Difference Between Joint venture and Partnership

Depending on the needs of your business, you can either choose to form a partnership or carry out a joint business venture. Both business structures will have their own legalities, and will be subject to taxation.

In a joint venture, entities combine and contribute financial resources, expertise, time and knowledge to launch a product or service. They work to launch a venture which would not have been feasible for any one entity to carry out on its own. A partnership will be considered as a binding legal arrangement between two or more individuals, all of whom will own or will be a part of a single business.

Management efforts will be carried out on a collective basis in a joint venture, where two businesses will combine and make strategic, financial and operational decisions with the consent of each other. This will ensure that no single entity has all the control. In a partnership, participants will contribute money, share their own expertise, and split the profits depending on a pre-arranged agreement or on the amount of money invested by each participant.

When running a joint venture, the risk as well as the benefits may be predetermined, depending on the efforts and resources put in by either entity. This will further depend on the interest of a particular party. Moreover, the amount of benefits may differ where one party gets monetary benefits while other is entitled for tangible gains such as development in Research or manufacturing. While a partner’s consent may be needed to handle day-to-day activities, it is not necessary that mutual consideration will be taken into account when dealing with business transactions. Furthermore, the risk in partnerships can be great if they are not limited partnerships. Under usual circumstances all partners will be held liable for the debts and obligations, which may include personal liability.

Tax considerations may vary depending on the scale of the venture. If the participants are working on an international level, they may be subject to double taxation or on the vested interest each has in the venture. In such cases, profits will be calculated on the participant’s individual returns. Joint ventures are usually temporary in nature and end as soon as the task is completed. However, a partnership is a going concern business, where profits are realized on an annual basis. The tax filling will be done individually, where taxes will be paid according to the percentage of each participant’s share.