Difference Between Joint Venture & Multi Member LLC

About 3.8 million LLCs are registered worldwide.
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Sometimes people or companies with related or compatible businesses wish to join together to conduct a shared business opportunity. For example, a small local bakery and a local coffee shop may wish to join forces to sell coffee and pastries at a local mall kiosk. Forming a joint venture or a limited liability company, or LLC, are two ways for the businesses to accomplish this goal.

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Multi-Member LLC Defined

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A limited liability company is a form of business organization recognized by all states. Owners are called members. The LLC can consist of one or multiple members and can be operated either by its members or by managers. A member's liability is limited to the member's initial investment in the LLC. An LLC is usually subject to the Uniform Limited Liability Company Act as enacted by each state.

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Joint Venture Defined

A joint venture is a partnership between two or more individuals or businesses for the purpose of making a profit. Each partner in the joint venture contributes assets, receives profits and assumes the risks and liabilities associated with the joint venture. Joint ventures are subject to partnership law, contract law and laws governing commercial transactions. A joint venture can consist of people or business entities.

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Issues of Liability

An owner's exposure to personal liability is an important consideration in deciding on a form of business.
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A multi-member LLC and joint venture share the characteristic of multiple people working together toward one goal. One important distinction between a multiple-member LLC and a joint venture, however, is personal liability. A joint venture is a partnership, and partners are personally liable for partnership debts. An LLC is a limited liability entity, and its owners are not personally liable for the obligations of the LLC. The partners of a joint venture can become an LLC, if they wish. While the LLC is liable for the joint venture's obligations, the members of the LLC are not.

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Written Agreement

The partners in a joint venture, or members of an LLC, need to reach an agreement on the operation of the business. An operating agreement is the document that outlines the agreement of the members of an LLC, while a joint venture agreement outlines the partners' agreement. A written agreement is not usually required, but it helps protect the interests of all parties. Consultation with an attorney may be necessary to ensure that all matters are properly addressed in the operating agreement.

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