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Joint ventures are often established in situations where entities cannot form formal partnerships. This is due to regulatory or legal constraints that may prevent the entities from fully merging or establishing a long-term partnership. In a joint venture, two or more parties come together to work on a specific project or business activity, sharing resources, expertise, and risks while maintaining their separate legal identities.

This arrangement allows entities to collaborate effectively without the need for a permanent relationship, which can be advantageous in various scenarios such as entering new markets, sharing costs for research and development, or pooling resources for a specific venture that might be too capital-intensive for one entity alone. The flexibility provided by joint ventures makes them an appealing option for organizations seeking to combine strengths temporarily without sacrificing their overall independence.