Joint Venture Agreement (California)

CALIFORNIA JOINT VENTURE AGREEMENT

A Joint Venture Formed Under California Law

CALIFORNIA-SPECIFIC PRACTITIONER NOTES

Under California law, a joint venture is generally treated as a partnership for purposes of the California Uniform Partnership Act of 1994 ("CUPA" / "RUPA"), Cal. Corp. Code §§ 16100 et seq. See Weiner v. Fleischman, 54 Cal. 3d 476 (1991); Cal. Corp. Code § 16101 (definitions); Cal. Corp. Code § 16202 (association to carry on business as co-owners for profit). Accordingly, each Joint Venturer owes fiduciary duties of loyalty and care under Corp. Code § 16404 that cannot be waived except within the narrow limits of § 16103(b).

Counsel should confirm whether the parties wish the JV to operate as (i) a contractual/unincorporated joint venture governed by CUPA, (ii) a California LLC formed under the Revised Uniform Limited Liability Company Act (Cal. Corp. Code § 17701.01 et seq.), or (iii) a California corporation under the General Corporation Law (Corp. Code § 100 et seq.). Each form carries distinct California Franchise Tax Board (FTB) consequences, including the $800 minimum franchise tax.

Because California voids virtually all post-term non-compete restrictions under Bus. & Prof. Code § 16600 (as strengthened by AB 1076 and SB 699 effective January 1, 2024), this template substitutes narrowly-drawn confidentiality, IP, and customer non-solicitation provisions in lieu of traditional non-competes.

1. PARTIES, FORMATION, AND RECITALS

1.1 Parties. This Joint Venture Agreement (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") by and between:

(a) [________________________________], a California [corporation/LLC/limited partnership] with its principal executive office at [________________________________] ("Venturer A"); and

(b) [________________________________], a [state of formation] [entity type] qualified to transact intrastate business in California under Corp. Code § 2105 (if foreign), with its principal California office at [________________________________] ("Venturer B").

Venturer A and Venturer B are each a "Venturer" and collectively the "Venturers."

1.2 Formation Under California Law. The Venturers hereby form a joint venture (the "Joint Venture" or "JV") that, unless otherwise elected in Section 2.1, shall be governed by the California Uniform Partnership Act of 1994, Cal. Corp. Code §§ 16100–16962 ("CUPA"), and shall constitute a "partnership" within the meaning of Corp. Code § 16202 and Weiner v. Fleischman, 54 Cal. 3d 476 (1991).

1.3 Recitals.

☐ A. The Venturers possess complementary assets, expertise, and California market relationships that each wishes to combine to exploit the business opportunity described in Section 2.3 (the "Venture Project").

☐ B. The Venturers acknowledge that they owe one another the fiduciary duties of loyalty and care set forth in Cal. Corp. Code § 16404, and that those duties may be limited only as expressly permitted under Corp. Code § 16103(b).

☐ C. The Venturers desire to allocate management authority, capital commitments, profits, losses, distributions, and dissolution rights in accordance with this Agreement and CUPA.

2. JOINT VENTURE STRUCTURE

2.1 Form of Vehicle (Check One).

☐ Unincorporated Contractual Joint Venture — governed by CUPA and this Agreement; no separate legal entity; each Venturer jointly and severally liable under Corp. Code § 16306 for JV obligations to third parties.

☐ California Limited Liability Company — the Venturers shall cause Articles of Organization (Form LLC-1) to be filed with the California Secretary of State pursuant to Corp. Code § 17702.01, and this Agreement shall constitute the operating agreement under Corp. Code § 17701.02(s).

☐ California Corporation — the Venturers shall file Articles of Incorporation (Form ARTS-GS or ARTS-PC) pursuant to Corp. Code § 200, and shall adopt a shareholders' agreement consistent with this Agreement.

2.2 Franchise Tax and Registration. The Venturers acknowledge that any California LLC, corporation, or limited partnership vehicle selected under Section 2.1 will be subject to the $800 annual minimum franchise tax imposed by Cal. Rev. & Tax. Code § 23153 (corporations), § 17941 (LLCs), or § 17935 (limited partnerships). If the JV is formed as an unincorporated contractual joint venture, the Venturers shall coordinate filing of any Statement of Partnership Authority (Form GP-1) under Corp. Code § 16303 as counsel advises.

2.3 Purpose. The exclusive purpose of the Joint Venture is to [________________________________] (the "Venture Project") and to engage in activities reasonably incidental thereto. Consistent with Corp. Code § 16101's treatment of joint ventures, the Venture Project is limited to the specific undertaking described in this Section 2.3 and shall not expand to general commercial activity without a unanimous written amendment.

