Partnership and Joint Venture: What’s the Difference?

When people talk about going into business together, they often talk about going into a joint venture. They also say they’ll be partners. Or they’ll say they will be partners in a joint venture. Whatever the combination, one thing is certain: many people just don’t know what the legal difference is between a joint venture, and a partnership.

What is a Joint Venture?

As a general rule of thumb, a joint venture is two people or a group of people that are working on one specific project—for example, imagine that scientists go into business to develop a medicine, or two people are going to join forces to fix up and sell a piece of property.

Joint ventures usually end—the project often has a stated end goal. Unlike partnerships, where partners usually share equally in profits and losses, joint ventures often do not. Profits and losses are determined by the joint venture agreement.

In fact, a joint venture may not involve any profit at all. A joint venture can be entered into to discover or invent something, or to help the community, or whatever goals that the joint venturers want, that could, but doesn’t have to, involve profiting.

Legal Status

Importantly, a joint venture is not actually a legal entity. You don’t file a joint venture with the state, and although joint venture contracts are usually involved, there is no governing corporate document, the way a partnership would be governed by a partnership agreement.

Partnerships

Unlike joint ventures, partnerships are long term; ideally, the partnership would continue into perpetuity. There is no end goal.

For example, if two chefs open a restaurant, the restaurant is, ideally, going to stay open and operating for any amount of time.

Partnerships are separate legal entities, which can be formed with the state, and which are governed by a partnership agreement. Because they are formed with the state, there are state laws that govern how partnerships form and are operated.

The partners will usually all reap the profits or the losses, and partnerships are formed for the purpose of doing business, and profiting the partners.

Cooperation and Collaboration

Partnerships can be ongoing cooperative agreements.

For example, Krispy Kreme doughnuts may partner with McDonalds to sell their donuts in their store, or IHOP may partner with General Mills to make pancake flavored cereal. Both are lending their expertise—and their valuable intellectual property—towards an ongoing collaboration.

Breaches and Lawsuits

Because joint ventures are usually governed by the contracts the parties sign, when someone doesn’t do what they are supposed to, enforcement is usually in the form of a breach of contract action.

But partnerships will be based on the language of the partnership agreement, and aggrieved partners can even ask the court to judicially dissolve the partnership, in more serious cases.

Unlike joint ventures, partnerships have to worry about setting forth rules about how the partnership will be governed, meeting procedures, or adhering to the processes set forth in the partnership agreement.

Questions about your business entity? We can help. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.