Small business concerns often form a joint venture (JV) to create opportunities to pool resources, share risks, and leverage complementary strengths to win government contracts. This post will provide a high level overview of creating a joint venture tailored for government contractors.
Understanding Joint Ventures
A joint venture is a business arrangement where two or more parties agree to combine their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In the context of government contracting, a JV can enable smaller contractors to collaborate and compete for contracts that would be out of reach individually.
1. Evaluate Compatibility and Goals
Before jumping into a JV, the businesses involved should conduct an evaluation on compliance, compatibility, expectations, and capabilities. This includes agreement on the venture’s purpose, the resources each party will contribute, and the mechanism for decision-making and dispute resolution.
2. Conduct Due Diligence
The parties forming the JV should conduct thorough due diligence on one another. This process involves assessing each partner’s financial health, operational capabilities, compliance with relevant regulations, and past performance on government contracts and projects in general. Due diligence helps mitigate risks and ensures that all partners bring valuable assets and a clean slate to the table.
3. Decide on Corporate Structure for the Joint Venture
The parties should come to an understanding on what corporate structure to choose for the JV. For government contracting, forming a JV as a separate legal entity is often advantageous. This is done by creating a new corporation, a partnership, or a limited liability company (LLC). Each structure offers different benefits and considerations regarding liability, taxation, and management.
4. Draft the Joint Venture Agreement
The JV agreement is the key document outlining the relationship between the parties. This document should detail the contribution of each party, governance structure, profit and loss distribution, roles and responsibilities, duration of the JV, and procedures for handling disputes and dissolution. For government contractors, the agreement must also comply with the Small Business Administration (SBA) requirements, including regulations around size standards and performance of work.
5. Register and Certify
Once a corporate structure is set and the JV Agreement is in place, the JV will need to register the venture with the appropriate state and federal entities. This includes obtaining an Employer Identification Number (EIN) from the IRS. If your JV is aiming for contracts set aside for small businesses, women-owned, veteran-owned, or disadvantaged businesses, obtaining the relevant certifications from the SBA is necessary.
6. Seek Opportunities and Bid
With the JV officially formed and registered, you can begin identifying government contracting opportunities that align with your JV’s capabilities and goals. Use the System for Award Management (SAM) at https://sam.gov/ and other resources to find relevant solicitations. When bidding, ensure that your proposals highlight the combined strengths and resources of the JV partners.
LET US HELP
This post is providing a high level overview of forming joint ventures is not to be taken as comprehensive overview. There are many more nuances and specifics, and you should have an experienced attorney assist you. Kader Law can help. If you’re interested, feel free to contact us.
This post is not legal advice, and does not establish any attorney client privilege between Law Office of K.S. Kader, PLLC and you, the reader. The content of this post was assisted by generative artificial intelligence solutions.