Difference between Joint Venture vs Partnership
Here we have to first understand that even if we talk about Joint Venture or Partnership both are the forms of business which mean that the ultimate purpose in both terms is to earn a profit. So here names and process are different but the ultimate objective of both joint venture vs partnership terms are the same.
Now first we understand the meaning of two words that are Joint and Venture, what do these two words mean?
- Joint: It means something that can be done or completed together.
- Venture: It means business.
So basically Joint Venture means Joint business, so it is the meaning of the Joint Venture. Now let’s understand the concepts of the Joint Venture with the help of the small example.
Let’s say there is a person called John and Andy, and both of these persons are builders by profession. John has his office in California, and in California, he has undertaken lots of projects. Andy has his office in Santiago, and in Santiago, he has undertaken lots of projects. So both are working separately, but they know each other because they are in the same profession. Now let’s say John has $20 Million and Andy also has $20 Million. The government published a tender in the newspaper to construct the building, and the minimum capital required is $40 Million than only they will consider any company to give the tender. John saw tender in the newspaper, and he became very much interested in this tender to undertake the project and earn the profit, but the problem was lack of finance because John has only $20 Million so couldn’t apply for the tender, but John reached out to Andy and talk with him and come to an agreement which is called as temporally partnership, they can both contribute in the tender and can do this project together. So, they can do this together, that what meant by Joint Venture. Two or more persons of the same field/Profession come together for a specific task is called as Joint venture, and after the completion of the specific project, the temporary partnership they created gets terminated as per agreement.
So From Above example, it is clear that Joint venture is nothing but the two or more Person who works separately, and comes together to make the profits and later again disconnected and work separately is called as Joint Venture.
The partnership is nothing but the relationship or association between two or more persons, who start the business, and who have agreed to share the profit and losses of the business carried on by all or by any of them acting for all. In partnership, Mutual understanding is required between the partners to run the business because the decision taken by one person may impact other partners or others have to face consequences of the decision. When two or more people come together for the common purpose of starting to do a business and who have agreed to share management and profit and losses is called Partnership.
The partnership is a legal business and its partners are also a legal and the most important thing in the partnership business is a belief, and it is based on a fiduciary relationship. In the partnership profit shares among the partners are as per the capital they invested and the duration of the investment.
Feature of Partnership Firm
- Sharing of Profit and Loss
- Simple Dissolution
- Mutual Trust
- Joint ownership
- Joint Management
- Unlimited Liability
- Number of Partners
- Registration of the Firm
- Lawful Business
Joint Venture vs Partnership (Infographics)
Below is the Top 9 Comparison between Joint Venture vs Partnership
Key Differences between Joint Venture Vs Partnership
Below are the Key differences between Joint Venture vs Partnership.
- Joint Venture is nothing but the business entity which is created by two or more persons/parties by and large characterized by pooled ownership and parties in Joint venture as known as co-Venturers, however Partnership is a legal arrangement where partners, agree to cooperate to advance their mutual interests, and participant in partnership is known as partners.
- Joint Venture is formed between the parties to achieve a precise goal in a specific time period and profit earning may or may not be the goal of Joint Venture, whereas Partnership is not limited only one project or goal, rather its focus running a business for long terms and make a profit from it.
- In Joint, Venture business is terminated or come to an end as soon as a precise goal achieved by the parties, however in partnership partners can close their partnership firm only after mutual consent. So, it shows that Joint Venture is a short term contract and partnership is a long-term contract.
- There is no special Act or law for Joint Venture, however, there is a separate act established by government for partnership.
- Accounting for Joint Venture is not done on going concern basis since it is for short terms. The method of accounting for the joint venture is liquidation accounting, whereas in the case of partnership firm accounting is done going concern basis, in short, it is essential for partnership firms to maintain books of accounts.
- In Joint venture there are no joint and several liabilities unless there is special agreement, however, in partnership, there is joint and several liabilities on partners.
Joint Venture vs Partnership Comparison table
How different is Joint Venture from Partnership? The Joint Venture differs from Partnership in the following aspects:
|Scope||Joint Venture is limited for a specific period and it is called as specific venture in which business is carried on by two or more persons.||In a Partnership duration or time period is not fixed and continuous ongoing concern basis and it is called as not limited to a specific venture in which business carried by two or more persons as per mutual understanding.|
|Persons Involved||The parties carrying on a business in the form of Joint ventures are Co-Venturers.||In Partnership, parties are called as partners.|
|Ascertainment of Profit or Loss||The Joint Venture ascertains the Profit or Loss at the end of a specific venture or on an interim basis.||In the Partnership, profit is distributed Annually.|
|Governing Law||There is no specific act that regulates the Joint venture.||Partnership firms are governed or regulated by the government.|
|Name||It’s not required to have a specific name.||It is required to have an identifiable name to Partnership firm.|
|Accounting||May or may not maintain a separate set of books.||It is required to maintain a separate set of books.|
|Method of Accounting||Liquidation accounting.||Accounting is done on-going concern basis.|
|Competition||The co-ventures’ can be in competing for business and no such restriction is placed on them unless the restriction incorporated in Joint Venture agreements.||In partnership, partners are not generally allowed to be in competing for business.|
|Purpose||It is a terminable profit-seeking venture.||It is a continuing profit-seeking enterprise.|
Joint Venture vs Partnership are the forms of business, but they are the two different entities, which differ from each other as mentioned above and these two terms come into pictures when an individual or business needs an additional fund or technical expertise. Nowadays various companies form a joint venture to complete a precise goal and once the goal completed the joint venture between them also comes to an end. In partnership firms partners comes together with an objective to earn the profit and shares the profit and loss jointly, so due to this partnership firms has longer life terms as compared to Joint venture. One important thing to understand here that liability in Joint venture is limited whereas, in the partnership, liability is unlimited because in partnership the entire firm is there-there is no other business and all.
This has been a guide to the top difference between Joint Venture vs Partnership. Here we also discuss the Joint Venture vs Partnership key differences with infographics and comparison table. You may also have a look at the following articles to learn more-