Joint Venture is a form of business organization which is temporary in nature. It is established for a specific purpose or to accomplish a certain task or activity and when this purpose is completed the joint venture comes to an end. Joint venture is not exactly same as partnership, which is also a type of business entity, that come into existence when two or more persons come together to share business profits. The partnership business is understaken either by all the partners or by one partner acting on behalf of all the partners.
The main difference between partnership and joint venture is that partnership is not limited to a particular venture, whereas joint venture is limited to a particular venture. Similarly, there are other distinguishing points between the two terms, that you can learn in the given article.
Content: Joint Venture Vs Partnership
|Basis for Comparison||Joint Venture||Partnership|
|Meaning||Joint Venture is a business formed by two or more than two persons for a limited period and a specific purpose.||A business arrangement where two or more persons agree to carry on business and have mutual share in the profits and losses, is known as Partnership.|
|Governing Act||There is no such specific act.||The partnership is governed by the Indian Partnership Act, 1932.|
|Business carried on by||Co-venturers||Partners
|Status of Minor||A minor cannot become a co-venturer.||A minor can become a partner to the benefits of the firms.|
|Basis of Accounting||Liquidation||Going Concern|
|Ascertainment of Profit||At the end of the venture or on interim basis as the case may be.||Annually|
|Maintenance of separate set of books||Not necessary||Mandatory|
Definition of Joint Venture
Joint Venture is defined as a business organisation where two or more parties come together for completing a particular task, project or activity. The venture is formed for a limited period, also known by the name temporary partnership. Here the parties to the venture are considered as Co-venturers who agree to run the venture jointly by combining their resources like capital, inventory, machinery, manpower, etc. and by sharing profits and losses in the specified ratio without the use of the firm name.
The determination of profit and losses of the joint venture can be done as follows:
- If the Venture is formed for short duration: At the end of the Venture
- If the Venture is formed for a long duration: On Interim Basis
Some popular example of Joint Venture business is:
- Sony Ericsson is a joint venture to make mobile phones where Sony is a Japanese electronics company, and Ericsson is a Swedish telecommunication company.
- Caradigm, a joint venture between Microsoft Corporation and General Electric Healthcare.
- Hero Honda, a joint venture between Hero Cycles India and Honda Motor Company Japan to manufacture two-wheeler vehicles.
Definition of Partnership
An agreement between two or more persons in which they agreed to carry on the business and to share the profits and losses mutually is known as the Partnership. The members are individually known as partners and collectively referred to as a firm. The following are the features of partnership:
- An association of two or more than two individuals.
- Agreement between the partners for carrying on business.
- Business to be carried on by all or any one partner on behalf of all the partners.
- The partners must share profits and losses in an agreed ratio.
- The liabilities of the partners are unlimited.
There can be minimum two members in a partnership firm, and the maximum limit of partners is 10 in the case of banking business and 20 for other business. Partners are held liable for the acts done in the name of the firm.
Key Differences Between Joint Venture and Partnership
The following are the major differences between the Joint Venture and Partnership:
- A Joint Venture is a type of business arrangement which is formed for accomplishing a particular project. The agreement between two or more than two persons for carrying business and sharing the profits thereof is known as the Partnership.
- The Indian Partnership Act governs the partnership, 1932 whereas there is no such statute in the case of the joint venture.
- The parties involved in the joint venture are known as co-venturers while the members of the partnership are called partners.
- A minor cannot become a party to Joint Venture. Conversely, a minor can become a partner to the benefits of the partnership firm.
- In Partnership, there is a specific trade name, which is not in the case of Joint Venture.
- A Joint Venture is formed for a short duration, and that is why going concern concept does not apply to it. On the other hand, the Partnership is based on going concern concept.
- In Joint Venture, there is no specific requirement to maintain books of accounts, but in partnership the maintenance of books of accounts is compulsory.
Joint Venture and Partnership are very famous business forms. Many big enterprises come together for specific purposes to form a joint venture and when that purpose is accomplished the venture also ceases to exist. Partnerships last longer because they are not formed with an intention to complete a particular purpose, but the sole objective of the partnership is to undertake business and share profits and losses mutually.
When we talk about profits, the profits are calculated at the end of the venture, for Joint Ventures but the profits of partnerships are determined annually.