Joint Venture foundation for further business growth

AquamanAquaman Posts: 1subscriber Member
Hey everybody, 

I own a sales and consulting agency company for water and waste water applications. 
On the one hand we earn commissions through consulting for manufacturers and endcustomers. On the other hand - for certain projects - we combine products of different manufacturers, make the design work and sell the whole package as a system solution.  

The strategy of the company in the long term (5 years or more) is to add more and more value to the system solution sales by:
1. Developing own products and finding contracting firms for the manufacturing 
2. Becoming shareholder of good manufacturers and products we use in our system solutions 

I want to make the first step in 2019 and therefore I am looking into founding a Joint venture company with a service/manufacturing company that I know for a long time. We want to found a new joint venture company together (50/50) to manufacture a certain product. With the foundation of the JV I have several questions but the most important is where to found the company. He is located in Mexico and I am in the US. 

His role in the JV will be to manufacturer the products  in Mexico or at temporary locations in the US and do installations and project supervisions. My task will be to design and sell the system solutions. The JV will be selling especially in the US. 

In which country should we found the JV and for what reasons? Is there maybe a better alternative to a JV?

Thanks a lot for any advice 

Comments

  • cristianicristiani San Diego, CAPosts: 5subscriber Member
    Hi @Aquaman I've had some experience on this topic. Depending on what your specific needs are there's several scenarios. Quick disclaimer, this is not legal advice nor is it tax advice. Mostly own experience and business opinion.

    Joint Ventures per se are agreements and you can sign one governed by US Laws or one governed by Mexican Law. In Mexico business law is Federal instead of by State. Thats one way to get your feet wet, but make sure you cover all bases such as who's responsible for taxes and how profits and/or losses will be allocated. 

    On the other hand you can establish an LLC or a Corporation. In Mexico for manufacturing purposes a Mexican corp can apply under certain requirements for something called IMMEX program (also referred to as Maquiladora) which provides some tax relief when the goods are manufactured in Mexico to be sent to the US. Check regulation on components and export/import. As the US partner just remember to check with your accountants the tax implications if whatever it is you end up setting up. I've seen many controversies due to having one party double or even triple taxed at the end, thus generating legal battles that can be avoided with proper planning.

    One more thing to review is the UN Convention on International Sale of Goods and see if it applies to your specific case if products are going to be sold cross-border. Both countries are a party and the convention provides with a common set of rules to govern contracts. 

    Finally, investing in a good international attorney and accounting services is key. Ask lots of questions!
Sign In or Register to comment.