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About Joint
Ventures in Costa Rica
Basic Elements of a Joint
Venture
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Contractual Agreement. JVs
are established by express contracts that consist of one
or more agreements involving two or more individuals or
organizations and that are entered into for a specific
business purpose.
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Specific Limited Purpose
and Duration. JVs are formed for a specific business
objective and can have a limited life span or be
long-term. JVs are frequently established for a limited
duration because (a) the complementary activities
involve a limited amount of assets; (b) the
complementary assets have only a limited service life;
and/or (c) the complementary production activities will
be of only limited efficacy.
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Joint Property Interest.
Each JV participant contributes property, cash, or other
assets and organizational capital for the pursuit of a
common and specific business purpose. Thus, a JV is not
merely a contractual relationship, but rather the
contributions are made to a newly-formed business
enterprise, usually a corporation, limited liability
company, or partnership. As such, the participants
acquire a joint property interest in the assets and
subject matter of the JV.
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Common Financial and
Intangible Goals and Objectives. The JV participants
share a common expectation regarding the nature and
amount of the expected financial and intangible goals
and objectives of the JV. The goals and objectives of a
JV tend to be narrowly focused, recognizing that the
assets deployed by each participant represent only a
portion of the overall resource base.
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Shared Profits, Losses,
Management, and Control. The JV participants share in
the specific and identifiable financial and intangible
profits and losses, as well as in certain elements of
the management and control of the JV.
Structuring the Joint
Venture
Structuring any JV may pose a
challenge. This is especially true where parties are from
different jurisdictions and various cultural backgrounds are
involved. After parties have decided on fundamental issues
such as the commercial nature, scope and mutual objectives
of the joint venture, the JVPs must determine the geographic
location of the venture and what form or legal structure the
joint venture will take.
Generally, the structure chosen will be between different
types of partnerships, corporations, or some form of a
limited liability company, depending on the tax and tort
liability each JVP wants to be exposed to. The precise tax
and legal features of vehicles of the same general type will
vary from one country to another, but the U.S. forms of
businesses can be broadly classified as follows:
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Corporations –
Corporations are a commonly preferred choice for JVs.
The legal status of a corporation is clear, and its
ability to own assets, incur liabilities and enter into
legally binding contracts is obvious to third parties.
The liability of shareholders for the corporation’s
debts and obligations is limited to their capital
investment in the corporation, something that is not
always the case with other entities. From a tax
perspective, corporations may be undesirable because
they generally lack pass-through tax status, making its
shareholders unable to set off profits and losses
generated by the JV against income or expenses from
other activities. Also, the net income of a corporation
is likely to be subject to corporate tax in the
jurisdiction it is located, be it in the U.S. or
elsewhere. Such tax payable by the corporation may not
be credible against taxes payable on dividends and other
profit distribution from the corporation and its
shareholders. However, the presence or absence of tax
treaties between respective countries may still make the
corporation profitable.
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General Partnerships – All
partners in a general partnership have personal
liability for debts and other obligations incurred by
the partnership. One advantage of a general partnership
in the U.S. and many other countries is that normally no
income or franchise tax is imposed on it. Also, all
partners can act on behalf of, and legally bind, the
partnership via third parties.
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Limited Partnerships –
Under a limited partnership there are two distinct types
of partners, general and limited. The general partner
carries responsibilities similar to the one he carries
in a general partnership, including the ability to
legally bind the whole partnership and being personally
liable for debts and obligations of the partnership. The
limited partner, on the other hand, mainly contributes
capital and receives a specified share of the profits.
The limited partner is excluded from active management
of the partnership, but is exempt from personal
liability for debts and obligations of the partnership.
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Limited Liability Company
– A limited liability company is a hybrid between the
partnership and the corporation in that it provides the
JVPs with insulation from the liabilities of the LLC as
in a corporation, while generally being classified as a
partnership for U.S. tax purposes. All members may take
part in management. Hybrid vehicles such as the LLC are
not recognized in all parts of the world.
Buying large and medium size tracts for long term
investment
The best way to do this is in a JV partnership whereby
you become the proportionate shareholder of the asset.
Often a large tract can be purchased very attractively.
If you participate in a group purchase it can be set out
that the land is for investment purposes and it will
bear no cost against it apart from taxes, and
maintenance. Also, it can be put into Fonafifo which
will pay costs for preservation and will offset the
annual costs to maintain it.
Here is an example of a large tract that will be
ideal for this especially with a 5 year time frame.
Contact us for more of this type of long term investment
land
Costa Rica Development Properties
at 1 888 581 1786 and ask for
Robert Shannon.
Or,
complete this form and we will get started with the proper
process for you. |
Buying unlisted large assets
such as Hotels or projects
How to buy Development land
Selling Development land
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