Difference Between Joint Venture and Partnership

Whenever people start a business, it can be a joint venture or based on a partnership. The main aim behind this is to reduce the cost and the investment. By having a partner or a joint venture, they can easily tackle the money. In this, people can share the profits and losses. It is followed by many big companies in India, and McDonald’s is one of them.

Joint Venture vs Partnership

The main difference between a Joint venture and a Partnership is that in a joint venture, two or more parties will agree to a business arrangement. On the other hand, in partnership, an agreement will be made where business parties agree to their mutual interests. In a joint venture, maintenance is not mandatory. Whereas in partnership, maintenance is mandatory. 

Joint Venture and Partnership

A joint venture is a combination where two or more parties seek the development of a single enterprise. They share the risks associated with the development of the project. It can be a combination of two natural persons or entities. They have a length of agreement that includes the resources that vary. Participant companies will split any profit the venture creates. 

The partnership means the state of being partners or partners. It is an association where two or more people will be associated as partners. In this agreement, two or more parties will manage and operate the business and share the profits. In this business, partners share liabilities and equality. While in other businesses, partners may have limited liability. One of the best examples of partnership is marriage. 

Comparison Table Between Joint Venture and Partnership

Parameters of ComparisonJoint VenturePartnership
DefinitionIt is an arrangement between two or more parties.It is an agreement where business parties agree to their mutual interests.
Trade nameIt has no trade name.It has a trading name.
MaintenanceIt is not necessary.It is mandatory.
Accounting basisLiquidation.Going Concerned.
Governing actNoIndian Partnership Act was established in 1932.

What is Joint Venture?

Two or more parties will come to a business arrangement. These parties will agree to a pool of resources so that they can accomplish a specific task. The parties in that venture are affiliates to each other. Some of the most common reasons for a joint venture in business is they enter to get access to new markets, to share resources, and increase market power. 

In India, McDonald’s is managed by two companies. It is a joint venture. A joint venture differs from a holding company because a single business establishes a subsidiary company that they can either fully control or partially control, whereas a joint venture is an agreement between two or more enterprises with an agreement. In a joint venture, companies won’t pay any taxes. Instead, they pass that income to their members, partnership, and the company.

The joint venture comes under a business entity. It has shared returns and risks. It is generally characterized by shared ownership and governance. It is limited in scope and duration. Many companies form a joint venture to get strong potential growth in business, and they can get innovative ideas and products. The partners also take the burden of loss incurred. If a partner wants any financial assistance, they can seek the joint venture.

What is Partnership?

It is an agreement where business parties agree to cooperate their mutual interests. The partners can be individuals, schools, governments, organizations, or combinations. The partnership is divided into 4 types called general, limited liability, limited, and limited liability limited partnership. It is an informal business structure that has two or more people. Here, people don’t have to file any paperwork to start the partnership.

They can create partnerships by simply agreeing to the business with another person. Each partner will share the loss or net income of the partnership. They can include this amount on their own tax return. Some of the main features of a partnership are two or more persons, lawful business, mutual agency, unlimited liability, agreement, sharing of profits, and no separate legal existence. According to law, it is a legal form of business operation.

The best type of partnership among the 4 types is limited liability limited partnership. It can be formed by any type of business. So, it is generally a good fit for people. The main goal of the partnership is to turn a profit to the maximum level. They optimize revenue from purchases. They make anomalous money. The importance of partnership is they increase your lease of knowledge and resources available for making better products to reach your audience. 

Main Differences Between Joint Venture and Partnership

  1. The definition of a Joint Venture is two or more business parties will agree to a business arrangement. On the other hand, a partnership will be made with an agreement where business parties agree to their mutual interests.
  2. A joint venture has no trade name. On the other hand, the partnership has a trading name.
  3. Maintenance is not necessary for the joint venture. On the other hand, maintenance is necessary for partnership.
  4. In a joint venture, the accounting basis is done on liquidation. On the other hand, in partnership accounting basis is done on going concerned.
  5. A joint venture has no governing act. On the other hand, the partnership has Indian Partnership Act which was established in 1932. 

Conclusion

Both Joint ventures and partnerships are good for business. But before you start a joint venture or a partnership, you should check all the necessary requirements so that there won’t be any problems in the future. Choosing a trustworthy partner is very important when people start a business. Marriage is also like a partnership.

In marriage, two people will share their happiness and sorrow. It will ease their burden. They will support each other in their life. Likewise in business also people should support each other. They should check all the paperwork and documents while making the decisions. This will help them to understand the business even more in a systematic way. 

References

  1. https://books.google.com/books?hl=en&lr=&id=rGbN_R9-PmgC&oi=fnd&pg=PR1&dq=Difference+Between+Joint+Venture+and+Partnership&ots=6hnurboSbu&sig=jidbg4SUvc7FNIPPSctqkrsshBY
  2. https://pubsonline.informs.org/doi/abs/10.1287/orsc.13.6.667.494
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