Difference Between Joint Venture and Partnership
Joint Venture and Partnership are distinct forms of business organization with different characteristics and durations. A Joint Venture is a temporary collaboration established for a specific purpose or project, which ceases to exist once the objective is achieved. On the other hand, Partnership is a long-term association where two or more individuals come together to share business profits, and the business is operated either collectively by all partners or by one partner representing the group.
Partnership and joint venture differ primarily in their scope: partnership extends beyond a specific venture, while joint venture remains confined to a particular venture. Besides this fundamental contrast, additional differentiating factors between the two can be explored in the provided article.
Comparison Table
| Basis for Comparison | Joint Venture | Partnership |
| Meaning | A temporary business collaboration with a specific purpose. | A business arrangement with mutual sharing of profits and losses. |
| Governing Act | No specific act. | Governed by the Indian Partnership Act, 1932 (in India). |
| Business carried on by | Co-venturers | Partners |
| Status of Minor | A minor cannot become a co-venturer. | A minor is eligible to share in the profits of the firm as a partner. |
| Basis of Accounting | Liquidation | Going Concern |
| Trade Name | No | Yes |
| Ascertainment of Profit | At the end of the venture or on an interim basis. | Annually |
| Maintenance of separate set of books | The maintenance of a separate set of books is not necessary | The maintenance of a separate set of books is Mandatory |
Definition of Joint Venture
A joint venture is a collaborative business arrangement in which two or more parties come together to accomplish a specific task, project, or activity. It is a temporary partnership where the participating entities, known as co-venturers, combine their resources such as capital, inventory, machinery, and manpower to jointly operate the venture. They share the profits and losses in a predetermined ratio without using a distinct firm name.
The determination of the joint venture’s profits and losses can take place either at the end of the venture for short-duration projects or on an interim basis for long-duration projects.
Some well-known examples of joint ventures include
Sony Ericsson, a joint venture between Sony (Japanese electronics company) and Ericsson (Swedish telecommunication company) for manufacturing mobile phones,
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, focused on manufacturing two-wheeler vehicles.
Definition of Partnership
Partnership is a contractual arrangement among two or more individuals, wherein they come together to conduct a business venture, jointly bearing the profits and losses. These individuals are known as partners, and collectively, they form a firm. The essential characteristics of a partnership include:
- Formation by multiple partners.
- Agreement among the partners to engage in the business.
- The business can be operated by all partners or any one of them, representing the entire group.
- The partners agree to distribute profits and losses based on a predetermined ratio.
- Unlimited liability for the partners.
- The partnership firm must consist of a minimum of two members, and there is typically a limit of 10 partners for banking businesses and 20 partners for other types of businesses. All partners are responsible for the actions taken on behalf of the firm.
Key Differences Between Joint Venture and Partnership
Joint Venture: Joint Venture is established to achieve a specific project or goal, and it involves co-venturers who collaborate temporarily for that purpose. No specific statute governs joint ventures.
Partnership: Partnership, governed by the Indian Partnership Act of 1932, is formed when two or more individuals or entities agree to carry on a business together and share its profits.
- Parties Involved:
- Joint Venture: The entities involved in a joint venture are called co-venturers.
- Partnership: In a partnership, the participants are referred to as partners.
- Minor’s Participation:
- Joint Venture: Minors cannot become parties to a joint venture.
- Partnership: A partnership firm may extend the benefits of its operations to include minors as beneficiaries.
- Trade Name:
- Joint Venture: Joint ventures do not typically have a specific trade name.
- Partnership: Partnerships often have a specific trade name under which they conduct their business.
- Duration and Going Concern Concept:
- Joint Venture: Joint ventures are usually formed for a short duration to accomplish a specific project, and the going concern concept does not apply to them.
- Partnership: Partnerships are established for the long term, and the going concern concept is applicable since they aim for continuous business operations.
- Maintenance of Books of Accounts:
- Joint Venture: There is no specific requirement to maintain books of accounts for a joint venture.
- Partnership: In a partnership, it is compulsory to maintain books of accounts to record the financial transactions and affairs of the firm.
Keep in mind that while these differences are generally applicable, the specific legal and regulatory requirements for joint ventures and partnerships may vary depending on the jurisdiction and the nature of the businesses involved. Always seek professional advice and consult relevant laws when establishing any business arrangement.
Conclusion
Joint ventures and partnerships are two popular business forms utilized by companies for various purposes. Joint ventures involve multiple entities collaborating for a specific project, with the venture dissolving upon completion. On the other hand, partnerships are established for ongoing business operations, where the focus is on sharing profits and losses among the partners. While joint venture profits are determined at the end of the venture, partnership profits are calculated annually.
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