Joint Venture vs Partnership Differences
When two or more entities come together to an understanding for a specific action or purpose then it is known as the joint venture and when that purpose is completed the said joint venture shall come to an end as it is temporary in nature whereas partnership is an understanding amongst its partners for a common goal and has a separate status which is more permanent in nature.
What is a Joint Venture?
Joint VentureJoint VentureA joint venture is a commercial arrangement between two or more parties in which the parties pool their assets with the goal of performing a specific task, and each party has joint ownership of the entity and is accountable for the costs, losses, or profits that arise out of the venture.read more is defined as a type of business corporation where two or more firms come together for a specific purpose to attain a certain activity or task and complete a specific project. The venture formed is non-permanent or temporary in nature (temporary partnership) and description as when the project is completed the joint venture comes to a conclusion.
Examples
- An apt illustration of an Indian Joint Venture with a foreign company is the airline, Vistara which is the brand identity of Tata SIA Airlines Ltd, a Joint Venture between India’s corporate giant Tata Sons and Singapore Airlines (SIA).
- Bharti AXA General Insurance Co Limited is a Joint Venture between paramount trade group Bharti Enterprises and France based insurance major known as AXA. It offers a massive variety of insurance products starting from health. home, vehicle, travel, and education
- Network18, a famous electronic media organization has two successful joint ventures known as Network18-CNN and Network18- Viacom.
- India’s private banking major player, ICICI Bank has two victorious Joint Ventures known as ICICI Prudential Life Insurance Company Limited, a joint venture between ICICI Bank and Prudential Corporation Holdings Ltd. (UK Based) and ICICI Lombard a Joint Venture between ICICI Bank and Fairfax Financial Holdings Limited (Canada based) offering insurance policy and investments solutions and products to individuals and corporates.
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Source: Difference Between Joint Venture and Partnership (wallstreetmojo.com)
What is Partnership?
The partnership pursuit is commenced either by all the partners or by a single partner acting as a spokesperson for the partners.
The features of the partnerships firm are mentioned as follows:-
- An alliance or consortium of two or more than two
- Trade and commerce to be sustained by all or any one partner acting as a spokesperson or on behalf of all the members of a partnership
- The partners must divide or split the net profit marginThe Net Profit MarginNet profit margin is the percentage of net income a company derives from its net sales. It indicates the organization's overall profitability after incurring its interest and tax expenses.read more and net lossNet LossNet loss or net operating loss refers to the excess of the expenses incurred over the income generated in a given accounting period. It is evaluated as the difference between revenues and expenses and recorded as a liability in the balance sheet.read more depending upon the market scenario or circumstance in a mutually pre-decided ratio i.e. all the partners must hold equal proportionate shares of the company or firm while running the business.
- The accountability and responsibility of the partners are bottomless and measureless/unbounded.
- There can be a minimum of 2 members in a partnership organization, and the maximum cap of partners is 10 when it comes to the banking industry or trade and 20 for other businesses.
Joint Venture vs Partnership Infographics
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Key Differences
- A Joint Venture is a type of business disposition or setup which is basically established for attaining a specific project, task, and activity. On the other hand, the contractual agreement between two or more than two individuals of sound mind for running the business and sharing the triple bottom lineTriple Bottom LineTriple Bottom Line (TBL) is a theory that states that companies should make efforts to capture social and environmental prospects in their primary objectives besides earning profits. John Elkington coined the framework for the long sustainability of the business run by the corporates.read more thence is known as the Partnership.
- The Indian Partnership Act administers the partnership, 1932 while in the case of the joint venture there is no such act.
- The parties associated or concerned with the joint venture are called as co-venturers while on the other hand the essential members or elements of the partnership are called
- A minor can never become an association or party to a Joint Venture while on the other hand a minor can become a partner to the welfare and best interest or benefits of the partnership organization/company.
- In Partnership, there is a particular business name, which is not in the prototype of Joint
- A Joint Venture is established for a short duration, and that is the reason why going concern accounting concepts does not register to it while on the other hand, the partnership trade is built ongoing concern accounting concepts.
- In Joint ventures, there is no particular precondition as such to sustain or look after the books of accounts, but on the other hand in partnership with the perpetuation or sustenance of books of accounts is mandatory.
Comparative Table
| Basis of Comparison | Joint Venture | Partnership |
|---|---|---|
| Definition | Joint Venture is a trade formed by two or more than two individuals for a particular motive and for a shorter time period. | A contractual business agreement where two or more individuals agree to start a business and have equally proportionate shares in the event of both Profit, as well as Loss, is known as the partnership. |
| Exercising Act | No particular act. | The partnership is administered by the Indian Partnership Act, 1932. |
| Trade sustained by | Co-venture | Partners |
| Repute of Minor | Minor can never become a co-venturer. | Minor can become a partner for the welfare and best interest of the organization. |
| Principles of Accounting | Liquidation | Going Concern |
| Name of Business | No | Yes |
| Determination of Triple Bottom Line | If the firm is established for a shorter time period- At the resolution of the venture or if the firm is formed for a longer time period then on an interim basis. | Yearly basis |
| Sustentation of the distinct set of books | Not mandatory | Compulsory |
Conclusion
Joint Venture and Partnership is a very well known and prominent business and trade manifestation. The company collaborates to capture market share or fill the gap in the market by forming strategic alliances for particular reasons
And when that reason is resolved or purpose is fulfilled the alliances/ firm/organization then as well ceases to subsist. However, partnerships, on the other hand, have a longer time period than joint ventures as they are not established to mere fulfil primary and secondary objectives of an organization. They have an intention to complete a specific function, but the primary aim of the partnership is split business and share the triple bottom lineBottom LineThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more or net profit margin and losses mutually. However, when we mention profits, the profits are estimated at the end of the resolution of the firm/venture, whereas for Joint Ventures the net profit of partnerships is estimated on a yearly basis.
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