As an e-commerce business owner, you may wonder about the avenues to grow your business. Hence, you may consider starting an online joint venture. During a joint venture, you will work with another business as a single, united front to complete a project. This has many benefits, including accessing uncharted markets and increasing capital and assets. However, before you launch your new joint venture, there are some steps to follow. This article will outline how to begin an online joint venture successfully.
What is an Online Joint Venture?
An online joint venture occurs when two or more businesses agree to work on a singular goal or project. It is a strategic alliance and is helpful when trying to penetrate new markets, technologies or distribution networks. Each partner can retain their autonomy when contributing to the joint venture. Additionally, you can choose what you want to contribute.
For example, your online business may have a strong presence in New Zealand, while another business may have great technology but lack customers in New Zealand. Through an online joint venture, you can benefit from their technologies while they benefit from your local market knowledge.
Difference Between a Joint Venture and Partnership
Although a joint venture and partnership sound similar, they are two different legal structures. A joint venture often has a limited scope compared to a partnership and is temporary. Further, you will only collaborate on a specific project rather than working together full-time to run your business. You and your partner will be seen as co-founders rather than two separate entities during a partnership.
Additionally, a joint venture is only regulated by a joint venture agreement rather than partnership laws. A partnership agreement should also govern the partnership. Likewise, the actions of each party are not binding to others without consent.
Continue reading this article below the formStarting an Online Joint Venture
Business Structuring
Online joint ventures can have any legal structure. Hence, they can either be incorporated or unincorporated. You can apply to the Companies Office to incorporate a company for your joint venture. Note that when operating a company for your joint venture, you will operate for the venture. Hence, once the venture ends, you can wind up the company. During an incorporated joint venture:
- each party holds shares proportionate to their holding in the joint venture
- you will benefit from limited liability; and
- enter into a joint venture agreement that outlines how your venture will operate.
To protect your business, ensure supplier contracts meet your business’ needs. Our free Commercial Contracts Checklist will help.
Drafting a Joint Venture Agreement
Your joint venture agreement will govern your relationship with other parties. It outlines key duties, rights and issues. Common clauses include:
- the venture’s purpose;
- interest of each participant in the joint venture;
- the amount of funds each member contributes;
- the circumstances that create a default event;
- term of the agreement;
- how property is distributed;
- dispute resolution; and
- termination.
You can acquire help from your corporate lawyer in drafting and reviewing your agreement. This can ensure that your agreement has all the necessary clauses and is tailored to your venture.
Complying With Relevant Laws
You must comply with NZ company laws when creating an incorporated joint venture. Under the Companies Act 1993, ensure to comply with the rules regarding:
- company registration;
- obligations for directors and directors;
- reporting;
- restructuring; and
- insolvency.
Additionally, ensure to follow all consumer laws such as fair trading and consumer guarantees. Further, if your online joint venture is a website, you can create a new privacy policy to comply with privacy laws. This can outline:
- personal information you collect and why;
- how you will manage, protect and store the data;
- who can access the information;
- how customers can contact you regarding their data;
- how long you retain data; and
- your process in case of a privacy breach.
Your website should also have website terms and conditions. Common terms include:
- acceptance of terms;
- intellectual property ownership;
- reference to your privacy policy;
- cookies;
- limitation of your liability;
- payment and delivery; and
- refunds, returns and exchanges.
Key Takeaways
Starting an online joint venture can be a great way to form a strategic alliance. Note that a joint venture differs significantly from a partnership. Confirm whether a joint venture or partnership is best for your business needs. To form an online joint venture, determine whether you want it incorporated or unincorporated. Further, remember to draft a joint venture agreement to govern the project. Additionally, you should comply with relevant company, consumer and privacy laws.
If you need help setting up an online joint venture, contact our experienced business lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
An online joint venture forms when two or more parties agree to work on a specific project together for a particular time.
Your agreement should outline each party’s interest, rights, obligations, how much each member contributes and dispute resolution methods.
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