What Is the Difference Between a Joint Venture and a Partnership?
Partnerships and joint ventures are similar in some respects, but decidedly different in others. Both are legal entities, the former almost always composed of two or more individuals, but the latter usually composed of two existing businesses which themselves may or may not be partnerships. At Hoegen & Associates, P.C., we have a Business Lawyer DelCo PA who is well vested in business law. We will guide you in understanding the difference between a joint venture and a partnership.
The major difference between the two is the intent of the parties. Typically, the people deciding to form a partnership do so for the purpose of establishing a business whose life is perpetual and whose main goal is simply to make a profit by providing a product, service or several of each. Conversely, businesses that form joint ventures with each other do so for the purpose of accomplishing a specific goal that neither entity likely could accomplish on its own. Consequently, the intended life of a joint venture is however long it takes to achieve the intended goal.
One excellent example of a highly successful joint venture was the agreement between NASA and Google to create Google Earth, the app that allows anyone to see any place on Earth that a NASA satellite can see and take a photo of. Obviously, Google didn’t want to run a government agency, nor could it, and NASA didn’t want to go into the app business. So they joined their respective abilities and the result was extraordinarily beneficial, not only for them, but for people and businesses worldwide.
Written Agreement
To be a legally recognized partnership, you and the other person or people must have a written partnership agreement that sets forth each person’s contributions, responsibilities, etc. Each state has its own laws regarding how a partnership may be formed and what all needs to be covered in the partnership agreement.
In general, joint ventures are under no such strict scrutiny by the state(s) in which they’re formed. Technically, they don’t require a written agreement. Nevertheless, as with any major business decision, your wisest strategy when contemplating entering into a joint venture with another entity is to consult with an experienced local business lawyer. Your proposed joint venturer should likewise consult with its own business lawyer so both of you know exactly what you’re getting into and what your responsibilities will be.
If you forgo a written agreement, understand that a court can find the existence of a joint venture by looking at the facts and circumstances surrounding whatever it is that you and your de facto joint venturer are doing together and how you’re doing it.
Length of Venture
As stated, a joint venture lasts, at a maximum, only as long as it takes for the venture’s to accomplish what they set out to do together. However, the relationship is an at will one, meaning that, theoretically, either of you can end the joint venture whenever you wish. Should the other venturer not wish to part ways, however, you may wind up in court battling each other.
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