A joint venture structure is a structure whereby the capital member and the operating member form a new limited liability company. The parties then enter into an operating agreement (also referred to herein as the joint venture agreement) for such limited liability company, which sets forth the parties’ agreement as to their respective rights regarding
- Distributions of profits.
- Management rights and control over decisions of the limited liability company.
- Exit rights and transfer rights with respect to the sale or transfer of membership interests in the joint venture.
- All other applicable rights and remedies. See Limited Liability Company Operating Agreement for a sample joint venture agreement.
Certain key issues to consider before getting into a JV
- Land and location feasibility.
- Best use study.
- Current and future infrastructure plans in the said micro-market by the Government.
- Legal due diligence.
- Developer / Land owner credentials.
- Choosing the right joint venture partner.
- Land regulations.
- Government approval responsibilities.
- Capital contributions.
- Whether one member or both members are entitled to make capital calls from the other members.
- The mechanics of notice and timing for making additional capital contributions.
- Various fees, such as leasing fee, financing fee, acquisition/disposition fee, asset management fee and responsibilities to pay the same.