When two or more business owners get together to form a business relationship, they have a few options as to what type of relationship to enter into. The two most common business relationships are partnerships and joint ventures. So, what is the difference between a joint venture and a partnership?
A joint venture is a business arrangement in which two or more business owners agree to combine resources to undertake a specific business project or activity. The basic idea of a joint venture is that each business will contribute something, such as capital, property, personnel or expertise, to the venture and share in the profits or losses. The joint venture agreement typically specifies how profits are to be split between business owners, but it also should include provisions for liability and dispute resolution.
One of the main benefits of a joint venture is that business owners can combine resources with another business owner to engage in a business project or activity without forming a new company. This allows business owners to benefit from the other business’s resources while only being liable for their own contributions to the venture. Another benefit of joint ventures is that business owners are able to take advantage of the other business’s contacts and customer base, which can help generate more business.
A partnership is a business relationship in which two or more persons (or entities) agree to share profits and losses arising from business activities conducted by all partners. A partnership is similar to a joint venture in that business owners combine resources to engage in business activities, but it differs in that the business owners have an ongoing relationship and share profits and losses. A partnership agreement typically outlines how business decisions are made, how profits and losses are shared, and how disputes will be resolved between business owners per business law guidelines.
The main benefit of a partnership is the business owners involved can combine resources to form one business and share in the profits or losses. This allows business owners to share capital, expertise, personnel and other business resources with each other to better engage in business activities.
Each business relationship has its own advantages and disadvantages, so business it’s important to carefully consider your business goals and the resources available before deciding which business relationship is best for you. Ultimately, each business owner will have to decide what type of business relationship is most suitable based on their individual situation.