A U.S. Joint venture is a business arrangement where two or more separate companies collaborate to undertake a specific project or business activity, sharing resources, risks, and profits, while maintaining their individual corporate identities.
It is typically a temporary partnership with defined goals, where each participant contributes expertise, funding, or assets, and agrees to share the risks and rewards of the collaborative enterprise.
Joint ventures can be structured as a separate legal entity or operate through a contractual agreement between the participating companies. It can take the form of a corporation, an LLC, or a partnership.
A foreign business may enter into a joint venture agreement with a U.S. business. The following vehicles can be used by Foreign Venturers when forming a Joint Venture:
LLCs/Partnerships: A Joint Venture can be organised into LLCs or Partnerships. Here, the members are not personally liable for the liabilities of the LLC/ partnership. There are no restrictions on the types of owners – they can be natural persons or any type of entity. Additionally, governance, economics, and risk sharing can be tailored to the Venture’s needs.
Here, the joint venture’s income tax treatment may be governed by partnership laws. If an entity joint venture is taxed as a partnership, the taxes will pass through the entity joint venture to the foreign joint venture party, and the foreign joint venture party becomes liable for the taxes.
Here, the foreign joint venture party may also be subject to an additional 30% branch profits tax (as of 2025) on the corporation’s dividend equivalent amount. This is because when a foreign corporation is a member of a U.S. limited liability company (LLC), the LLC’s activities constitute a branch of the foreign corporation, triggering branch profits tax considerations.
Corporations: Corporations are another way of incorporating a Joint Venture. Here the independent legal entity in the form of corporation is separate from its owners. This separation gives the owners (aka shareholders) protection from personal liability.
By electing as a US corporation, only the US corporation may be subject to U.S. corporate income tax on all profits generated within the United States, currently at a standard rate of 21% (2025). Dividends paid by the corporation to its foreign joint venture parties are subject to a withholding tax of 30% (2025), unless otherwise reduced under the applicable treaty. The US Corporation withholds this withholding tax on foreign shareholders and remits it to the Internal Revenue Service (IRS).
Process of establishment of a Joint Venture:
A Joint Venture entity is created by filing a formation document with the Secretary of State in its jurisdiction of formation. In addition, Venturers enter into a Joint Venture Agreement for such entity to govern their relationship. Filing a formation document is typically a simple process, and many states offer online filing and expedited options.