Wednesday, March 30, 2011

Joint Venture Company formation in Dubai


According to the article 56 of the UAE Federal Law No 8, Joint venture is a way of company formation UAE that includes two or more partners for carrying out a single or multiple businesses by one of the partners in his own personal name. A joint venture is a contractual agreement between a foreign party and a local party licensed to operate in the desired commercial activity. The local equity participation in the joint venture must be at least 51 percent, but the profit and loss distribution can be prescribed.

There is no requirement for a license of the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who partially owns the joint venture. He also bears all liability. In practice, joint ventures are seen as offering a suitable structure and environment for companies that work together on specific projects.
A joint venture is an effective way to broaden your customer base for an affordable investment. Joint venture allows two or more companies to benefit from one another, in terms of customers, sales and profits.

Despite the popularity of JV partnerships, many business owners are still unsure of what a joint venture partnership looks like. This article will discuss about the JV partnership in detail.
Choose the right partner for your joint venture

Related Companies come together and form joint ventures if they offer related but different products or services. It is very important to find a company that caters similar customer base so that you can build your product together without competing with each other. Consider the industry you are in, and then find other opportunities within the industry that offer products or services that are totally vary from the ones you offer. Such a company will be ideal for a joint venture.


An agreement based on contract

Once you have decided upon a JV partner to work with, it is important to design a contractual agreement that will unite both companies to the terms and conditions of the partnership. Make sure the terms are clearly mentioned and defined, including the duration of time that the partnership will remain in existence. It should also elaborate on the sharing of the profits. Both parties should sign the agreement and save a copy for their records.

Goal of the JV

JV partners usually share a common goal for their partnership that involves tapping of customers to promote sales. The goals of the partnership should be the same and each party should have a thorough knowledge and understanding of how their individual activities and plans contribute to the goal of the partnership.

Shared Profits and common Management
In most cases, a joint venture will assure shared profits and individual control over the partnership. To reach this decision of sharing, it is important to have accurate accounting practices in the JV Company to account for the profits achieved through the joint venture. The contract should also state the responsibilities of each partner in managing the partnership company. Usually these responsibilities are shared equally among both the parties. With a common goal, it is much easier to track the success of the partnership through the shared profits and losses and accounts.

A joint venture can have many beneficial aspects based on what the partners want to achieve. However, most JV's will consist of these common components if they are to be fair and successful for all businesses and partners involved. If you are planning for an offshore joint venture you may need an experienced consultant’s help whether it is to chose your JV partner, or set up a JV company or the accounts maintenance and auditing. UAE is one of the most popular destinations for joint venture companies and especially Dubai has a lot of facilities that make it suitable for Joint venture company formation. There are many professional business consultants who can help you with the whole process of joint venture company formation in Dubai.

2 comments:

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