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Real Estate Joint Ventures
Real estate joint ventures play a crucial role in the growth and success in this sector. A joint venture is a business agreement between two more parties who have agreed to share their resources and effort to achieve a goal. Each partner is associated with a specific task. Joint ventures are sometimes initiated by people who experts at something but not everything. He would want to bring some more people with the expertise that are requires and lacking to complete the project.
Members of the joint ventures
There are two main parties in a joint venture. One party provides the capital and the other has the operating members. The operating members are responsible for managing the day to day tasks. The operating members are highly professional and experienced. The members of the capital group are the investors who provide resources for the project. In joint ventures each member is equally responsible for the loss, profit, costs and prices.
Joint venture agreements
The operating members and the capital members come up with common terms that are filed into an official contract. The agreement enlists the details of the joint venture. The distribution of the profits and losses are clearly mentioned in the contract.
Distribution of profit
The profit distribution is not equal for everyone. It might depend on the contribution of the members. Some parties receive more and the others less. It is also possible that the passive members may not be compensated as well.
Contribution of capital
In a joint venture, a certain amount of capital is expected from each member to reach the total amount of investment and to cover all expenses.
Exiting a joint venture
It is better for both parties to come up with some dissolution on their own without involving the legal teams. Legal processes cost a lot. It is beneficial for all the members to settle the dissolution on their own. The agreement should be including all the events that will lead to premature dissolution of the joint venture.
Advantages of joint venture
There are many advantages of entering a joint venture. People who opt for joint ventures have the following things in their mind.
Complements
In joint ventures, experts of different fields are brought together on the same platform. Expert financial advisors and the capital providers keep the economy of the project stable. The experienced operational members put time and effort to manage the project efficiently.
Encouragements
Successful joint ventures generally generate a lot. It is a great encouragement for all the participants that they are going to get a lot on the successful completion of certain steps.
Effective way of entering a joint venture
It is ideal for the initiator of the joint venture to establish a separate company to carry out the project of the joint venture. It is beneficial in many ways. The team in the new company will be able too completely focus on the project without any other tasks to complete. Along with this if the project nears failure, the rest of the assets of the are secure. Joint ventures that are done to acquire a few thousand bucks do not require such efforts, but larger projects do require a new company setup.
Limited liability company
Generally, the operating and the capital members set up a limited liability company. However not all real estate joint ventures are limited to an LLC. Corporations, partnerships and other business arrangements can also be used to set up a joint venture. The structure of the joint venture dictates the exact relationship between the operating member and the capital providers.