At Patel Fuller Law, we can help you make the right decision for your business formation. Many of our clients are uncertain about where to begin. There is also often confusion between partnerships and joint ventures. We can help you decide which setup is better suited to help you achieve success.

The Difference Between Partnerships and Joint Ventures

Although a joint venture is considered a form of partnership, there are some distinct differences, including:

  • A joint venture involves the joining of two or more companies, while a partnership is two individuals.
  • A joint venture is a contractual agreement between the two companies with specific goals in mind, while a partnership is an agreement between two individuals who agree to share the profits and losses of the business.
  • Partnerships have co-owners with the goal of making a profit, while a joint venture can have other purposes, such as research and development, which requires more investment than individuals might be willing to make.
  • Partnerships will last for many years, while joint ventures last for a limited time until your specific goals are met.
  • Partnerships are allowed to claim a capital cost allowance, while joint ventures can use as much or little of the capital cost allowance as needed.
  • Partnerships do not allow for individual identity, but in joint ventures, each entity can retain their own identity.
  • A joint venture is a setup for a single transaction, making it a less formal agreement than a partnership.
  • The rights and liabilities of joint ventures adhere to the same principles applicable to partnerships.
  • Joint ventures can be held jointly and severally liable for each other’s wrongful acts, while only the culpable members in a partnership are held criminally responsible.

What Are the Different Types of Joint Ventures?

There are two main types of joint ventures:

  1. Contractual: A contractual joint venture is a contract between the joint venture partners. The contract can be in writing or oral. We always recommend written contracts to ensure the contract remains enforceable.

 

  1. Separate Legal Entity: A separate legal entity can be a limited liability company or a corporation.

If the joint venture is a short-term relationship without a major investment at stake, we usually recommend a contract. They tend to be quicker and less expensive than forming a separate legal entity.

What is the Better Setup?

We can help you determine if a joint venture or partnership is right for your situation. In many cases, a joint partnership can increase your potential for increased growth. You will also have more resources that can provide improved technical capabilities as well as broader market and distribution access.

The most important element of a joint venture is finding the right venture partners. We can help you assess what prospective companies have to offer and provide advice on how they can help you achieve your business goals.

At Patel Fuller Law Firm, it is our goal to help you succeed. We provide legal advice and services required to find the right fit to improve your growth opportunities.