what is equity share profit interest in joint venture? Does it mean that the investor only shares the profit but is NOT part ower of the company?
Answers (5)
Christine H.
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Rick C.
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The specifics matter greatly, including the language of the terms, the type of entity, if any, that the joint venture is, and what is intended.
Usually, however, someone using the phrase "profit interest' should mean exactly what you say: that there is an interest in a piece of the profits that does not include ownership rights (or responsibilities) in the joint venture entity itself.
That might be appropriate, for example, when the joint venture doesn't have a separate existence but is a true project operated by two or more companies: there's no way to give anyone ownership in anything and so profits are all that can be shared.
Hope that helps,
Rick Colosimo
David P.
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The phrase means nothing by itself. The definition is in whatever document created the joint venture. If the JV is being implemented by an LLC, the definition should be in the operating agreement. If the JV is being implemented by a partnership, the definition should be in the partnership agreement. Etcetera. If the document doesn't define the term, don't sign it.
David
Mark W K D.
General Counsel and Business Advisor
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Hard to answer because you haven't specified the JV structure, eg could be incorporated or unincorporated. But I will assume from your reference to "the company" that we are talking about an incorporated JV, in which the JV participants own shares.
The phrase "equity share profit interest in joint venture" is not a clearly defined legal phrase. I woudl expect it to be defined in the document that sets up the JV (eg shareholders' agreement or partnership agreement or unincorporated JV participants agreement).
Having said that, the phrase:
1. "equity share" connotes some equity interest in the JV, which I would normally expect to equate to an ownership interest, and
2. "profit interest" connotes right to share in profit generated by the JV.
But there is no point having any ambiguity around such a critical phrase. It should be clearly defined in the relevant document as noted above.
