What defines a joint venture (JV)?

A joint venture (JV) is characterized by the establishment of a new corporate entity that is formed by two or more parent companies, which contribute resources and share in the profits and risks of the venture. This collaboration typically involves a specific project or business activity and allows the involved parties to combine their assets, expertise, and market presence to achieve common goals. The creation of this separate entity distinguishes a JV from other forms of collaboration, such as mere agreements to collaborate on projects or temporary partnerships. In addition, the joint venture operates independently of the parent companies, although they retain some degree of control depending on the ownership structure. This formation allows for innovation and strategic advantages in competitive markets.