What is the Difference Between a Partnership and a Joint Venture?

If you’re about to form a business, you may have heard the terms partnership and joint venture. You may think that these terms mean the same thing and can be used interchangeably, but they’re different.

Any business agreement between two or more people can be considered a partnership. However, not all partnerships are joint ventures. A joint venture is just one way of structuring a partnership.

There are differences and they may not seem so significant, but they can mean a lot in the business and legal worlds. Here’s a look at the differences between a partnership and a joint venture.

The Composition

A partnership is typically made up of at least two individuals who form a legally recognized association for the purpose of operating a business. A joint venture is different in that it may include entities as well, such as corporations, businesses, or even governments.

The Purpose

The purpose is one of the main things that makes partnerships and joint ventures different. A partnership’s purpose is oriented toward running a business for a long time and making a profit.

Joint ventures, on the other hand, are more like short-term projects designed to accomplish a specific goal. Profit is not always the main goal for joint ventures. For example, sometimes universities team up with drug companies for the sole purpose of creating new drugs.

The Agreement

Partnerships are usually formed with a partnership agreement or contract between the individuals involved. The partnership agreement covers various topics such as sharing in profits and losses, leaving the partnership, and the percentage of control by each partner.

Joint ventures are different in that they do not always have an agreement in place. If there is an agreement, it is a very specific contract that addresses the particular project.

Length of Time

Partnerships are designed to last infinitely. In contrast, joint ventures are short-term projects lifetimes that last just long enough to allow the parties to reach a particular goal.

Size and Scope

Joint ventures are limited in their scope and what they can accomplish because they are just short-term projects. In contrast, partnerships can be huge and can last for however long as they want.

Accountability

When a company is labeled as a partnership, there are protections involved. When something goes wrong, only the offending party is considered at fault. This is true even though the deal is for the long term. In the case of a joint venture, liability is placed on both parties, even if only one is technically at fault. This makes joint ventures riskier.

Learn More About Corporate Law

When forming a business, there are various business structures to consider. If you plan to run a business with someone else, there are a couple types of partnerships to consider.

Which business entity is right for you? Orlando corporate lawyer B.F. Godfrey from Godfrey Legal can help you find the right structure to fit your business’ needs. We are well-versed in corporate law and are prepared to act as general counsel when legal matters arise. To schedule a consultation with our office, fill out the online form or call (407) 890-0023.

Source:

investopedia.com/ask/answers/100214/whats-difference-between-limited-liability-partnership-and-general-partnership.asp