If you are considering a joint venture or getting ready to enter into one, it is vital that you establish a joint venture contract. This is one instance where word of mouth or simple verbal agreements are not going to be adequate. You need to have a clearly defined outline of how things will go, what the rights and responsibilities of various partners are, and how payments and expenses will be determined and delivered. But why is this so important?
Protect Yourself
Any potential joint venture partner that encourages you not to consider a contract or is dead set against a contract is one that you are probably better off without. If for no other reason than the fact that you should probably doubt this partner's true intentions. Even if the doubts are unfounded or untrue, you would be better served avoiding doing business with those whose motives you question or integrity you distrust. Trust is important in any business venture and a contract helps keep everyone in the process honest.
Protect all Partners
It would be a shame to create a profitable joint venture that is later ruined by one partner who either robs you all of your profits or maligns your good name by accusing you of stealing his or her idea. Unfortunately, these things have been known to happen. Having a physical contract that is signed by every single partner will eliminate the possibility of the work being stolen, the profits being stolen, or someone accusing you of theft for the product that was created collectively. Everyone involved in the process benefits from the protection that a contract offers except those who have ill intentions.
Clearly Defines Roles
The other reason you need contracts in all joint ventures is so that the roles of each partner can be clearly defined. There is something about seeing your responsibilities in black and white on a legal contract that bring them front and center in your mind. If everyone knows their roles and responsibilities, everyone is better prepared to handle them and get the job done. This also avoids questions and grumbling when the time comes to distribute the profits between you or when contemplating ending the partnership. Your contract should define the terms for all these eventualities and give you the answers you need in these situations.
There is no question that you need a contract when considering all joint ventures. The contract is the one piece of paper that is most necessary in a joint venture partnership. If you are considering a joint venture with someone who doesn't want the benefit of a contract and is unwilling to extend you the courtesy of signing a contract, it is a good idea to rethink the partnership before you invest any more time, effort, energy, or information into the process. Remember that everything you discuss with this potential partner is information that he or she has to come up with a product that will compete with yours if the partnership falls through and without a contract, there really seems to be no reason to go forward.
