Best practices for construction joint ventures

By

Randi Wilson

and Julia Tell

Last Updated Apr 3, 2026

By

Randi Wilson

and Julia Tell

Construction projects often require many types of expertise and substantial financial resources to complete. Companies that form joint ventures (JVs) share risks and rewards while contributing their specialized knowledge and experience to the project’s success. Many industries use joint ventures, and this structure has numerous advantages in construction.

Joint ventures in construction offer general contractors an avenue to work on megaprojects like stadiums or civil projects, qualify for new types of business, or work in geographic areas outside their typical project territories.

The complexities of forming a joint venture — whether as a new separate business entity or a contractual partnership on a project — require carefully considering the ramifications and eagle-eyed project management to keep the collaboration aligned and functioning efficiently.

Structure of a joint venture

Two companies with complementary skillsets or resources can decide to form a joint venture on either a single project or an ongoing basis.

Although a joint venture is not the same as a legal partnership, the parties can agree to terms typical of a partnership, such as fiduciary duties to act in each other’s best interest. However, the JV can be merely a contractual arrangement that doesn’t rise to the legal standard of “partnership.”

The two basic ways to structure a joint venture are:

1. New separate legal entity

Companies can use any legal structure—LLC, corporation, or legal partnership—to form a JV, which can then enter into contracts, own assets and act as a legal entity.

There is a comprehensive governance structure, share allocation, and liability can be limited. With this structure, the JV can obtain financing, and shares can be distributed based on the contributions of each party within the JV.

Drawbacks can include more cumbersome reporting and administrative requirements, possible tax ramifications, and complex exit schemes should the parties disagree.

2. Contractual arrangement

A contractual JV is more flexible and easier to set up than a new legal enterprise. When forming a JV as a purely contractual agreement, parties retain ownership of their assets and are not liable for other parties' debts. However, there can be joint liability for contracts with third parties.

Contractual JVs are useful for shorter-term projects as they are easy to dissolve when the goal of the JV is achieved. However, the lack of a clear structure and the difficulty of raising external financing can be issues in this type of joint venture.

With either type of joint venture, the parties to the JV will have joint and several liabilities to the owner. This means that if any of the entities within the JV fails to meet obligations, the other parties are responsible for the delinquent partner’s share and the JV’s total commitment.

Benefits of joint ventures in construction

Because construction projects involve many components and varied capabilities, construction general contractors cooperate with other companies in many different forms. Joint ventures provide a way for companies to take on larger projects and more risk than they might otherwise be able to carry. Here are specific examples of how a joint venture might be an advantageous approach for construction projects:

Combining expertise

Every company has knowledge and experience, but partnering with a contractor with complementary strengths can allow a GC to take on new project types. For example, a GC with experience in commercial or public buildings may want to partner with a grading and paving company to construct an airport project that includes extensive roadways and runways. Combining the proficiencies of two companies can make more sense than hiring subcontractors for a major portion of the work.

Entering new markets

GCs wanting to expand into new geographic areas can form a joint venture with a local company with on-the-ground knowledge of the region's regulations, land features, and business environment. Likewise, a company performing projects exclusively in urban areas could expand into more rural areas by teaming up with a contractor experienced in the hurdles and project types typical of sparsely populated areas.

Expanded resources

Joint venture parties may combine employees, equipment, and management resources to perform work with a broader scope than participating companies could handle alone. Companies can share resources without making new investments in technology, staff, or necessary equipment that any entity lacks. By combining resources for a project, a JV can realize economies of scale.

Access to technology

One significant advantage for construction companies forming joint ventures is access to the construction platforms, reality capture, and integrated IT resources to complete complex projects more efficiently. As new technologies enter the market, not every company has the human and financial capital to invest in implementing digital tools and systems that can facilitate the construction of intricate designs and challenging projects.

Shared risks and profits

Large-scale projects involve financial and operational risks that may exceed one company's risk tolerance. JV risk-sharing mechanisms dilute those risks, enabling companies to tackle extensive civil, public, or commercial projects. Financial gains are also shared among the involved parties.

