A joint venture is an entity formed by two or more businesses in order to pursue a specific purpose for a specified period of time. A partnership differs from a joint venture as the former lasts indefinitely and its purpose may change.
A joint venture (or JV) can consist of sole proprietors, corporations, partnerships or any combination of these entities. Such ventures often bring together two areas of expertise to be applied to a single objective. Therefore, JVs allow the participating entities to capitalize on that combined expertise for a specified time period. JVs may also consist of entities that are, typically, rivals in the same market that may join forces for a commercial activity that they are unable to pursue alone (typically due to size, resources or expertise).
Insurance policies generally do not cover a JV unless the JV’s name is shown on the policy. There is no automatic coverage for a business that begins a joint venture during a policy term. The oversight could result in the joint venture suffering a loss that isn’t covered by insurance.
Contact The Flanders Group to discuss your possible coverage needs which may include general liability, automobile liability and, if the joint venture has employees, workers compensation insurance. It is also important to determine if the joint venture will need insurance to continue after the JV ceases to exist. While JVs can be extremely beneficial to all participants, they also have the potential for legal and operating problems that are unforeseen. JVs often involve complex contracts and non-disclosure agreements.