Understanding Equity Joint Ventures in Australia
The real estate market in Australia is getting back on its feet after being in a slump for a long
time. No small part to the World Bank crisis seemed to affect with backlash of greater deal than
this side of the planet. The results can be appreciated with the tight conditions that push
entrepreneurs to seek joint ventures for new businesses. To many, a financial team-up sounds like a
hassle, but when properly managed, can be rewarding. Aside from the bank's onerous restrictions, it
is best to attract capital rather than to wait for it.
- A joint venture is not everyone’s first option. Working alone will always be the dream for people who seek full creative control of their ideas.
- It also offers a wide range of motion when it comes to decisions. A partnership means the creation of boundaries. There will be a constant search to please everyone on board with agreements and compromises.
- Nonetheless, it can be a thoughtful experience. An experience where you get to learn from your peers, or from people with more experience than you.
What are Equity Joint Ventures and how do They Work?
A joint venture is a legal business entity created by various partners. It is characterised by the
shared ownership of each one of the participants. For the most part, these associations are defined
by the amount of money put in place by each partner. By those terms, each entrepreneur gets to share
profits, risks, and governance. People choose to pursue joint venture equity for various reasons.
- A joint venture allows them to gain access to and knowledge about a new market.
- It also enables them to gain leverage with scaled efficiencies provided by combined assets and operations.
- Sharing ownership also allows the risk burden to be shared in a major investment project.
- Finally, it can grant access to a new set of skills of their particular interests.
Formal joint ventures between established companies is recognized as incorporated. It possesses the
acronym “INC” ("incorporated") at the end of the new legal entity. In the oil and gas industry, high
profile businesses are treated as unincorporated. This includes joint ventures that are managed like
any corporate entity. For regular people, when two or more pursue the formation of a partnership, it
can be with different purposes. By definition, the goal to join all partners is a joint venture,
where every participant is a co-venturer.
Features and Benefits of a Joint Venture Partnership
Defining the basic components of a joint venture is the best way to notice its benefits. Let’s take a
- Joint Ventures are the best way to learn the fine art of Contributions: To fund
your idea for your business venture, you will need to seek partners with money. This will
require of you necessary skills to set the ground rules of the partnership. You will also need
to be able to handle agreements when it comes to profits and giving credits to the person behind
- Managing Responsibilities: With each of your partners, you will need to agree
on the responsibilities they will have. Even if your capital partners don't want to deal with
your day-to-day struggles, they must be available to deal with money related issues when
necessary. This applies to all participants that will be working on the floor with you.
- Devising a Plan for the future: You and your partners need foresight to know
what the business venture plan is. For example, if you are buying assets, you need to the
determine duration for which they will remain in the partnership. Setting goals with timetables
is much more realistic than setting goals on profits.
- Set the Ground Rules for an understanding: By definition, plans need to have a
flexible point to pursue a goal more efficiently. However, no partner should need to change the
strategy of the business venture on a dare. Joint ventures are often a preferred vehicle to make
a profit out of real estate properties. If the plan of the partners is to stick with ownership
and rent out of their assets over a defined period, that should be the plan to the very end.
- Be willing to risks and win and to experience losses: There is a lot to gain
when equity joint ventures go right. But there is also plenty of guilt to share around when
things go wrong. Each participant needs to have a mindset that profits is not necessarily
'everything'. Sometimes things don't go the way we want them to. We just have to suck it up and
take the losses.
Are you Eligible For an Equity Joint Venture?
Equity Joint Ventures can’t offer guarantees of success.
- To be successful in it, you need starting capital.
- Your ability to find funders is what determines your eligibility
- After that, you must approach equity joint ventures with a clear plan
- Your plan should include end goals and your ideal time frames
- A strategy is also needed. There is lots to gain with forming a joint ownership of existing properties, that follows the classic 'buy and hold' investment.
- If you have the capital for it, you can also pursue a build and sell strategy that runs a little longer