What is a Joint Venture? | IRS Definition of a Joint Venture

Unlike a legal partnership, a joint venture is by nature impermanent. Joint ventures are undertaken on a project-by-project basis, pooling the resources of two or more entities towards a common goal. During a joint venture, multiple labs may pool their resources to complete specific research, or factories may pool their resources for the purposes of research and development. But because each involved entity is only connected for a specific project, they are not considered to be a single entity,

Because of this, each company still remains legally distinct. There is usually a joint venture agreement which will govern the resources that are going to be pooled and the rights that each company or individual involved have. A lawyer would be needed to draft up these documents, as they can become quite complex. Each entity involved will need to know what they “own” once the joint venture is complete.

Joint ventures are very common ways to tackle mutually beneficial projects. However, they aren’t entities in and of themselves; rather, they are ways of making an arrangement between companies and between individuals. The entities involved are still going to file their taxes on their own and are not considered by the IRS to be a single entity.


Written by Maurice Mallory