Difference Between a Joint Venture and Partnership

A business can come in different forms, like a sole proprietorship, corporation, joint venture or a partnership. Among these types, joint venture and partnership are commonly mistaken for each other. Here are the variations between a joint venture and partnership.

A joint venture is a contractual agreement between two companies or parties to join together in order to accomplish a particular project or business undertaking. Both parties continue to maintain their own businesses and exist as separate entities. Companies may take part in a joint venture for reasons like research and development, property development, or travel agreements.

A partnership is a form of business wherein partners contribute money, property, and/or industry to pursue a common objective for the sake of profit. Unlike a joint venture, a partnership exists as a single entity. The partners agree on how they contribute to the business as well as stipulate division of profits and losses. A partner can be rendered liable to pay for debts that the other partners cannot pay if it concerns the business. 

Comparison Board

Joint Venture
Partnership
Definition Two different entities join together in a contractual agreement to pursue a mutual objective Partners contribute money, property, and/or industry to accomplish a specific objective for the purpose of profit
Key Points A common interest or purpose, joint control, right to a share in profits, a duty to share in the losses, does not necessarily pursue profit A common interest or purpose, joint control, right to a share in profits, a duty to share in the losses, pursuit of profit, a maximum number of 20 partners
As an entity The involved entities are separate from each other The partnership itself is the single entity
Advantages Opportunity for business expansion, ability to grow without the need to increase liabilities, development, greater access to resources and labor Ease of establishment, lower costs, flexibility in business structure, less external regulation, privacy of each partner’s affairs
Disadvantages Risk of breach of trust, lack of collaboration can pull the other entity down, risk of conflicts Liability and accountability regarding other partners’ debts and actions, division of profit, unlimited liability which can possibly affect personal assets
Division of profit and loss Division at the end of the project Division based on stipulation, usually based on capital contribution
Scope of liability Each party is liable for their own incurred debts Unlimited liability (except in the case of limited partners); accountability for the debts incurred by other partners

 

Venn Diagram