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What Is the Difference Between a Joint Venture and Partnership?

In most cases, the duration of the relationship is different between a joint venture and a partnership.
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  • Written By: Maggie Worth
  • Edited By: Jenn Walker
  • Last Modified Date: 24 August 2014
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The difference between a joint venture and partnership is largely a matter of financial, operational and legal structure. A joint venture is a situation in which two distinct and independent entities work together toward a common goal. While each will make concessions and help the other out, their finances and operations remain separate, and they are unlikely to be liable for the other entity's debts, except within the confines of the venture. In a partnership, two formerly independent entities join forces to create a third entity. As such, their finances and operations become joined and each is liable for the other's debts and actions.

One key way to distinguish between a joint venture and partnership is legal organization. A partnership is a legal entity, which is generally set up under specific governing regulations and is registered with a governing body. Legal documents explaining the nature of the partnership must often be filed in order to obtain a business license. A joint venture, though it may be governed by a contract between the parties, requires no legal declaration and, in most cases, no filing of paperwork.

The terms joint venture and partnership refer to very different financial and operational structures as well. In a partnership, the entities merge to form one set of operations and report earnings as one entity. Profits are realized to the entity and debts are paid by it.

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In a joint venture, the terms of the agreement dictate which portion of the profits and debts will be realized by each party. The agreement should also outline each party's responsibility in terms of operations. Taxes and debts will be paid independently by each party, and each will be responsible for executing its responsibilities using its own staff and location.

In most cases, the duration of the relationship is different between a joint venture and partnership. Most joint ventures are temporary in nature. They may last for as little as a few days or as long as years, but are rarely intended to last for the life of either entity. Partnerships, by definition, create an entity and, therefore, do last for the lifetime of the entity. If one partner wishes to withdraw, the partnership must be legally dissolved and a new entity or entities must be formed.

It is important to note that a joint venture and partnership are distinct only in legal terms. It is not unusual for members of a joint venture to refer to one another as partners or to tell the public that they are partnering to present a special offer. This may be because the word "partner" tends to have a warmer, less businesslike connotation than the term "joint venture."

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