the purpose of the venture has been completed. 

Working with someone who has already met certain regulatory and/or licensing requirements means one less hurdle to clear. Joint ventures can also help mitigate competition, by working directly with a competitor to the good of both entities. 

There are a few downsides to JVs to consider as well. The potential for disputes is always present when two strong management teams come together. This could result in a less-than- optimal parting of ways, resulting in wasted time, resources, and capital. The possibility of legal issues and liability exposures when working with another entity should be considered as well. 

Further, a JV may prove limiting in other areas of operation for one of the entities. For example, an exclusivity agreement executed as a result of entering the JV could preclude continued current relationships if one exists with a competitor of one of the partners in the venture. Moreover, use of resources is sometimes divided in a less-than-equal manner, which could lead to concerns down the line. 

Joint Ventures vs Partnerships  

The main difference between joint ventures and partnerships is time. JVs are formed for a specific purpose and for a limited period. Meanwhile, a partnership is formed for ongoing business opportunities. 

Consortiums are also sometimes referred to as joint ventures. However, consortiums do not create a new business entity. Instead, it represents an informal agreement between multiple entities. 

Simply put, joint ventures are usually for a single project, where partnerships are usually open-ended.

Joint Ventures, Taxation and Regulations

Every business entity experiences taxation. Members of an unincorporated JV will handle their taxes on their own. Taxes are handled collectively in the case of incorporated JVs, which is the most common scenario.

Parties entering into a JV agreement create a new entity separate from their other interests. Thus, the venture will be taxed according to the type of business it represents. It’s important to note that the IRS does not formally recognize joint ventures, so the partners will need to determine how best to manage tax liability. 

This detail is usually spelled out in the JV agreement. If it is formed as a C corporation, the JV will pay a 21% flat tax on profits, and shareholders will be taxed on dividends. Unincorporated JVs, like LLCs, are taxed on a pass-through basis. This means that income and losses are reflected on the tax returns of each of the members of the JV, because it does not complete a business tax return. In situations in which all the JV participants are corporations, each member reports joint venture income on their individual corporate returns.

In addition to taxes, there are regulations to consider at every stage of government — federal, state, and municipal. Employees tasked with serving the JV must be handled in accordance with the laws pertinent to the place in which the joint venture will be located — regardless of where the companies from which they are “borrowed” are based. 

Licensing concerns must be examined and met as well.  International JVs will also have to comply with the laws of each nation within which they have operations. 

Real Estate Joint Ventures and Investors

Investors may consider investing in real estate through joint ventures. This provides a ready path to accessing large-scale real estate investment opportunities, without having to put together a team or marshal an outsized capital investment. Considered one of the prime alternative investments, real estate can provide a means of diversifying an investment portfolio. 

Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. 

However, most alternative assets were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  Yieldstreet opens up a variety of investment strategies that were formerly available only to institutional investors and the top one percent of earners to all investors. 

The company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10000.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

In Summary

Joint ventures can provide significant investment opportunities for both businesses and individuals. They can provide access to expertise and resources. Costs and risks are shared. And they can be formed and dissolved on a project-by-project basis. Real estate joint ventures, in particular, can be attractive opportunities for individual investors. Platforms such as Yieldstreet also offer a variety of attractive pathways into large-scale real estate investing.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetalternativeincomefund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022


No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Plaid, Orum.io and Footprint and none of such entities is affiliated with Yieldstreet. By using the services offered by any of these entities you acknowledge and accept their respective disclosures and agreements, as applicable.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure