What Is a Common Enterprise?

A common enterprise is any type of business arrangement in which two entities decide to enter into a relationship in the pursuit of some type of common goals. The process may involve sharing certain resources or creating some sort of joint project that will ultimately benefit both parties. A common enterprise may be ongoing, or exist only for a short period of time, depending on the reasons for the partnership.

Typically, a common enterprise is developed when two or more entities determine that working together will produce rewards that are significant for everyone concerned. The idea is often to share certain resources while in pursuit of the goal, jointly absorb any costs involved in the effort, and ultimately share in the rewards that follow. When successful, this approach can allow the partners to accomplish goals that would never be possible alone, and possibly enhance the reputations as well as generate additional revenue.

The idea of a common enterprise can be applied to all sorts of business arrangements. For example, a decorator, a landscaper, and a contractor may decide to buy a home together, with the idea of restoring the home and selling it for a profit. The contractor brings to the table the ability to enhance the integrity of the structure, updating plumbing and wiring to current codes. At the same time, the decorator is able to make changes to the rooms of the home that help to make it more attractive to today’s market. The landscaper brings exterior of the home back to life, creating a setting that helps to increase the appeal of the property.

With this type of common enterprise, each of the three partners devotes time, talent, and financial resources in making improvements to the property. Records of all expenses are kept so they are able to know how much of an investment they have in the project. Once the changes are complete and the home sells, each of the three are reimbursed for the expenses incurred and any remaining profits is divided among them, based on the terms of the legal agreement governing the common enterprise. At that juncture, the three partners may choose to consider the purpose for the enterprise to be fulfilled, dissolve the relationship and move on to other projects. If the enterprise was lucrative enough, they may choose to maintain the partnership, find a new property to revitalize and attempt to repeat their success.