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How is a joint venture different from a partnership?

On Behalf of | Sep 15, 2021 | Business Formation

You may want to share your business with another entrepreneur, perhaps to the point of forming a partnership. However, not all business ventures consist of partnerships. The nature of your professional relationship with another person or business might constitute a joint venture.

It is important to know the difference between a joint venture and a business partnership. Whichever one you choose will depend upon your priorities and goals for your business endeavor.

The purpose of a joint venture

Chron explains that parties use a joint venture to work together on a specific project. The parties contribute labor, finances or geographic assets to bring the project to fruition. The venture concludes when the project is complete. This is in contrast to a partnership, which may continue indefinitely with ongoing or multiple work projects.

Joint ventures and independence

A partnership involves an arrangement between two or more individuals under the umbrella of a single business structure. Conversely, a joint venture does not cause the parties to give up their independence. If you enter into a venture as the owner of a business, the venture agreement does not change the structure of your business into a permanent partnership.

Time is a factor

A partnership contract generally does not have a time limit. There may be conditions to dissolve the partnership like a buyout or the death of a partner. However, a joint venture generally lasts for a time period specified in the contract. Your venture may last for one year but could go on for multiple years.

Be aware of disadvantages

While you might feel comfortable with a joint venture, be aware of how your contract binds you. Your venture may require you to give up some control and revenues. The venture might expose you to liability. Negotiating the venture contract may also take a while if there are difficult issues to settle. Be certain that you have chosen the best business structure to protect your rights.