Joint Venture Agreements

In a contractual joint venture, each business keeps its own assets, employees and contracts, and a joint venture agreement ties them together. A joint venture entity is usually an LLC the businesses form and own, run under a company agreement, covered on our operating agreements and formation documents page.

Exclusivity needs care in both. A promise not to compete with the venture must meet Texas's reasonableness rules for non-competes, which apply between businesses too.

Under Texas law, two or more persons who associate to carry on a business for profit as owners create a partnership, whether or not they intend to and even if they call it a joint venture. Signs of a partnership include sharing profits, expressing an intent to be partners, sharing control, sharing losses or liability for claims, and contributing money or property. Sharing gross revenues doesn't by itself indicate a partnership.

A venture treated as a general partnership has two consequences the parties may not expect. The partners can be jointly and severally liable for its obligations. And each owes the others duties of loyalty and care, including a duty not to compete with the venture, which a partnership agreement can limit to some extent but can't eliminate. An LLC's company agreement, by contrast, may expand, restrict or eliminate fiduciary duties.

Our breach of fiduciary duty page explains those duties, and our partnership disputes page covers what happens when co-owners fall out.