Joint Venture vs Partnership: Difference and Comparison

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.

Key Takeaways

1. A joint venture is a temporary business arrangement between two or more parties who agree to pool their resources for a specific project or goal. At the same time, a partnership is a long-term business relationship between two or more individuals who share a business’s ownership, profits, and losses.
2. Joint ventures are formed for a specific purpose or time frame and dissolve once the project is completed. At the same time, partnerships are ongoing and may evolve as the business grows and changes.
3. Both joint ventures and partnerships involve collaboration, shared decision-making, and financial investment, but joint ventures have more narrowly defined objectives and a limited duration.

Joint Venture vs Partnership

A joint venture is a business arrangement in which two or more parties come together to form a new business entity for a specific project or purpose. A partnership is a business arrangement in which two or more parties come together to operate a business as co-owners. Partnerships can be formed as general partnerships or limited partnerships.

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

Parameters of Comparison	Joint Venture	Partnership
Definition	It is an arrangement between two or more parties.	It is an agreement where business parties agree to their mutual interests.
Trade name	It has no trade name.	It has a trading name.
Maintenance	It is not necessary.	It is mandatory.
Accounting basis	Liquidation.	Going Concerned.
Governing act	No	Indian 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 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 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. 

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

Last Updated : 24 July, 2023