Difference Between Joint Venture and Partnership

Updated on April 5, 2024
Article byRishabh Chaddha
Edited byRishabh Chaddha
Reviewed byDheeraj Vaidya, CFA, FRM

Joint Venture vs Partnership Differences

When two or more entities come together to understand a specific action or purpose, it is known as the joint venture. When that purpose is completed, the said joint venture shall end temporarily. In contrast, a partnership is an understanding amongst its partners for a common goal and has a different status which is more permanent.

What is a Joint Venture?

A 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 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 (temporary partnership), and when the project is completed, the joint venture concludes.

Examples

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Source: Difference Between Joint Venture and Partnership (wallstreetmojo.com)

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What is Partnership?

The partnership pursuit is commenced either by all the partners or by a single partner acting as a spokesperson.

The features of the partnerships firm are mentioned as follows:-

Joint Venture vs Partnership Infographics

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Source: Difference Between Joint Venture and Partnership (wallstreetmojo.com)

Key Differences

  1. A joint venture is a type of business disposition or setup established for attaining a specific project, task, and activity. On the other hand, the contractual agreement between two or more 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 is known as the partnership
  2. The Indian Partnership Act administers the partnership, 1932, while there is no such activity in the case of the joint venture.
  3. The parties associated or concerned with the joint venture are called co-venturers, while on the other hand, the essential members or elements of the partnership are called partners. 
  4. A minor can never become an association or party to a joint venture. On the other hand, a minor can become a partner to the welfare and best interest or benefits of the partnership organization/company.
  5. In partnership, there is a particular business name, which is not in the prototype of a joint venture.
  6. A joint venture is established for a short duration, so going concern Going Concern Any analyst analyzing a company will be left to a basic assumption that the company does not go bankrupt or file a chapter 11 bankruptcy. This basic assumption allows the analyst to think that there is no immediate danger to the company. The company can operate until infinity is called the principle of going concern. accounting concepts do not register to it. On the other hand, the partnership trade is built on ongoing accounting concepts.
  7. In joint ventures, there is no particular precondition 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 ComparisonJoint VenturePartnership
DefinitionJoint 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 ActNo particular act.The partnership is administered by the Indian Partnership Act, 1932.
Trade sustained byCo-venturePartners
Repute of MinorMinor can never become a co-venturer.Minor can become a partner for the welfare and best interest of the organization.
Principles of AccountingLiquidationGoing Concern
Name of BusinessNoYes
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 booksNot mandatoryCompulsory

Conclusion

Joint ventures and partnerships are well-known and prominent business and trade manifestations. The company collaborates to capture market share or fill the gap in the market by forming strategic alliancesStrategic AlliancesA strategic alliance is a type of agreement between two companies to reap the mutual benefits of a specific project, in which both agree to share resources and thus result in synergy to execute the project, resulting in a higher profit margin.read more for particular reasons.

Moreover, when that reason is resolved or the purpose is fulfilled, the alliances/ firm/organization cease to exist. However, partnerships, on the other hand, have a longer period than joint ventures as they are not established to fulfill an organization’s primary and secondary objectives. Instead, they have an intention to complete a specific function. Still, the primary aim of the partnership is to 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. In contrast, the net profit of partnerships is estimated every year for joint ventures.

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