There’s a difference between a merger and a joint venture. A merger involves two companies coming together to form one new company, meaning that the two former companies no longer exist in the end. A joint venture consists of the creation of a new, separate company. The two original companies remain in existence in the case of the latter.
Two companies may be thinking about coming together and forming a merger; however, they may want to test the waters first to see if it’s a good fit. A joint venture allows two companies to operate together in a limited scope, without being fully committed to proceeding forward as a single entity.
There are instances in which two companies merge. One of the businesses may decide that the partnership isn’t going to work out. It can be quite a legal ordeal to undo a merger. It can also be very disruptive to their business to do so as well. A joint venture can be temporary and short term; however, a merger is a permanent undertaking.
An example of a joint venture is if two law firms that are considering forming one company. They may work together on several cases to see if the relationship is mutually beneficial enough for them to proceed as a single business entity.
If you’re considering going into business with another Cincinnati company, you must understand the difference between a merger and joint venture. The two are entirely different from a legal perspective. The implications of setting up one type of Ohio business entity versus another can be significant. An attorney can explain the differences between these two types of arrangements and help you draft any necessary legal documents to protect your rights.