"Disadvantages of Joint Venture"

                             When two or more persons join together to carry out a specific business venture and share the profits on an agreed basis it is called a 'joint venture'. Each one of them who join as a party to the joint venture is called 'Co-Venturer'. No firm name is normally used for the joint venture business because its duration is limited to a short period. During this period, the co-ventures are free to carry on their own business as usual, unless agreed otherwise. The business relationship amongst the co-venturer comes to an end as soon as the venture is completed. Thus, a joint venture is some kind of a temporary partnership between tow or more persons who have agreed to jointly carry out specific venture. The joint ventures are quite common in construction business, consignment, sale and purchase of property, underwriting of shares and debentures, etc. For example, A and B agreed to construct a college building for which they pooled their resources and skill. A provided Rs. 6 lakh and B Rs. 4 lakh as capital. They completed the building and shared the profits in the ration of their contributions to capital. In this example, joining hands by A and B to construct a building is a joint venture. A and B are co-ventures. They will share the profits in the ration of 6 and 6 (same as the ratio of their capitals).

"Disadvantages of a Joint Venture"

• Shared profit :–

             

                  Since you share assets, you also share the profit. The profit of both parties usually depends on the size of the share to the venture or may be defined on the agreement.

• Diminished control over some important matters :- 

                   Operational control and decision making are sometimes compromised in joint ventures. Since there is an agreement that divides which one will take over a particular operation, the other may not be satisfied with how the things are worked out with another. This leads us to another disadvantage of a joint venture...

• Undesired outcome of the quality of the product or project :– 

                   Since one party may not have control on the supervision of the production or the execution of one part of the system, this can happen. This often leads to disputes and lawsuits. To avoid this, both parties agree on specific details about the whole operation process.

• Uncontrolled or un-monitored increase in the operating cost :– 

                  Again, defined control over the operation may lead to this disadvantage. It is important therefore to make sure that all things are clarified on the paper before singing in the joint venture agreement.

  

                    Making money by entering a joint venture is easy provided that you know exactly what you are doing. With these advantages and disadvantages presented, you are clearly aware of the things that await you.