Joint ventures are quite popular in federal contracting. And for good reason. Joint ventures allow contractors to team up to pursue and perform federal set-aside contracts and subcontracts–combining their past performance, experience, and capabilities and sharing their costs and resources. They allow contractors that are not quite ready or capable to take on a full federal project solo to gain such experience and establish that direct client relationship as sort of a “co-prime.” They also offer the government-client a two-for-one package that still “checks the boxes” for set-aside work–that is, if they are formed and utilized in a manner compliant with the rules. This blog provides the step-by-step process of forming a joint venture (don’t forget to brush up on the basics of joint ventures here for more on the benefits, the agreement itself, and the performance requirements).
Step 1: Pick a name for your joint venture and form your joint venture under your chosen state.
Picking the name is the easy part! You can be as creative or predictable as you wish. Sure, most joint ventures are just some combination of the venturers’ company names. And many joint ventures even include “JV” or “Joint Venture” in the name itself. But none of these are actual SBA requirements. In fact, the only real “requirements” for naming your joint venture vary by state and depend on the type of joint venture you plan to form (more on this in the two tips below).
Vast majority of joint ventures are set up as LLCs or separate legal entities. SBA does allow for simple contractual joint ventures as well (which follow most of the same rules for the agreement and performance)–but they are far less common and don’t require most of the formation steps discussed here. So, for the purpose of this blog, we are going to focus solely on joint ventures set up as LLCs or separate legal entities.
As for forming your joint venture under your chosen state of formation, that is (unfortunately) not something we government contracting experts can help with. So, we recommend speaking with the appropriate state or local business experts about both selecting the state of formation and going through that process. The good news, though, most of our clients and blog readers have reported back that their state’s Secretary of State offices, resources, and websites made this process fairly straightforward.
Tip #1: Most joint ventures are set up as LLCs, and some states do require their LLCs to have “LLC” somewhere in the company name. So, it is best to either confirm the state you plan to form your joint venture under does not require this or make sure you include “LLC” or whatever term such state requires in the joint venture’s name right off the bat (to avoid having to make changes later that could cause issues or delays in registrations, bid submissions, etc.).
Tip #2: It can also be wise to avoid slashes, hyphens, and other unique characters in the joint venture’s name, as the IRS website does not allow certain special characters. And many will attest to the recommendation to do your best to avoid any kind of situation where your company’s registered name, name on its SAM.Gov profile, name on a bid submission, etc., doesn’t quite match up with the name attached to the IRS’s EIN (as this also has the potential to could cause issues or delays in registrations, bid submissions, etc., down the line).
Step 2: Request your Employer Identification Number (EIN) for your joint venture through the IRS.
Indeed, as a separate legal entity, the joint venture will need to have its own EIN through the IRS. You can request the joint venture’s EIN pretty quickly and painlessly (usually) at the online EIN application section of the IRS’s website, found here. As noted in Tip #1 for Step 1 above, the IRS website can be a bit finicky when it comes to special characters–so, that is something to keep in mind when you are choosing a name for your joint venture in Step 1.
Tip: For the EIN application and most of the formation steps discussed in this blog, SBA certainly prefers to see the joint venture’s managing venturer doing most of the registration and formation legwork. Doing things this way can help to demonstrate the required level of managing venturer control over the joint venture early on. And having someone other than the managing venturer do all the registration and formation legwork has at least been considered a negative factor by SBA in certain regulatory compliance analyses before (i.e., size and affiliation determinations, etc.).
Step 3: Register your joint venture with SAM.Gov.
Once you have an EIN and UEI, you can get started registering your joint venture at SAM.Gov (found here). This is intentionally listed as the third step of the process because you will need an officially named and formed company, with an official EIN, in order to complete this state. Once you get to the SAM.Gov page linked above, you will see a section called “Before You Get Started” listing four steps of the registration process. It may be helpful to review these before you begin.
When you are ready, you can then click on “Get Started” on the right side, and “Go to Login.gov” at the bottom of the section entitled, “Get a Login.gov Account”–or you can go straight here. You will then have to accept SAM.Gov’s terms to get a login and continue with the other SAM.Gov registration steps. If you have any issues with the Login.Gov or SAM.Gov systems, you can also reach out to the Federal Service Desk for assistance.
Tip: Although this step has some prerequisites, as explained above, it is also not a step one should wait too long to complete. Most solicitations for federal government contracts contain or reference the FAR’s SAM.Gov registration requirements for all companies submitting bids or proposals–and far too many companies have faced the consequences (including lost awards) of not having an accurate and active SAM.Gov registration at the required time.
Step 4: Get your Commercial And Government Entity (CAGE) Code through the DLA.
In order to complete your registration in SAM.Gov, you will also need to request a Commercial And Government Entity (CAGE) Code through the DLA (which is technically available here). But this step is intentionally included as Step 4, following “Step 3: Register your joint venture with SAM.Gov” for a reason. Even though you will need a CAGE code to complete your SAM.Gov registration, you must begin your SAM.Gov registration in order to get your CAGE code. As DoD explains in its helpful Contractor/Vendor Procurement Toolbox, once you submit your information to SAM.Gov, it automatically sends your information over to DLA. Then, DLA will process and assign your five-character CAGE code and send it back over to SAM.Gov, where it will be linked to your active profile. So, despite the link I provided above (which can be used for various other CAGE code registration and maintenance purposes), if everything goes according to plan, SAM.Gov should get you your initial CAGE code as just another step in the registration process.
Step 5: Draft and execute your joint venture agreement (JVA) and joint venture operating agreement (JVOA) or your combined JVA/JVOA.
Now, unlike most of the other steps outlined in this blog, this Step 5 does not, by any means, need to come last. In fact, depending on your state’s business formation requirements, you may need to submit a company operating agreement to the Secretary of State in order to even form your company (but even then, most such states will allow you to update your operating agreement on file later on if needed–so, again, we just recommend speaking to your state/local business experts with any questions).
Really, the only reason I listed this step last is that it can often take a few weeks to work with government contracting experts to draft, negotiate, and execute your regulatory compliant JVA and JVOA (or combined JVA/JVOA). So, the most efficient option is often to simultaneously work with such experts on the documentation and work through the entity formation steps yourself (and please note, case law precedent strongly supports seeking out experts for this process). Further, as I noted in Step 3 above, if there is a “hold-up” in the process of forming your joint venture, the culprit is most often issues or delays with SAM.Gov. And that is why I made sure to prioritize the steps above for the purposes of this blog. But do keep in mind, there are still required deadlines applicable to this step (for different types of joint ventures) relative to submitting proposals or bids for federal work.
For more information on the JVA and JVOA documentation–and SBA’s various requirements therefor–make sure to read our prior blog, Back to Basics: Joint Ventures. There, you can also find more information on the required timelines for the execution of these joint venture documents, including any required project-specific addendum or amendment thereto, when it comes to bid or proposal submissions.
Finally, if you have any questions about these formation or registration processes, you can potentially get some free assistance by finding your local PTAC counselor here. Or you can, of course, reach out to us regarding the federal legal aspects of the process–or for assistance with drafting, negotiating, and executing any of your joint venture documents (both the initial JVA/JVOA and project-specific documentation).
Questions about this blog? email us at info@koprince.com
Need legal assistance? Give us a call at 785-200-8919.
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