Difference between equity joint venture and contractual joint venture
Answers
An equity joint venture (EJV) is an agreement between two companies to enter into a separate business venture together.
The business structure for an EJV is a separate limited liability company (LLC). This shields each partner and business from liability.
Each partner participates in gains and losses according to the percentage equity ownership they have in the joint venture.
The purpose of the EJV is to diversify risk, provide capital-raising opportunities, reduce barriers to entry and create economies of scale while establishing a definitive time the joint venture exists.
whereas Contractual joint venture(CJV) is an agreement in which two parties come together for a particular business project and sign a contract outlining the terms under which they will work together.
The parties do not set up a separate legal entity for the project but work together in partnership.
sharing the profits or losses of the venture on the terms set out in the joint venture contract.
The contractual joint venture is a different legal arrangement from the incorporated or equity joint venture in which two or more parties set up a separate legal entity to act as the vehicle for carrying out the project.
Participants in a contractual joint venture normally would set out the objectives of the joint venture in the agreement.
Answer:
Joint venture refers to the arrangement which includes more than one party.
Here all the parties concerns in a specific task which are accomplished by pool their resources for purpose.
Joint venture can be divided into three types- separate joint venture, business partners and limited cooperation.
Advantage of joint venture is it helps in growing business fast, increment of productivity.
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