Joint Venture PDF Print E-mail

A joint venture is similar to a partnership and there is little practical distinction between the two entities [seeĀ  Zeibak v. Nasser (1938) 12 Cal. 2d 1, 12, 82 P.2d 375] .

A joint venture is like a partnership in that its members associate as co-owners of a business enterprise, agreeing to share profits and losses. However, a joint venture is usually formed for a transaction or a series of transactions, thus being more limited in both scope and duration, while a partnership ordinarily engages in a continuing business for an indefinite or fixed period of time [ Rickless v. Temple (1970) 4 Cal. App. 3d 869, 893, 84 Cal. Rptr. 828] . This distinction is not ironclad as a partnership may be formed for a single business transaction and for a defined period of time [see Kaufman-Brown Potato Co. v. Long (9th Cir. 1950) 182 F.2d 594, 599] .

A joint venture, like a partnership, is formed under California law by an agreement between the parties, which may be oral or written, and may be implied from the acts as well as the statements of the participants [ Rickless v. Temple (1970) 4 Cal. App. 3d 869, 894, 84 Cal. Rptr. 828 ; Nelson v. Abraham (1947) 29 Cal. 2d 745, 749, 177 P.2d 931 ; see De Anza Enterprises v. Johnson (2002) 104 Cal. App. 4th 1307, 1314-1315, 128 Cal. Rptr. 2d 749 (litigation between joint venturers over buyout procedure set forth in written joint venture agreement)]. Whether a joint venture exists depends on the intention of the parties [ Rennick v. O.P.T.I.O.N. Care, Inc. (9th Cir. 1996) 77 F.3d 309, 317 ; April Enterprises, Inc. v. KTTV and Metromedia, Inc. (1983) 147 Cal. App. 3d 805, 819, 195 Cal. Rptr. 421 ; Universal Sales Corp. v. California Press Mfg. Co. (1942) 20 Cal. 2d 751, 704-765, 128 P. 2d 665] .

Ā There are three basic elements of a joint venture [ Orosco v. Sun-Diamond Corp. (1997) 51 Cal. App. 4th 1659, 1666, 60 Cal. Rptr. 2d 179 ; 580 Folsom Associates v. Prometheus Development Co. (1990) 223 Cal. App. 3d 1, 15-16, 272 Cal. Rptr. 227] :

  1. The members must have joint control over the venture (even though they may delegate it);
  2. They must share the profits of the undertaking; and
  3. The members must each have an ownership interest in the enterprise.

Some courts have not upheld the authority of one joint venturer to bind the venture, and to impose liability on the other joint venturers, when the venture's undertaking is limited in scope and it would be inequitable to do so [see Hayward's v. Nelson (1956) 143 Cal. App. 2d 807, 299 P.2d 1013] . Other courts, however, have made no such distinction and have applied the mutual agency theory of a partnership to bind joint venturers [see Smalley v. Baker (1968) 262 Cal. App. 2d 824, 69 Cal. Rptr. 521] .

Thus, for practical purposes, there is no significant distinction between a joint venture and a partnership, except, perhaps, for that given it by tradition.

Definition for Tax Purposes

A joint venture is defined for tax purposes as a joint transaction of two or more persons for the purpose of making a profit, without any ''actual corporate or partnership designation'' [ Tompkins v. Commissioner of Internal Revenue (1938) 97 F.2d 396, 398] . The difference between a joint venture and a partnership is that the former relates to a single transaction, while the latter involves a general and continuing business of a particular kind [ Bartholomew v. Commissioner of Internal Revenue (1951) 186 F.2d 315, 317] . However, because a joint venture is taxed as a partnership by both the federal and the state taxing authorities, there is no significant distinction between the two entities for tax purposes [I.R.C. Ā§Ā§ 761(a), 7701(a)(2); Treas. Reg. Ā§ 301.7701-3(a)].

 

What Our Client's Say

"For over 10 years, Michael has been my company and personal lawyer, helping us with everything from trademarks to disputes. His knowledge, skill and commitment to helping me grow my business has been invaluable."

Marshall Stuart
Stuart Cellars Winery

 

"Michael's pragmatic approach to working with our company has made navigating through our legal issues both efficient and cost effective."

Richard Brewster, President
Zuroma Restaurant Group, Inc.

 

"Michael has assisted us with a dispute with a competitor, shareholder meetings, corporate securities, and trademark and intellectual property issues. Sensitive to our goals, Michael is always easygoing and able to synthesize complex legal issues in a way that can be easily understood by those without a legal education."

Dorian Linkogle, President
Briar Rose Winery, Inc

home search