Understanding the Difference Between a Partnership and a Joint Venture

Trying to understand the differences between partnerships and joint ventures leaves many people scratching their heads. The truth is that they are fairly similar. However, there are some differences, and these are essential to understand before entering into such an agreement.

Both a partnership and a joint venture involve two or more parties joining forces to launch a business or embark on another type of project. However, deciding whether to create this business or project as a partnership or a joint venture can affect things later down the line.

What are the main differences?

The Intention

The purpose of a partnership or a joint venture is often very different. If people come together to form a partnership, they may have numerous objectives under the umbrella of running a business or enterprise together. However, those creating a joint venture tend to have one specific, clearly defined goal.

The Agreement

Partnerships and joint ventures are both typically created with an agreement or a contract that is drawn up and signed by all parties involved, but can also exist simply by the parties conducting business together. A partnership agreement states the terms of the partnership’s ongoing business and will contain information such as how any profits or losses are distributed. In a joint venture agreement, the terms are usually very specific to reflect the particular agreed upon purpose of that specific joint venture rather than an ongoing business.

The Duration

Because a partnership is almost always formed with the intention of setting up and running an ongoing business, the duration of the partnership would last as long as the company continues to run, with no definite end. Joint ventures, on the other hand, have a limited lifespan. The purpose of a joint venture is to achieve a definitive business goal. Once the goal is reached, the joint venture no longer needs to exist.

How do you know if you should set up a partnership or joint venture?

Whether you need to establish a partnership, joint venture, or something else entirely, depends on many factors. Before you decide, you should examine:

  • your business purpose, goals, and objectives
  • the length of time required to achieve your business goals and objectives
  • each of your intentions and roles in pursuing those objectives
  • how resources, staff, and profits will be shared between you

Consulting with experienced legal counsel before entering into a joint venture or partnership can help ensure you make the right choice for you and your business. Get in touch with John Espinosa, Esq. today for a free, 30-minute consultation.

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John Espinosa, Esq.

John Espinosa helps entrepreneurs do business right by providing convenient access to quality legal advice and services, with more than 15 years experience in the legal field from multiple perspectives.

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