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Difference between joint venture and partnership

Difference between joint venture and partnership

Joint Venture a form of business organization that is temporary in nature. established for a specific purpose or to perform a specific task or activity and when this purpose completed the joint venture ends. The joint venture is not exactly the same as the partnership, which is also a type of corporate entity, which arises when two or more people come together to share company profits. The partnership activity is carried out by all partners or by a partner who acts on behalf of all partners.

The main difference between partnerships and joint ventures is that the partnership is not limited to a particular firm, while the joint venture is limited to a particular firm. Likewise, there are other distinctive points between the two terms, which you can learn in the given article.

Comparative chart

Basis for comparison Joint venture Association
Sense Joint Venture a company consisting of two or more than two people for a limited period and a specific purpose. A commercial agreement in which two or more people agree to conduct business and have a mutual share of profits and losses, known as a partnership.
Government law There is no such specific act. The partnership regulated by the Indian Partnership Act, 1932.
Activities carried out by Co-participants Partner
State of minors A minor cannot become a co-venturer. A minor can become a partner for business benefits.
Accounting basis Clearance Going Concern
Trade name No s
Profit assessment At the end of the enterprise or on a provisional basis, as appropriate. Annually
Maintenance of a separate series of books Unnecessary Obligatory

Definition of Joint Venture

Joint Venture defined as a corporate organization where two or more parties come together to complete a particular task, project or activity. The company set up for a limited period, also known as the temporary partnership. Here the parts of the enterprise are considered as co-participants who agree to manage the enterprise jointly by combining their resources such as capital, inventory, machinery, workforce, etc. And by sharing profits and losses in the specified relationship without the use of the company name.

The joint venture's profits and losses can be determined as follows:

  • If the Venture formed for short duration: At the end of the Venture
  • If the firm formed for a long duration: on a provisional basis

Some popular examples of Joint Venture activities are:

  • Sony Ericsson a joint venture to create cell phones where Sony is a Japanese electronics company, and Ericsson is a Swedish telecommunications company.
  • Caradigm, a joint venture between Microsoft Corporation and General Electric Healthcare.
  • Hero Honda, a joint venture between Hero Cycles India and Honda Motor Company Japan for the production of two-wheeled vehicles.

Definition of partnership

An agreement between two or more people in which they have agreed to carry on the business and to share profits and losses mutually known as Partnership. Members are known individually as partners and collectively referred to as a company. The following are the characteristics of the partnership:

  • An association of two or more than two individuals.
  • Agreement between the partners for the conduct of business.
  • Activities to be carried out by all or one of the partners on behalf of all partners.
  • Partners must share profits and losses in an agreed relationship.
  • The responsibilities of the partners are unlimited.

There can be at least two members in a partnership company, and the maximum limit of partners 10 in the case of banking activities and 20 for other activities. The partners are held responsible for the acts performed on behalf of the company.

Key differences between joint ventures and partnerships

The main differences between Joint Venture and Partnerships are shown below:

  1. A Joint Venture is a type of commercial agreement that is formed to carry out a particular project. The agreement between two or more than two people to bring business and share their profits known as partnership.
  2. The Indian Partnership Act governs the partnership, 1932 while there is no such statute in the case of the joint venture.
  3. The parties involved in the joint venture are known as co-participants while the members of the partnership are called partners.
  4. A minor cannot become part of the joint venture. On the contrary, a minor can become a partner for the benefits of the partnership company.
  5. In Partnership there is a specific commercial name, which is not the case for Joint Venture.
  6. A joint venture established for a short period of time, which is why the concept of business continuity does not apply to it. On the other hand, the partnership is based on the concept of business continuity.
  7. In Joint Venture, there is no specific requirement to maintain accounting books, but in mandatory association the maintenance of accounting books.

Conclusion

Joint Venture and Partnerships are very popular forms of business. Many large enterprises come together for specific purposes to form a joint venture and when the goal is achieved, the enterprise ceases to exist. Partnerships last longer because they are not formed with the intention of completing a particular purpose, but the sole objective of the partnership to undertake business and share profits and losses with each other.

When we talk about profits, profits are calculated at the end of the venture, for Joint Ventures but the profits of partnerships are determined annually.