2.4 Principal Place of Business. The principal office of the Joint Venture shall be located in [________________________________] County, California.

2.5 Term. The Joint Venture shall commence on the Effective Date and continue until the earlier of (a) completion of the Venture Project, (b) [__/__/____], or (c) dissolution under Article 9.

3. CAPITAL CONTRIBUTIONS AND INTERESTS

3.1 Initial Contributions. Each Venturer shall contribute the cash, property, or services described on Schedule A (each a "Capital Contribution"). Property contributions shall be valued in accordance with Cal. Corp. Code § 16401(a) and allocated to the contributing Venturer's capital account consistent with Treas. Reg. § 1.704-1(b)(2)(iv).

3.2 Percentage Interests. Each Venturer's "Percentage Interest" is set forth on Schedule A. Percentage Interests shall control allocations, distributions, and voting unless expressly stated otherwise.

3.3 No Mandatory Additional Contributions. Consistent with Cal. Corp. Code § 16401(b), no Venturer shall be required to make additional capital contributions beyond those set forth on Schedule A without that Venturer's written consent.

3.4 Failure to Fund — California Remedies. If a Venturer fails to timely fund a committed Capital Contribution, the non-defaulting Venturer may, without limiting any other remedy at law or in equity under Cal. Code Civ. Proc. § 337 (four-year statute for written contracts):

☐ (a) advance the deficiency as a loan bearing interest at the lesser of (i) 10% per annum or (ii) the maximum non-usurious rate permitted by California Constitution Article XV, § 1;

☐ (b) dilute the defaulting Venturer's Percentage Interest pro rata in accordance with Schedule B; or

☐ (c) pursue specific performance under Cal. Civ. Code § 3384 and injunctive relief.

4. MANAGEMENT, FIDUCIARY DUTIES, AND VOTING

4.1 Management Committee. The JV shall be managed by a committee (the "Management Committee") comprised of [____] representatives designated by each Venturer. Each Venturer's representatives may vote that Venturer's Percentage Interest.

4.2 Fiduciary Duties Under Corp. Code § 16404. Each Venturer owes the JV and the other Venturer the duties of loyalty and care set forth in Cal. Corp. Code § 16404. Specifically:

(a) Duty of Loyalty — accounting to the JV for any property, profit, or benefit derived from JV business (Corp. Code § 16404(b)(1)); refraining from adverse dealings (§ 16404(b)(2)); and refraining from competing with the JV before dissolution (§ 16404(b)(3)).

(b) Duty of Care — refraining from grossly negligent or reckless conduct, intentional misconduct, or knowing violations of law (Corp. Code § 16404(c)).

(c) Good Faith and Fair Dealing — Corp. Code § 16404(d).

The Venturers may modify these duties only to the limited extent permitted by Corp. Code § 16103(b), and in no event may they eliminate the duty of loyalty, unreasonably reduce the duty of care, or waive the obligation of good faith and fair dealing.

4.3 Major Decisions (Unanimous Consent Required). The following actions require unanimous written consent of the Venturers:

☐ (a) amending this Agreement, Schedule A, or Schedule B;
☐ (b) admitting a new Venturer or issuing additional interests;
☐ (c) dissolving or selling substantially all JV assets;
☐ (d) incurring debt exceeding $[____________] in the aggregate;
☐ (e) encumbering JV assets with any lien perfected under Cal. Com. Code Division 9;
☐ (f) commencing or settling litigation in excess of $[____________];
☐ (g) making any tax election, including the partnership audit regime election under IRC § 6221(b);
☐ (h) entering any transaction with an affiliate of a Venturer.

4.4 Deadlock. If the Management Committee is deadlocked on a Major Decision for [____] consecutive Business Days, either Venturer may trigger the buy-sell procedure in Schedule C or petition the California Superior Court for judicial dissolution under Cal. Corp. Code § 16801(5) (economic frustration) or § 17707.03 (LLC dissolution), as applicable.

5. ALLOCATIONS, DISTRIBUTIONS, AND TAX MATTERS

5.1 Profit/Loss Allocations. Profits and losses shall be allocated to the Venturers in proportion to their Percentage Interests, subject to IRC § 704(b) substantial economic effect and IRC § 704(c) built-in gain/loss rules.

5.2 Distributions. Distributable cash shall be distributed within [____] days after the end of each fiscal quarter in proportion to Percentage Interests, subject to reserves determined by unanimous consent.

5.3 California Franchise Tax Payments. The JV (or its LLC/corporate vehicle) shall timely remit the $800 minimum franchise tax and any applicable LLC gross receipts fee under Cal. Rev. & Tax. Code § 17942, and file Form 568 (LLC), Form 565 (partnership), or Form 100 (corporation) with the California Franchise Tax Board.

