Structuring a Joint Venture Before the Contract Was Signed

The situation

Khalil and Samir had worked their way up in hospitality and security work before starting their own company together five years earlier. Khalil had spent years as a hotel front-desk supervisor, learning how event venues actually operated behind the scenes. Samir had worked as a security guard at conference centres and large retail sites. Between them they built a small staffing company supplying trained security personnel to hotels, retail properties, and the occasional private event, with annual revenue that had grown to somewhere between $250,000 and $1,000,000.

The company's ceiling was real, though. Most of the contracts it could win on its own were modest — a hotel's overnight security rotation, a retail property's weekend coverage. The larger opportunities, the kind that came from a venue operator wanting one company to handle both security staffing and event-day hospitality staffing under a single contract, were out of reach. Khalil and Samir simply did not have the hospitality-staffing side of the business.

That changed when a regional venue operator put out a request for a combined staffing contract covering a series of trade shows and conferences over the following year. Sana ran a smaller company supplying event hospitality staff — greeters, coat check, registration desk workers — and had the reverse problem: strong hospitality relationships, no security capacity. Sana approached Khalil and Samir with an idea. If the two companies bid together, combining security and hospitality staffing under one proposal, they had a real chance at a contract that was too large for either of them individually.

They liked the idea. They also had no framework for it beyond a verbal handshake and a shared spreadsheet.

The problem

A joint venture is not a merger and it is not a partnership in the legal sense, though people often use the words loosely. It is an arrangement where two or more separate businesses agree to combine effort, and sometimes assets, toward a specific project or a defined period of work, while each remains its own company. Done properly, it lets smaller businesses punch above their weight. Done on a handshake, it is one of the most common sources of business litigation Ontario courts see — not because the companies were dishonest with each other, but because nobody wrote down what would happen when circumstances changed.

Khalil, Samir, and Sana had agreed on the big picture: split the contract revenue roughly in proportion to each company's labour costs on it, with Khalil and Samir's company leading the security side and Sana's company leading hospitality. What they had not agreed on, in writing or otherwise, was almost everything that actually causes joint ventures to fall apart.

• Who signed the master contract with the venue operator, and who was legally on the hook if a shift went unstaffed.
• How decisions got made if the two companies disagreed about pricing a follow-on event, or about firing an underperforming worker supplied by the other side.
• What happened to the arrangement if the venue operator wanted to extend it for a second year, and one company wanted to continue while the other did not.
• How to unwind the venture if the relationship simply stopped working — who kept which client relationships, whether either side could solicit the venue operator directly afterward, and how any shared bank account or joint invoicing got closed out.

None of this needed to be a problem yet. The bid hadn't even been submitted. But a joint venture agreement written after a dispute starts is written by two sides who no longer trust each other, over terms that now feel like a concession to the other party. Written before the ink is dry on the first invoice, the same terms are just planning.

What we did

1. Started with control, not just money. The financial split was the easy part — the companies already agreed on it. The harder work was defining who had authority over what. We structured the agreement so each company retained full control over its own staff, its own employment obligations, and its own pricing for the services it led, while decisions affecting the joint bid itself — accepting the venue operator's contract terms, agreeing to a rate change, or extending the arrangement — required both companies' written sign-off.
2. Clarified who was liable to the venue operator. The venue operator wanted one point of contact, not two companies pointing at each other if a shift went unstaffed. We set up the venture so Khalil and Samir's company held the master contract as the primary contracting party, with a separate subcontract flowing the hospitality-staffing portion to Sana's company on matching terms. That kept the venue operator's relationship simple while giving Sana's company a direct, enforceable right to be paid regardless of any disagreement between the two founders' companies.
3. Built in a decision-making process for disagreements. Rather than leaving disputes to escalate, the agreement set a short, defined process: a disagreement over a joint decision first went to a conversation between Khalil, Samir, and Sana directly, with a defined number of business days to resolve it before either side could treat the matter as unresolved and trigger the exit provisions below. This is a small thing that stops a lot of arguments from turning into standoffs — it forces the conversation to happen instead of letting silence do the talking.
4. Wrote the exit terms while everyone still liked each other. This was the core of the file. The agreement set out exactly how either company could leave the venture: a minimum notice period tied to any current contract term, so a departure couldn't strand the venue operator mid-event-season; a formula for dividing any work in progress and outstanding receivables at the time of exit; and a limited non-solicitation term preventing either company from directly approaching the venue operator to replace the other's services for a defined period after separation. None of this assumed the venture would fail. It assumed that businesses change direction, and that a clean way out protects a good relationship from becoming a bitter one.
5. Addressed what happened if the contract grew. Because the venue operator had hinted at a possible multi-year extension, we added a term letting either company decline to continue into a renewal without breaching the agreement, provided it gave adequate notice and didn't undercut the other company's ability to staff the departing portion of the work.

The outcome

The joint bid was accepted. The two companies ran the combined contract successfully through the first trade show season, and the working relationship between Khalil, Samir, and Sana stayed genuinely good — which made what happened at the eleven-month mark easier than it could have been.

The venue operator offered a second-year renewal, but this time wanted to fold the staffing contract into a larger, multi-venue arrangement with different volume and pricing expectations. Sana's company, still relatively small, did not have the hospitality-staffing capacity to scale into the larger deal without significant hiring risk. Khalil and Samir's company did want to pursue it, having grown its own security-staffing capacity over the year specifically to handle more volume.

Because the agreement already answered the question — either company could decline a renewal without breaching the venture, subject to notice — there was no negotiation from scratch and no argument about whether declining was even allowed. Sana's company gave the required notice, the outstanding receivables from the first-year contract were divided under the formula already agreed, and Khalil and Samir's company pursued the larger renewal on its own, later subcontracting a smaller hospitality-staffing portion to a different partner. The non-solicitation term meant Sana's company could not simply approach the venue operator to try to keep a piece of the new deal outside the agreed process, which protected the arrangement Khalil and Samir had spent a year building.

All three stayed on good terms. Sana's company kept its existing client relationships and the receivables it was owed without a fight. Khalil and Samir's company grew into the larger contract. Nobody spent money on a lawyer to fight over what should have happened next, because the agreement had already decided it.

What you can learn from this