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Joint Ventures are a very popular topic with real estate investors, maybe the most popular topic. We all talk about them. Sooner or later most of us get involved in Joint Ventures.
In a nutshell, the basic Joint Venture is two people getting together to acquire a piece of real estate. The details of your Joint Venture are contained in a contract known as a Joint Venture Agreement or JVA. A good Joint Venture Agreement is very detailed and tailored to the circumstances and requirements of the participants in the JVA. This blog post will cover some frequently asked questions about Joint Ventures, especially concerning disagreements among partners.
One major concern for all Joint Venture participants is, “how do we settle disputes”?
The JVA should deal with this topic in lots of detail. Sometimes investors partner with friends or family, which actually makes dispute resolution even more important—not less. A Joint Venture that goes sours can easily sour relationships, too.
Some questions that need to be asked include: How many partners? What is the role of each partner? What happens if one partner wants out or a new partner wants in on the existing Joint Venture? What type of real estate investing strategy are you using? What is the timeline for the investment? When will the JVA be reviewed and renewed? It’s not possible to get into all the possible disputes or the ways of handling them in this blog post. You really ought to consult with a lawyer in order to draft a document that protects your interests and those of your partner.
For those seeking a Joint Venture Agreement template, check out the digital Booster Pack for Creative Real Estate home study kit in our online shop.
The second most popular question is, “should I incorporate”? followed by, “how do I do a Joint Venture within a Corporation”?
That question is front and centre in the minds of real estate investors. Answering this question takes a bit of research and is ever so much an individual decision. There just isn’t a ‘one-size-fits-all’ answer to the question, “should I incorporate”? Consult with accountants and lawyers familiar with real estate investing.
If you decide to incorporate with another person(s), there are now two or more shareholders in your new Corporation. If you want to do Joint Ventures within the Corporation, you need a Unanimous Shareholders Agreement, often referred to as a ‘USA.’ If it were just two of you without a Corporation you would enter into a detailed, written Joint Venture Agreement.
Corporate lawyers will almost always suggest that you enter into a USA as part of incorporation, as it sets out the rules of how the Corporation will operate, make decisions, and distribute profit! Tailor that USA to your own circumstances and requirements. And, again, pay particular attention to that important question, “how do we settle disputes”?
The time to talk about settling Joint Venture disputes is when you don’t have any.
If you’re in a Joint Venture, or thinking about entering into one, then don’t delay. Get in touch with me today to book your appointment to discuss incorporation in Alberta and/or the details of your Unanimous Shareholders Agreement.
“Money Fight” image by Frits Ahlefeldt-Laurvig (http://hikingartist.com/) used under Creative Commons Attribution-NoDerivs 2.0.