Legal Articles

Joint Ventures are amongst the most popular types of business arrangements being used by South Africans, in the Tender environment. The following are eight things that you need to know about Joint Ventures:

1. Definition

A joint venture is a strategic cooperation in which two or more people and/or companies agree to provide goods, services and/or capital to a common commercial enterprise for a particular tender or request for proposal.

2. Difference between a Joint Venture and a Private Company

The moment two or more people and/or companies come together; to do business it can be construed as being a Joint Venture. But once the parties of this business register a formal private company then it is no longer a Joint Venture.

3. Difference between a Joint Venture and a Partnership

Joint ventures often sound like partnerships, but the main difference between Joint Ventures and partnerships is that members of a Joint Venture have gathered for a specific Tender or Request for Proposal, while a Partnership is usually formed between two or more people to do business indefinitely.

4. Share expenses

Each member of a Joint Venture only share the costs of the specific Tender for which the Joint Venture was established.

5. Income Tax

Each member of a Joint Venture is liable for their own Income Tax. If the Joint Venture is generating revenue, the net profit of the joint venture will be distributed to each member of the Joint Venture according to their percentage contribution towards arrangement. The members will then be taxed on their individual capacity or if the member of the Joint Venture is a company, then the gains of the Joint Venture will form part of the income of the company and will be taxed according to company tax legislation.

6. Ownership

It’s very important to realise is that each member of the Joint Venture retains ownership of their own personal fixed assets as well as their current assets.

7. Bank account

It is important to open a separate bank account for the Joint Venture. You do not want your private funds to get entangled with the funds of the Joint Venture.

8. Set of accounts

Always keep a separate set of accounts for the Joint Venture. You don’t want the Joint Venture transactions to get mixed up with your own transactions or those of your company.

Van Deventer & Van Deventer Inc. - Attorneys Sandton, Johannesburg

Contact our attorneys in Johannesburg for legal assistance with your joint venture agreement.