Joint Venture vs Partnership
The purpose of a partnership is not limited to a single project or to a single goal. The object of partnership is oriented towards the running of the business for the purpose of a long-term enterprise and for making a profit in the enterprise. Joint ventures, on the other hand, are strategized to accomplish a specified goal. In a JV, each party contributes their share to the agreed-upon task.
A joint venture is a contractual arrangement between the two or more entities which aims to undertake a specific task. A partnership whereas, involves an agreement between the two or more parties where they together agree to share the profits as well as share any loss which might have incurred in a single venture.
What is a Joint Venture and Partnership?
Joint Venture
A joint venture (JV) is a type of business arrangement where two or more parties agree to put together their resources for the purpose of accomplishing a specific task. This is a task for a new project or any other business activity which might be a goal for them. In JV type of business, the partners are responsible for all the profits.
Partnership
A partnership is a formal arrangement between two or more parties who manage and operate the business and they share their own profits in profit sharing ratio. Partners may distribute the losses and profits equally or in a distinct ratio. Some partnership business restricts the liability of the partners to limited liability.
Points of Difference Between Joint Venture and Partnership
Who is in the Business?
A partnership is made up of persons, two or more, who is legally recognized for the purpose of operating this business.
A joint venture, on the other hand, can be individuals or even entities who can come together to form a business organization.
The Purpose of the Business Style
Both the partnerships and joint ventures are different in their style. A partnership’s purpose is not restricted to a single project or goal, rather, partnerships are formed for earning long-term profit.
Joint ventures are designed to accomplish only a specific goal, which might be a single project.
How are Both Structured?
Partnerships are formed with a partnership agreement or a contract between the individuals who make up the partnership.
Joint ventures, not necessarily have an agreement in the first place. Even, if there is an agreement, it is only for a short-term and it is a very specific contract.
How Long Does the Business Exist?
Partnerships are designed to last for eternity while in business. They can run to an infinite term.
In contrast to this, the joint ventures are meant only for a short-term project lifetime.
How Big is the Size and Scope of the business?
Joint ventures are limited in scope and their accomplishment is also limited. Partnerships, in contrast, can be huge in terms of both scope and size.
Who Remains Accountable?
When a partnership goes wrong and causes a moral hazard, only the party who has committed the wrong faces with fault.
In the case of a joint venture, both the parties are seen at fault in the case of a moral hazard or criminal wrongdoing. Accountability increases greatly which makes the joint ventures riskier in the short-term.
FAQs on Joint Ventures vs. Partnerships: Key Differences
1. Define an Enterprise?
Enterprise is another word for a for-profit business or company, but it is most often associated with entrepreneurial ventures. A sole proprietorship is a company that is owned by a single individual, typically for their own benefit, with unlimited liability for any damages which occur as a result of the business' operations.
An enterprise is a project, in which the owners are willing to take on a new project, an undertaking or business venture with a particular project. A good example of an enterprise is to start a new business. Another example of an enterprise is someone who is taking an initiative to start a business.
2. What do you mean by profit sharing ratio?
The ratio in which the profits or the losses of a particular business is being shared. For a partnership, the profit-sharing ratios will be mentioned in the partnership agreement. The same will show the amount, which is usually given as the percentage of the total profits, that is attributable to each partner.
When a new partner buys his or her share of profit from an old partner, the new profit -sharing ratio of the former partner is to calculated by deducting the sacrifice that is made by the old partner from his or her existing share of the profit.
3. What is a Limited Liability Partnership?
Limited liability partnerships abbreviated as LLPs a partnership structure where each of the partner's liabilities is quite limited to the amount while they put into the business. Limited liability means that when the partnership fails, the creditors cannot claim a partner's personal assets or income to fulfil his own money.
Every partner is for the purpose of the business of the LLP, an agent of the LLP but not of the other partners. Liability of partners shall be limited except in acts like fraud and negligence.
