A joint venture is an arrangement between two or more parties...where each party retains its separate identity, but works together through the joint venture, for a specific purpose...A partnership is the relationship between two or more parties...carrying on a business, in common, with a view of profit. A partnership is an ongoing relationship between the partners, unlike a joint venture which is usually for a limited period.
A joint venture is an arrangement between two or more parties...where each party retains its separate identity, but works together through the joint venture, for a specific purpose...A partnership is the relationship between two or more parties...carrying on a business, in common, with a view of profit. A partnership is an ongoing relationship between the partners, unlike a joint venture which is usually for a limited period.
It can be difficult to differentiate a joint venture and a partnership. What’s more, knowing which structure best suits your business and your objectives can be confusing. Despite their similarities, each has its own unique characteristics, resulting in varying legal rights and obligations.
To ensure you use the appropriate vehicle for your circumstances, it’s important you understand the key points of difference between a joint venture and a partnership. We’re here to explain the differences and highlight the pros and cons of each. So, let’s get started…
What is a joint venture?
A joint venture is an arrangement between two or more parties (either individuals or entities) where each party retains its separate identity, but works together through the joint venture, for a specific purpose, and typically for a limited time.
A joint venture can be structured in two ways:
Parties in a joint venture enjoy rights and assume obligations, which are often several and determined by contributions of capital made or ownership of shares. The joint venture agreement determines how profits and losses are shared.
A clearly written joint venture agreement (whether it is an agreement establishing an unincorporated joint venture or a constitution and shareholders’ agreement governing an incorporated joint venture) is essential in outlining the rights and obligations of the parties. It is the main source of regulation between the parties and its importance is further highlighted where, as in the case of many unincorporated joint ventures, the parties seek to exclude the operation of laws relating specifically to partnerships.
A joint venture has both pros and cons. You should consider the advantages and disadvantages before deciding to enter such arrangement. We run through some of these below.
Pros of a joint venture
Some of the pros of a joint venture include:
Cons of a joint venture
Some of the cons of a joint venture include:
What is a partnership?
A partnership is the relationship between two or more parties – up to 20 (either individuals or entities) carrying on a business, in common, with a view of profit. A partnership is an ongoing relationship between the partners, unlike a joint venture which is usually for a limited period. A partnership is not a separate legal entity.
In a partnership, each partner is:
Partners have a fiduciary relationship with each other, which means good faith is an essential element.
A partnership is governed by statute, with each Australian state and territory having its own version of the Partnership Act. Some jurisdictions also have regulatory instruments concerning partnerships.
However, the partnership relationship is primarily based in contract. Consequently, it is essential to have a clearly drafted partnership agreement in place to establish the basis of the relationship between the parties in the partnership business.
Like a joint venture, a partnership has advantages and disadvantages. You should weigh up the pros and cons before entering a partnership structure. We outline some of these below.
Pros of a partnership
Some of the pros of a partnership include:
Cons of a partnership
Some of the cons of a partnership includes:
Before entering into any type of arrangement, be it a joint venture, partnership or other, it’s essential you take into account the various business-relationship options available. Get in touch with the team at Lawthentic… We’ll consider your specific venture, advise you on the best vehicle, and equip you with a well-drafted agreement to establish a strong foundation for your business to thrive.
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