4 Key Differences Between a Partnership and a Joint Venture

When it comes to a partnership or a joint venture, two terms are not interchangeable, especially in the business world. While the differences may seem tiny, in legal language these have quite an impact.

Joint Venture Examples

One innovative joint venture was Google and NASA partnering to make Google Earth. Google Earth allows you to see any place on Earth that the satellites can see, with photos that can be updated readily. NASA launched the satellite that Google uses for its maps, which have since paved the way for driving apps such as Google and Waze. 

Another joint venture that is still in the works is Uber and Volvo. Uber is the ride-sharing company that runs on apps, while Volvo is a car manufacturer. They have collaborated to create self-driving cars for Uber. Volvo will deliver the vehicles while Uber still installs the necessary software between 2019 and 2021. 

While there are still kinks in the process, with the technology of self-driving cars and licensing concerns in Europe, the deal is still moving forward. If successful, it could prove to be a game-changer in ride-sharing.  

Joint Venture Vs. Partnership

On the face of it, a partnership and a joint venture would seem to be the same thing. Both involve more than one party getting together for the purpose of undertaking business or some other project. However, this is where their two roads diverged. Here are the key differences:

1) Who Is In It

A partnership is usually only made up of persons, two or more, who form a legally recognized association for the purpose of operating a business. A joint venture, on the other hand, can be individuals or entities such as corporations, or even governments and businesses. It can also be individuals, whereas a partnership is often only individuals.

2) The Purpose

This is perhaps where partnerships and joint ventures are the most different. A partnership’s purpose is not limited to a single project or goal; rather, it is oriented towards running a business or long-term enterprise and making a profit. 

Joint ventures, on the other hand, are designed to accomplish a specific goal. Each party contributes their share to an agreed-upon task. Profit may not be on the list of goals of the joint venture at all. For example, universities and drug companies often enter into joint ventures to find new drugs.

3) How Each Is Made

Partnerships are usually formed with a partnership agreement or contract between the individuals who make up the partnership. The partnership agreement lays out the terms of the partnership covering topics such as sharing in profits and losses, how partners can leave the partnership, the percentage of control held by each partner, and similar issues. 

Joint ventures, on the other hand, may not necessarily have an agreement in place. Or, if there is an agreement, it is a short-term and very specific contract that addresses the particular project that is going to be undertaken.

4) How Long Each Lasts

Partnerships are designed to last for the life of the business. They can run infinitely. In contrast, joint ventures are meant for short-term project lifetimes. They are not meant to last forever, just long enough to allow the parties to reach a particular goal.

Let’s go back to Volvo and Uber. Volvo is only planning to make the cars and deliver them to Uber. This will not be a longer-term deal because once Uber has enough cars, they won’t need to order them in bulk again. 

5) How Big Is The Size And Scope

Joint ventures are limited in their scope and what they can accomplish. This is due to the duration and size of the agreement on a project. Partnerships, in contrast, can be huge; consider how every Barnes & Noble bookshop has a Starbucks. The combination of food and books lures many people to the shop, and they are more likely to make purchases. 

6) Who Is Accountable

When a partnership goes wrong and causes a moral hazard, only the offending party is faced with fault. Even though the deal is for the long-term, this protects partners that have entered a deal unwittingly before a disaster. 

In the case of a joint venture, however, both parties are seen at fault in the case of a moral hazard or criminal wrongdoing. Accountability greatly increases. This makes joint ventures riskier in the short-term. 

Refine Your Joint Venture Agreement With Trembly Law

Trembly Law wants to assist you with every important business decision. Are you contemplating entering into a partnership or a joint venture? Consulting with competent and experienced legal counsel is a must whether you are thinking about joining a partnership or a joint venture. 

Consider scheduling a consultation with the Trembly Law Firm today to get the help you need making such big decisions. Our team of experienced lawyers will assist you with specific projects and the right type of business.

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