Financial investment

Allied parties in a joint venture provide capital to the project. Companies looking to extend their reach can benefit from a JV that allows them to win large-scale projects beyond their current financial capacities.

Flexibility

Joint ventures allow construction companies to form temporary alliances. An end date, completion milestone or mutual agreement sets the timeframe for dissolving a joint venture. Rather than considering a merger or acquisition, participants in a JV retain their company identity and operations and can continue the business when parties agree to end the joint venture.

Steps to set up a joint venture

Clearly setting out structures, obligations and goals for a joint venture can help avoid later disputes. Here are the steps involved in creating a joint venture agreement:

1. Establish the entities involved.

Choosing appropriate JV partners with complementary capabilities and resources is similar to vetting subcontractors. However, it could include a more thorough investigation of legal and risk histories, company culture compatibility, and financial vetting.

Larger construction companies should also consider identifying the regional office or subsidiary that will become a party to the JV.

2. Define the objectives.

Concretize the goal of the JV, whether it be one project or an ongoing alliance for a specific type of work. Define the benefits to involved organizations to provide a mission statement and manage expectations.

3. Determine resources to be shared.

Identify what each participant brings to the JV, including capital, equipment, technology, labor, skills, experience in the particular market, or other resources.

4. Assess distribution of profits, losses, and risk.

Joint ventures may have asymmetrical participation by involved companies, and delineating how profits and risks will be shared to reflect that can prevent misunderstandings. One company may perform a more significant percentage of the work or contribute more capital to the project, and a mutual agreement on the allocation of profits is foundational to a functional alliance.

5. Identify responsibilities and rights.

Clarifying each company's responsibility and the structure of the joint venture will provide a roadmap for the work ahead. Defining the JV's limits and the parties' duties can help staff align with the workflow needed to complete the JV's goals.

6. Create processes for dispute resolution and governance.

Determining the process to resolve potential disputes and organizing the governance structure will outline the JV’s rules of operation and decision-making structure.

7. Plan termination ahead.

Defining the expected length of the joint venture or the process for termination allows for an orderly dissolution of the JV when the agreed-upon time approaches.

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Best practices for construction joint ventures

Any collaboration between companies has challenges, and the cooperative nature of joint ventures requires participants to agree on the details and the overall goals of the JV.

Align goals clearly.

A common reason for JV failure is a mismatch of objectives among the parties. Establishing clear and detailed goals for the JV at the outset can provide documentation to revisit if disputes arise.

Pay attention to company cultures.

A well-functioning JV requires working more closely with other companies with differing cultures.

Finding a shared work style and welcoming input from both sets of workers to contribute to mutual goals will help a JV succeed. Encouraging open communication and establishing regular check-ins can facilitate better collaboration among teams despite differences in workplace norms.

Build relationships.

Relationships are central to construction success. In JVs, investing in building relationships among key staff members throughout the duration can help mitigate disagreements and facilitate working through issues together.

Because companies come to a JV with differing expertise and backgrounds, it may take effort to bridge barriers and forge productive relationships.

Share technology and develop work procedures.

Technology enables the communication necessary to prevent mistakes in construction. In joint ventures, the closer working relationships of two or more teams require shared technology, access to knowledge and up-to-date project information. In addition, personnel should create shared procedures and routines to carry out the work toward their joint mission.

Achieve shared objectives through a joint venture.

Although the overall agreement for a joint venture may appear aligned, the details of the original documents will help drive the successful alliance toward the shared objectives.

Adjusting to sometimes disparate cultures can be challenging for construction professionals in all roles within a joint venture. However, the benefits of expanding project scope and size through strategic joint ventures can help general contractors realize noteworthy projects that propel further company success.

Written by

Randi Wilson

Procore

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Julia Tell

Contributing Writer | Procore Technologies

72 articles

Julia Tell is a freelance writer covering education, construction, healthcare, and digital transformation. She holds a Ph.D. in Media & Communications and has written for publications including Business Insider, GoodRx, and EdSurge, as well as nonprofits, international businesses, and educational institutions.

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