When one is asked to differentiate Joint Venture Vs Partnership, it is often getting very confusing. Sometimes people misinterpret and it appears as if both associations have the same nature. However, they are very different undertaking with different goals and objectives. Discussing some of the striking difference between Joint Venture Vs Partnership can be an eye-opener to an aspiring individual or even for an organisation if they want to move forward with the idea.
Who Constitutes What
Joint Ventures are initiated up by organisations. It can be between private companies, with the government, or by individuals who already have established businesses. Partnerships, on the other hand, are formed by association with two or more individuals to run a business and is legally documented.
What is the Goal
When two or more organisations want to execute a specific program with a common interest, they enter into Joint Venture. Here profits may not be the ultimate goal. The participant share.
Partnerships are formed purely for running a business with the ultimate objective of earning profits. They usually have multiple goals and execution motivated by profits.
Identity of Entity
Joint Ventures usually do not have a specific identity. Each member maintains their own identity and sometimes the venture is named combining the name of all the involved parties.
The partnership must have a specific identity and all individuals come under the purview of this specific identity.
Terms of Association
Joint Ventures are done on mutual accord and may or may not have a contractual agreement.If a contract is executed between the involved parties, it is for a definite task.
Partnerships are done through legal association wherein terms of engagement are specified - share of the investment owned by each party, the share of profits for each partnership, how the association can be dissolved and other terms.
Duration of Association
Joint ventures are usually undertaken for a very specific period and can be extended through mutual agreement. However, it is for a limited duration only.
The partnership does not have any duration and can continue till the time the involved parties decide to dissolve the same. It aims to run a profitable business until involved parties are not satisfied with the previously agreed terms.
Accountability of Associated Members
Accountability means empowering involved members with responsibility for a specific task.
In partnership, each partner is accountable for specific activity which when executed will earn profits for the business and vice versa. Hence, an earning partner can be held accountable for his failures to complete the given responsibility.
For Joint Venture, all involved parties will be equally accountable for any failures to achieve the specific objective. Hence, accountability is gathered responsibility for all involved parties.
Periodicity of Profit Calculation
Joint Ventures being a short term project, usually, accounting is done at the end of the project to examine the expenditure Vs the earnings (profits/loss in terms of tangible assets or level of achievement in terms of intangible assets). Sometimes, if a project spills over for more than a year, then it may be done annually also.
In partnership, it is specifically done annually to make profits and loss mean a failed association.
Thus, though Joint Venture and Partnership hold differences in their approaches, yet the bottom line remains static in terms of attaining profit margins and growth to the companies.