When two parties (individuals or companies) incorporate a company, that entity is known as joint venture company.The business of one party is transferred to the company and as consideration for such transfer, shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash. The above two parties subscribe to the shares of the joint venture company in agreed proportion, in cash, and start a new business. In India, the procedure of registering a joint venture company is the same as registering a new sole entity company.
A joint venture is a business enterprise under-taken by two or more persons or organizations to share the expense and profit of a particular business project. "Joint ventures are not business organizations in the sense of proprietorships, partner-ships or corporations," noted Charles P. Lickson in A Legal Guide for Small Business. "They are agreements between parties or firms for a particular purpose or venture. Their formation may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show. Other arrangements can be extremely complex, such as the consortium of major U.S. electronics firms to develop new microchips…. A joint venture is, in effect, a form ofpartnership that is limited to a particular purpose." Joint ventures have grown in popularity in recent years, despite the relatively high failure rate of such efforts for one reason or another. Creative small business owners have been able to use this business strategy to good advantage over the years, although the practice remains one primarily associated with larger corporations.
Most joint ventures are formed for the ultimate purpose of saving money. This is as true of small neighborhood stores that agree to advertise jointly in the weekly paper as it is of international oil companies that agree to work together for purposes of oil and gas exploration or extraction. Joint ventures are attractive because they enable companies to share both risks and costs.