General partnership or limited partnership Key features Public filing requirements exist, in particular in relation to accounts, but these are not as extensive as for limited companies.Ĥ.The roles and responsibilities of LLP members are not as familiar as the defined roles of directors and shareholders in limited companies.Separate legal identity – benefits from a clear corporate identity both internally, in terms of a dedicated management and workforce, and to the outside world.Legislative framework for LLPs is not as comprehensive as for limited companies allowing greater flexibility (e.g., strict rules on distributions/dividends do not apply).Increasingly common vehicle for commercial ventures (no longer used solely for professional partnerships).The LLP itself is not taxed on its profits (provided it is carrying on a trade or business with a view to profit). Treated as a partnership for tax purposes – fiscal transparency means that each JV party will be taxed directly on its share of the profits and losses of the venture.Limited liability partnership Key features Potentially difficult to raise external loan finance as not a legal entity and does not own assets – it cannot grant a floating charge as security for financing.ģ.Risk of creating a partnership, giving rise to unlimited joint and several liability where each of the JV parties is liable for all losses of the venture.Lacks a separate legal identity – can suffer from a lack of clear structure and identity which may affect both internal operation and dealings with third parties.Each JV party will be taxed directly on its share of the profits and losses of the venture.JV party is not normally liable for the debts of the other JV party but they may share liability on specific contracts with third parties.JV parties retain ownership of their own assets. Useful for strategic alliances or short term, single-goal ventures. Flexible option – can be quick to set up and easy to dismantle as no separate entity is created.Limited liability may be undermined in practice by guarantees and security required to support external financing and third party contracts.Reporting and compliance requirements bring increased administration and public disclosure of information.Comprehensive legislative framework can restrict flexibility.This lack of tax transparency is, however, not always a disadvantage in practice and the tax position will depend on the nature of the JV parties themselves (e.g., where the JV parties are also limited companies, dividends received should be tax free). Potential for double taxation – tax will be applied at the JV company level and possibly again on the JV parties directly when they take profits out of the JV company or realise their investment in it.Realising an interest by way of a sale of shares will not disrupt the legal ownership of the underlying business.Permits employee share incentive schemes.Tailored share rights can reflect the size, contributions and motivations of the JV parties.Comprehensive legislative framework supports the contractual arrangements between the JV parties.Liability is limited to the amount each party contributes by way of share capital.Can own its own assets, sue and be sued and enter into contracts in its own right.Familiar, universally recognised structure with a clear corporate identity and established corporate governance regime.Below we look at the most commonly used structures, their key features and the advantages and disadvantages associated with each. There is no distinct legal form for a joint venture in the UK, allowing each joint venture relationship to take the form which is best suited to its own circumstances and specific purpose. The potential benefits may be easy for those involved to see but will be difficult to achieve without a clear-cut strategy, mutually understood objectives, thorough documentation and plenty of commitment from all involved. It may wish to share the costs and risks associated with developing new markets or technologies. It may be looking to tap into a partner’s greater or more specialised expertise or resources – financial, technical, marketing or employee-related. It may wish to expand, develop new products or markets or grow returns from existing ones. There are many reasons why a business may seek a joint venture partner. Joint ventures cover a wide range of collaborative business arrangements which involve differing degrees of integration and which may be for a fixed or indefinite duration. A joint venture is a commercial arrangement between two or more participants who agree to co-operate to achieve a particular objective.
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