Joint ventures and partnerships

Strategic legal frameworks for stronger collaborations.

If embarking on a new business activity or project with a partner, it is essential to structure collaboration to maximise benefits for all parties involved.

A joint venture agreement or partnership agreement establishes clear guidelines, responsibilities and expectations - setting the foundation for a successful collaboration that advances shared business goals.

Our experienced team delivers practical guidance across industries, helping you navigate your rights and obligations to ensure your joint venture or partnership operates effectively and achieves its objectives.

What is a joint venture?

While Australian common law does not define “joint venture” explicitly, it typically refers to a business arrangement where two or more parties (often companies or entities) collaborate on a specific project or business activity. Each party pools resources, expertise and capital to achieve a common goal, while maintaining separate legal identities.

Joint ventures often require detailed negotiations and clear division of responsibilities, especially when directors from different companies work together under a contractual agreement.

Joint ventures can be either incorporated or unincorporated, with choice depending on business needs.

Incorporated joint ventures

This involves creating a separate legal entity solely for the project or activity. This entity can hold and sell assets, enter into contracts, sue and be sued independently from its members.

Benefits include legal separation from other businesses, which can reduce risk. However, incorporated joint ventures have additional obligations such as financial reporting and administrative compliance, which may be burdensome depending on the project size.

Unincorporated joint venture

Also called a contractual joint venture, this is formed through a contract between parties who agree to collaborate on a specific project without creating a separate legal entity.

Because it lacks a separate legal identity, it is vital that the joint venture agreement is carefully drafted. Poorly drafted agreements risk being interpreted as partnerships, with associated legal implications.

What is a partnership?

This is a relationship between two or more individuals or companies carrying out common business with the intention of making a profit.

Partnerships are governed by a partnership agreement and relevant legislation such as the Partnership Act 1891 (Qld), as well as common law principles.

Partners owe fiduciary duties to one another, which brings significant legal responsibilities. For this reason, partnership agreements must be drafted with care and independent legal advice is strongly recommended.

Differences between joint ventures, partnerships and incorporated and unincorporated joint ventures

● In an unincorporated joint venture, members hold their interests, liabilities and entitlements separately, whereas in a partnership, these are jointly held.
● Partnerships impose extensive fiduciary and legal duties on the partners, which joint ventures typically seek to avoid.
● Incorporated joint ventures create a separate legal entity, unlike partnerships and unincorporated joint ventures.

Unit trust joint ventures

Another method to structure a joint venture is through a private unit trust. This approach divides beneficiaries’ interests into units, allowing joint venture members to hold a proportional share.

It is crucial to use a private unit trust to avoid public trust obligations under the Corporations Act 2001 (Cth).

Because of the complexity involved, setting up a unit trust joint venture requires specialised legal advice to ensure compliance and proper structuring.

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