Structuring a Joint Venture Before the Contract Was Signed

The situation

Khalil, Samir and Sana built their staffing company together five years earlier, pooling backgrounds that turned out to complement each other well. 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. Sana had come from event operations work, coordinating vendor logistics for a hospitality company before the three of them decided to build something of their own. Together the three co-owners built a 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 contract to cover both security staffing and specialized audio-visual production for its events, were out of reach. Khalil, Samir and Sana simply did not have any in-house AV or production capacity, and building it from scratch would have taken capital and time the company did not have.

That changed when a regional venue operator put out a request for a combined contract covering security staffing and event AV production for a series of trade shows and conferences over the following year. A separate, smaller company that specialized in event audio-visual and production work — sound, lighting, screens, the technical side of a conference — had the reverse problem: strong AV capability, no staffing arm. Its principals approached Khalil, Samir and Sana with an idea. If the two companies bid together, combining staffing and AV production 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's company had agreed on the big picture with the AV company: split the contract revenue roughly in proportion to each company's labour costs on it, with Khalil, Samir and Sana's company leading the security side and the AV company leading production. What the two companies 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, Samir and Sana's company held the master contract, with a separate subcontract flowing the AV and production portion to the AV company on matching terms — keeping the venue operator's relationship simple while giving the AV company a direct, enforceable right to be paid regardless of any disagreement between the two businesses.
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 direct conversation between the two companies' principals, with a defined number of business days to resolve it before either side could treat the matter as unresolved. 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: a minimum notice period so a departure couldn't strand the venue operator mid-season; a formula for dividing work in progress and receivables at exit; and a limited non-solicitation term preventing either company from approaching the venue operator to replace the other's services for a defined period afterward. None of this assumed the venture would fail — it assumed businesses change direction, and that a clean way out protects a relationship from turning bitter.
5. Addressed what happened if the contract grew. Because the venue operator had hinted at a possible multi-year extension into a larger, multi-venue arrangement, 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 or produce the departing portion of the work on its own. That clause turned out to matter more than anyone expected at the time it was drafted.

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 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 contract into a larger, multi-venue arrangement with different volume and pricing expectations. The AV company, still relatively small, did not have the production capacity to scale into the larger deal without significant equipment and hiring investment. Khalil, Samir and Sana's company did want to pursue it, having grown its own 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. The AV company gave the required notice, the outstanding receivables from the first-year contract were divided under the formula already agreed, and Khalil, Samir and Sana's company pursued the larger renewal on its own, later subcontracting a smaller AV-production portion to a different partner. The non-solicitation term meant the AV 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, Samir and Sana had spent a year building.

Both sides stayed on good terms. The AV company kept its existing client relationships and the receivables it was owed without a fight. Khalil, Samir and Sana'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