5.4 Partnership Representative. [Venturer A] shall serve as the "partnership representative" under IRC § 6223 and the equivalent California representative under Cal. Rev. & Tax. Code § 18622.5.

6. CONFIDENTIALITY, IP, AND CALIFORNIA TRADE SECRET PROTECTION

6.1 CUTSA Trade Secret Protection. The Venturers acknowledge that JV information meeting the two-element test of Cal. Civ. Code § 3426.1(d) — (i) independent economic value from not being generally known and (ii) reasonable efforts to maintain secrecy — constitutes a "trade secret" under the California Uniform Trade Secrets Act ("CUTSA"). Each Venturer shall implement reasonable measures to maintain secrecy as contemplated by § 3426.1(d)(2).

6.2 Misappropriation Remedies. Misappropriation of JV trade secrets entitles the injured Venturer to injunctive relief under Cal. Civ. Code § 3426.2, actual and unjust-enrichment damages under § 3426.3, exemplary damages up to 2× actual damages for willful and malicious misappropriation (§ 3426.3(c)), and attorneys' fees under § 3426.4.

6.3 DTSA Whistleblower Notice. Pursuant to 18 U.S.C. § 1833(b), no individual may be held criminally or civilly liable under federal or state trade secret law for the confidential disclosure of a trade secret to a government official or attorney solely for the purpose of reporting or investigating a suspected violation of law.

6.4 California Silenced No More Act. Nothing in this Agreement shall be construed to restrict any Venturer, its employees, or contractors from disclosing factual information regarding unlawful acts in the workplace, including harassment, discrimination, or retaliation, as protected by Cal. Civ. Code § 1670.11 and Cal. Gov. Code § 12964.5 (SB 331, Silenced No More Act).

6.5 IP Ownership. All intellectual property independently developed by a Venturer prior to the Effective Date remains the sole property of that Venturer. IP developed by or for the JV shall be jointly owned by the Venturers in proportion to their Percentage Interests unless assigned in writing to the JV vehicle.

7. CALIFORNIA NON-COMPETE PROHIBITION; LIMITED RESTRICTIONS

7.1 Acknowledgment of Bus. & Prof. Code § 16600. The Venturers acknowledge that Cal. Bus. & Prof. Code § 16600, as amended by AB 1076 and SB 699 (effective January 1, 2024), voids every contract by which anyone is restrained from engaging in a lawful profession, trade, or business, "no matter how narrowly tailored," except within the narrow statutory exceptions of §§ 16601 (sale of business goodwill), 16602 (partnership dissolution), 16602.5 (LLC dissolution), and 16606.5 (non-solicitation by licensed broker-dealers).

7.2 No General Non-Compete. Accordingly, this Agreement contains no general non-compete covenant.

7.3 Sale-of-Business Exception (Corp. Code § 16601). To the extent any Venturer sells or conveys goodwill of its business to the JV as part of its Capital Contribution, that Venturer may be asked to sign a separate, narrowly-drawn non-compete falling within § 16601, specifying the geographic area in which the sold business was conducted.

7.4 Permitted Confidentiality/Trade Secret Restrictions. Nothing in this Article 7 limits a Venturer's obligations under Article 6 (Confidentiality and CUTSA), which are enforceable notwithstanding § 16600.

7.5 Customer Non-Solicitation. The Venturers acknowledge that even narrowly-drawn customer non-solicitation clauses are generally void under Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), and AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal. App. 5th 923 (2018). Accordingly, this Agreement relies solely on CUTSA trade secret protection rather than customer non-solicitation.

8. REPRESENTATIONS AND WARRANTIES

Each Venturer represents and warrants as of the Effective Date:

8.1 Good Standing. It is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation and, if required, is qualified to transact intrastate business in California under Cal. Corp. Code § 2105.

8.2 Authority. It has full power and authority, including any board or member approval required under Corp. Code §§ 300, 17704.07, or equivalent, to execute and perform this Agreement.

8.3 No Conflict. Execution and performance do not violate its organizational documents, any material contract, or any judgment, order, or California statute or regulation.

8.4 No Undisclosed Liabilities. There are no pending or threatened actions under Cal. Code Civ. Proc., the California Business & Professions Code, or FEHA (Cal. Gov. Code § 12900 et seq.) that would materially impair its performance.

9. DISSOLUTION AND WINDING UP

9.1 Events of Dissolution. The JV shall dissolve upon the earliest of:

(a) completion of the Venture Project;
(b) unanimous written consent of the Venturers;
(c) entry of a decree of judicial dissolution under Cal. Corp. Code § 16801 (CUPA) or § 17707.03 (LLC);
(d) any other event specified in CUPA that terminates the partnership.

