A joint partnership is a legal structure for a business to use to bring together the abilities, resources, and talents of multiple companies or individuals for a common goal.

Joint Ventures Versus Partnerships

Joint ventures (JVs) and partnerships are frequently thought to be the same thing, even though they differ. Their differences are significant and, although they do have a similar legal structure, it's important that entrepreneurs understand which type of structure is right for their business goals.

If a business owner wants to work with another company or individual, they should analyze their options so that they can use the optimal strategy for their plans. Joint ventures and partnerships both have co-owners, and they share the profits and losses of the enterprise.

Joint ventures are usually used for one or more transactions between two companies or individuals, whereas a partnership is used when two parties want to maintain an ongoing relationship for their business ventures. Joint ventures are limited in both their duration and scope when it comes to cooperative business structures.

When individuals or companies decide to begin a specific research study or develop a new product, this is a great opportunity for a joint venture with another party that may bring some new knowledge or experience to the table. Joint ventures are also helpful when a company wants to pursue a new opportunity but lacks the funds to make it possible. A larger company can offer financial support to a smaller one through a joint venture.

In some cases, a court might decide that you actually entered into a partnership, instead of a joint venture, depending on how finances and other aspects of the business relationship were handled.

Joint Venture Basics

Joint ventures are business commitments made between two or more parties that are working on a specific project together. An undertaking by a joint venture can be anything from a brand new task for the company to an experimental research project.

All of the participants in a JV are each responsible for the following financial aspects:

  • Profits
  • Losses
  • Costs

In order to run a successful joint venture, the individuals or businesses involved will need to form a written or oral agreement and be sure that everyone is on the same page as far as their goals for the project. All of the members should not only have equal rights to profits and responsibility for losses, but they should also carry equal weight in major decisions regarding the venture.

Important Aspects of a Joint Venture

Whether a joint venture should be formed depends on the circumstances of the individuals or business considering the start of a new project.

When deciding if this sort of collaborative structure is right for you, think of the following questions:

  • Is there a shared interest in the success of a particular task or project?
  • Do you want to share control of your venture with others?
  • Is there a shared financial interest in the focus of the venture?
  • Do you want to share rights to profits and a responsibility for losses?

When forming a joint venture, it's a good idea to sign a written contract, but an oral agreement is acceptable. Both parties will need to make sure that they are clear about the following details of the arrangement:

  • Ownership percentages
  • Profit splitting
  • Investment amounts
  • Asset sharing
  • Partner rights and responsibility

Partnership Basics

Joint venture are basically a type of partnership. Partnerships are voluntary arrangements between two parties or more that decide to start a business together. General partnerships are permanent business structures, unlike joint ventures. The members, or partners, in a general partnership take equal responsibility for all of the company's efforts and projects.

Some partnerships do include passive partners who are involved only financially in the business, but they do reserve the right to ask questions and have say in major company decisions at any point during the life of the business.

Important Aspects of a Partnership

There are a few important things to keep in mind when deciding between a partnership and a joint venture.

Members of a partnership share in the ownership of a company, not just a specific project or business venture.

Taxes and business expenses fall under the responsibility of partners.

Written contracts are not required to form partnerships, but they are a good idea to outline the specific rights and duties of all partners involved. In the case of future company disputes, a written contract can help to provide clear and concise resolutions.

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