The joint venture is a vehicle for the development of a business opportunity by two or more entities acting together, and will exist if the parties have: (1) a community of interest in the venture, (2) an agreement to share profits; (3) an agreement to share losses, and (4) a mutual right of control or management of the venture. A joint venture may be structured as a corporation, partnership, limited liability company (“LLC”), trust, contractual arrangement, or any combination of such entities and arrangements. Structure decisions for a particular joint venture will be driven by the venturers’ tax situation, accounting goals, business objectives and financial needs, as well as the venturers’ planned capital and other contributions to the venture, and antitrust and other regulatory considerations. Irrespective of the structure chosen, however, certain elements are typically considered in connection with structuring every joint venture.

Because a joint venture is commonly thought of as a limited duration general partnership formed for a specific business activity, the owners of a joint venture are sometimes referred to herein as “partners” or “venturers,” and the joint venture as the “entity,” “partnership” or “venture,” in each case irrespective of the particular form of entity or other structure selected for the joint venture. Today the LLC is typically the entity of choice for the formation of a joint venture because, as discussed below, it offers structuring flexibility and limited owner liability for joint venture activities under both the Texas Business Organizations Code (“TBOC”), which now governs all LLCs formed under Texas law, and the Delaware Limited Liability Company Act (the “DLLCA”)...

Originally published for the THE UNIVERSITY OF TEXAS SCHOOL OF LAW 10TH ANNUAL MERGERS AND ACQUISITIONS INSTITUTE IN DALLAS, TX • OCTOBER 16, 2014.