9.2 Winding Up. Upon dissolution, the Venturers shall wind up affairs under Cal. Corp. Code §§ 16802–16807 and distribute assets in the following order:

(i) to creditors, including Venturers who are creditors;
(ii) to Venturers for unreturned Capital Contributions;
(iii) to Venturers in proportion to positive capital account balances.

9.3 Statement of Dissolution. The Venturers shall execute and file a Statement of Dissolution (Form GP-4) with the California Secretary of State pursuant to Corp. Code § 16805, if applicable, or a Certificate of Dissolution / Certificate of Cancellation for any LLC/corporate vehicle.

10. DISPUTE RESOLUTION

10.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California, without regard to conflict-of-laws principles. Questions of federal partnership tax law shall be governed by the Internal Revenue Code and Treasury Regulations.

10.2 Forum — California Courts. Subject to Section 10.3, each Venturer irrevocably submits to the exclusive jurisdiction of the Superior Court of California in and for the County of [________________] and, where federal subject-matter jurisdiction exists, the United States District Court for the [Northern/Central/Southern/Eastern] District of California.

10.3 Arbitration (Optional). At the election of either Venturer, any dispute may be submitted to binding arbitration under the California Arbitration Act, Cal. Code Civ. Proc. §§ 1280–1294.4, administered by JAMS in [Los Angeles / San Francisco / San Diego], California, under the JAMS Comprehensive Arbitration Rules then in effect, before a single arbitrator who is a retired California Superior Court, Court of Appeal, or federal judge.

10.4 Labor Code § 925 Carve-Out. Notwithstanding any other provision of this Agreement, if any individual signatory is an "employee" who primarily resides and works in California within the meaning of Cal. Lab. Code § 925, that individual shall not be required to adjudicate outside California any claim arising in California, nor be deprived of the substantive protection of California law, unless individually represented by counsel in negotiating this Agreement as provided in § 925(e).

10.5 Statute of Limitations. The parties acknowledge the four-year statute of limitations for breach of written contract under Cal. Code Civ. Proc. § 337, the three-year statute for fraud under § 338(d), and the three-year statute for CUTSA claims under Cal. Civ. Code § 3426.6.

10.6 Attorneys' Fees. In any action or arbitration to enforce this Agreement, the prevailing party shall recover reasonable attorneys' fees and costs under Cal. Civ. Code § 1717.

11. GENERAL PROVISIONS

11.1 Entire Agreement. This Agreement, together with Schedules A through C, constitutes the entire agreement between the Venturers regarding its subject matter and supersedes all prior agreements.

11.2 Amendment. Amendments require a unanimous writing signed by both Venturers.

11.3 Assignment. Neither Venturer may assign this Agreement or its interest in the JV, in whole or in part, without the prior written consent of the other Venturer, consistent with the "pick-your-partner" principles of Cal. Corp. Code § 16503.

11.4 Severability. If any provision is held unenforceable by a California court, the remainder shall continue in full force and effect.

11.5 Notices. All notices shall be in writing and deemed delivered when personally delivered, sent by overnight courier, or sent by certified mail, return receipt requested, to the addresses in Section 1.1.

11.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signatures pursuant to the California Uniform Electronic Transactions Act, Cal. Civ. Code §§ 1633.1–1633.17.

12. SIGNATURES

VENTURER A:

[________________________________]

By: [________________________________]

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

VENTURER B:

[________________________________]

By: [________________________________]

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

SCHEDULE A — Capital Contributions and Percentage Interests

SCHEDULE B — Dilution Formula for Funding Defaults

[________________________________]

SCHEDULE C — Buy-Sell Procedure on Deadlock

[________________________________]

Sources and References

• California Uniform Partnership Act of 1994, Cal. Corp. Code §§ 16100–16962: https://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=CORP&division=&title=2.&part=&chapter=5.
• Cal. Corp. Code § 16101 (definitions, including joint ventures): https://codes.findlaw.com/ca/corporations-code/corp-sect-16101/
• Cal. Corp. Code § 16404 (fiduciary duties): https://leginfo.legislature.ca.gov/
• Cal. Bus. & Prof. Code § 16600 (non-compete ban, as amended by AB 1076): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600
• Cal. Civ. Code §§ 3426–3426.11 (CUTSA): https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=4.&title=5.
• California Revised Uniform Limited Liability Company Act, Cal. Corp. Code § 17701.01 et seq.
• Weiner v. Fleischman, 54 Cal. 3d 476 (1991) (joint venture–partnership relationship)
• Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008) (strict § 16600 enforcement)
• California Secretary of State Business Programs: https://www.sos.ca.gov/business-programs
• California Franchise Tax Board: https://www.ftb.ca.gov/