What Are the Different Types of Joint Venture?

Among the many joint venture types are those formed as temporary joint ventures, nonprofit joint ventures, international joint ventures and commercial joint ventures. Equity and construction joint ventures are also types commonly referred to in the business world, particularly when referring to large commercial investments. Governments also sometimes form a joint venture to complete projects or investments in foreign countries.

Often, a joint venture is simply referred to as a JV. These business arrangements are business vehicles formed for the express purpose of two or more legal business entities working together toward one or more shared objectives. In order to achieve these objectives, businesses agree to jointly share in the risks, losses and profits collected during the course of their business relationship. As such, JVs are legally formed as a separate entity and are bound to perform according to all governing laws in the region where they are formed. In the case of international joint ventures, partnerships are further governed by international business laws.

Some JVs are formed for long-term or even permanent business dealings, but many are created for more short-term use. Known as a temporary joint venture, such partnerships are clearly understood to exist in order to accomplish an objective within a short period of time. After the objective is completed, the JV is dissolved.

While many JV types are dedicated to increasing profits, not all are. For instance, a nonprofit JV is generally formed between businesses to benefit a certain demographic or the public-at-large. Examples of this type of JV are hospital joint ventures formed to offer free or low-cost health care education and services to indigent communities.

Commercial joint ventures are often formed for the purpose of increasing visibility and profits. Many are also referred to as equity joint ventures as participating companies share in the equity assumed or gained during the course of the partnership. When these relationships are not profitable, participating businesses and their shareholders also share in the JV’s losses.

A joint venture between foreign business entities may be formed for profit or for purely altruistic objectives. Often, international joint ventures are also formed to provide foreign entities access to international trade. Governments and large nonprofit entities such as hospitals and foreign aid organizations often form an international joint venture to offer education, health, humanitarian and rebuilding assistance to countries devastated by war or natural disaster.