Understanding Joint Ventures: Who Takes On The Tasks In Your Business?

Joint ventures often look straightforward on paper: two (or more) parties form a new business to pursue a shared opportunity. In practice, many JVs succeed or fail based on a more basic question—who is actually doing the work.

Manufacturing, R&D, distribution, customer support, back-office administration, and compliance frequently sit with one of the owners rather than the JV itself. That can be efficient, but it also can introduce additional risk if you have not aligned your expectations, pricing and incentives.

Services provided by the JV parties: alignment matters as much as price

A JV that relies on owner-provided services should treat those services as core deal terms, not an afterthought. The goal is more than getting a “fair” price. Ultimately, you have to ensure that each party’s incentives support the same business plan. Misalignment can show up quickly. One partner may want to build enterprise value for a future sale, while the other may be more focused on steady service revenue over time.

Below are two common ways to structure these contributions.

Option 1: Contribution-in-kind

One approach is to treat services as part of a party’s capital contribution. This can work well when a partner’s know-how, facilities or operational platform is a key reason the JV exists.

Key issues to address include:

• Valuation: If services count as capital, the parties need a method to value them. They also need to confirm what is included and what is not.
• Performance standards: Define scope, timelines, quality metrics, reporting and who controls day-to-day priorities.
• Remedies for non-performance: If the services don’t show up as promised, the agreement should specify what happens. This may include replacement services, make-up contributions, dilution, damages, termination or other negotiated remedies.

The challenge is that “services as capital” can be harder to administer than cash, especially if performance is ongoing or difficult to measure.

Option 2: Create an ongoing service contract

Another common structure is for the JV to contract with one (or both) owners under a services agreement. Operationally, this can be simpler: the JV pays invoices and receives defined services, and the arrangement can be adjusted over time like a typical vendor relationship.

However, service contracts can create incentive problems if they become a primary economic benefit for one owner. For example, if a partner earns significant fees from supplying the JV, they may prefer long-term service revenue over strategies that maximize the JV’s exit value. As a result, the JV may become dependent on a partner’s platform, making it harder to replace that partner or renegotiate terms later.

How can you ensure that your venture benefits both parties?

To keep the relationship healthy, service contracts often benefit from clear SLAs, pricing terms, audit rights, termination rights, and transition assistance if the JV needs to change providers. When an owner provides services to the JV, the transaction is often a related-party transaction. Even if the parties trust each other, governance protections help prevent disputes and protect minority stakeholders.

Common guardrails include:

• Approval by disinterested decision-makers (for example, independent board members or non-conflicted managers)
• Disclosure requirements (pricing, margins, key assumptions)
• Benchmarking or “market” checks to support fairness
• Ongoing oversight through reporting and renewal approvals

These steps are not just about compliance. They can reduce resentment and keep the JV focused on performance rather than accusations of self-dealing.

Build a plan today that protects your venture’s operations and success

Joint ventures run on execution. If one or both owners will provide essential services, the JV documents should spell out how you will value, deliver and oversee those services. Everyone involved in the venture can protect their interests by addressing these operational details early and seeking guidance about the legal impact of your business decisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.