Joint Venture vs Partnership Differences

What is a Joint Venture?

A joint ventureJoint VentureA joint venture is a commercial arrangement between two or more parties in which the parties pool their assets with the goal of performing a specific task, and each party has joint ownership of the entity and is accountable for the costs, losses, or profits that arise out of the venture.read more is a type of business corporation where two or more firms come together for a specific purpose to attain a certain activity or task and complete a specific project. The venture formed is non-permanent or temporary (temporary partnership), and when the project is completed, the joint venture concludes.

Examples

  • An apt illustration of an Indian joint venture with a foreign company is the airline, Vistara, the brand identity of Tata SIA Airlines Ltd, a joint venture between India’s corporate giant Tata Sons and Singapore Airlines (SIA).Bharti AXA General Insurance Co Limited is a joint venture between Paramount Trade Group, Bharti Enterprises, and a France-based insurance major known as AXA. It offers a massive variety of insurance products starting from health, home, vehicle, travel, and education.Network18, a famous electronic media organization, has two successful joint ventures known as Network18-CNN and Network18- Viacom.India’s private bankingPrivate BankingPrivate banking refers to a type of banking and financial service offered by certain banks only to high-net-worth individuals (HNWIs). Clients opting for this service are individually assigned a financial representative who personally takes care of their banking needs.read more major player, ICICI Bank, has two victorious joint ventures known as ICICI Prudential Life Insurance Company Limited, a joint venture between ICICI Bank and Prudential Corporation Holdings Ltd. (UK Based), and ICICI Lombard, a joint venture between ICICI Bank and Fairfax Financial Holdings Limited (Canada based) offering insurance policy and investment solutions and products to individuals and corporations.

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What is Partnership?

The partnership pursuit is commenced either by all the partners or by a single partner acting as a spokesperson.

The features of the partnerships firm are mentioned as follows:-

  • An alliance or consortium of two or more than two.Trade and commerceCommerceCommerce is the accumulation of several transactions for a given industry. A transaction is a one-time event where an entity exchanges anything of value with a different entity.read more to be sustained by all or any one partner acting as a spokesperson or on behalf of all the partnership members.The partners must divide or split the net profit marginThe Net Profit MarginNet profit margin is the percentage of net income a company derives from its net sales. It indicates the organization’s overall profitability after incurring its interest and tax expenses.read more and net lossNet LossNet loss or net operating loss refers to the excess of the expenses incurred over the income generated in a given accounting period. It is evaluated as the difference between revenues and expenses and recorded as a liability in the balance sheet.read more depending upon the market scenario or circumstance in a mutually pre-decided ratio, i.e., all the partners must hold equal proportionate shares of the company or firm while running the business.The accountability and responsibility of the partners are bottomless and measureless/unbounded.There can be a minimum of 2 members in a partnership organization. The maximum partners’ cap is 10 for the banking industry or trade and 20 for other businesses.

Joint Venture vs Partnership Infographics

Key Differences

  • A joint venture is a type of business disposition or setup established for attaining a specific project, task, and activity. On the other hand, the contractual agreement between two or more individuals of sound mind for running the business and sharing the triple bottom lineTriple Bottom LineTriple Bottom Line (TBL) is a theory that states that companies should make efforts to capture social and environmental prospects in their primary objectives besides earning profits. John Elkington coined the framework for the long sustainability of the business run by the corporates.read more is known as the partnershipThe Indian Partnership Act administers the partnership, 1932, while there is no such activity in the case of the joint venture.The parties associated or concerned with the joint venture are called co-venturers, while on the other hand, the essential members or elements of the partnership are called partners. A minor can never become an association or party to a joint venture. On the other hand, a minor can become a partner to the welfare and best interest or benefits of the partnership organization/company.In partnership, there is a particular business name, which is not in the prototype of a joint venture.A joint venture is established for a short duration, so going concern Going Concern Any analyst analyzing a company will be left to a basic assumption that the company does not go bankrupt or file a chapter 11 bankruptcy. This basic assumption allows the analyst to think that there is no immediate danger to the company. The company can operate until infinity is called the principle of going concern. accounting concepts do not register to it. On the other hand, the partnership trade is built on ongoing accounting concepts.In joint ventures, there is no particular precondition to sustain or look after the books of accounts, but on the other hand, in partnership with the perpetuation or sustenance of books of accounts is mandatory.

Comparative Table

Conclusion

Joint ventures and partnerships are well-known and prominent business and trade manifestations. The company collaborates to capture market share or fill the gap in the market by forming strategic alliancesStrategic AlliancesA strategic alliance is a type of agreement between two companies to reap the mutual benefits of a specific project, in which both agree to share resources and thus result in synergy to execute the project, resulting in a higher profit margin.read more for particular reasons.

Moreover, when that reason is resolved or the purpose is fulfilled, the alliances/ firm/organization cease to exist. However, partnerships, on the other hand, have a longer period than joint ventures as they are not established to fulfill an organization’s primary and secondary objectives. Instead, they have an intention to complete a specific function. Still, the primary aim of the partnership is to split business and share the triple bottom lineBottom LineThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more or net profit margin and losses mutually. However, when we mention profits, the profits are estimated at the end of the resolution of the firm/venture. In contrast, the net profit of partnerships is estimated every year for joint ventures.

This has been a guide to Joint Venture vs Partnership. Here we discuss the top differences between them along with infographics and comparison table. You may also have a look at the following articles –

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