Joint Venture
7. Protect Yourself
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 10 Aug 2015
- When entering any business arrangement with another person or business it is essential to consider how this will affect your personal liability if things go wrong.
- When you are drafting a joint venture agreement it will usually state that participants are severally liable in proportion to their interest in the joint venture. If you are only ‘severally liable’ this means that you are only liable to remedy the wrongdoings of you and your own business and not those of the other participants. Conversely you cannot hold another participant liable for debts that you incur in the name of the joint venture unless this is contained in the terms of the joint venture agreement. This element of liability refers to your liability to other joint venture participants.
- Your liability to the public is different. Generally your liability to the public will be joint and several and unlimited. This means that if a public claim arises because of your joint venture activities the claimant can seek recovery of any debts or compensation from:
- you;
- your business; or
- any other participants in the joint venture.
- This is regardless of whether your own business or another participating business caused the wrong that resulted in the claim for compensation.
- Whether liability will be limited to your business assets or will extend to your personal assets depends on how your own business is structured. Each different business structure provides different types of protection for personal assets. For more information on management of personal liability and protection of personal assets through different business structures see our topic on Starting a Business.
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