Joint ventures and partnerships differ in financial, operational, and legal structures. Joint ventures are temporary and involve separate finances and operations, while partnerships create a new entity and share profits and debts. Partnerships require legal registration, while joint ventures do not. The terms are often used interchangeably.
The difference between a joint venture and a partnership is basically a matter of financial, operational and legal structure. A joint venture is a situation in which two distinct and independent entities work together towards a common goal. Although each makes concessions and helps the other, their finances and operations remain separate and they are unlikely to be liable for the other entity’s debts except within the confines of the venture. In a partnership, two previously independent entities join forces to create a third entity. In this way, their finances and operations come together and each is responsible for the other party’s debts and actions.
An important way to distinguish between a joint venture and a partnership is the legal organization. A partnership is a legal entity, usually created in accordance with specific government regulations and registered with an administrative body. Legal documents explaining the nature of the partnership usually must be filed in order to obtain a business license. A joint venture, although it may be governed by a contract between the parties, requires no legal declaration and, in most cases, no filing of paperwork.
The terms joint venture and partnership also refer to very different financial and operating structures. In a partnership, entities merge to form a set of operations and report earnings as one entity. Profits are realized for the entity and debts are paid by it.
In a joint venture, the terms of the contract determine which share of the profits and debts will be held by each party. The agreement should also describe each party’s responsibility in terms of operations. Taxes and debts will be paid independently by each party, and each will be responsible for carrying out its responsibilities using its own team and location.
In most cases, the duration of the relationship is different between a joint venture and a partnership. Most joint ventures are temporary in nature. They may only last a few days or years, but they are rarely intended to last the lifetime of any one entity. Partnerships, by definition, create an entity and therefore last for the lifetime of the entity. If a partner wishes to withdraw, the partnership must be legally dissolved and a new entity or entities must be formed.
It is important to note that a joint venture and a partnership are only legally distinct. It is not uncommon for joint venture members to refer to each other as partners or tell the public that they are partnering to present a special offer. This may be because the word “partner” tends to have a less warm and less commercial connotation than the term “joint venture”.
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