Many people often consider a joint venture and a partnership as being the same. Although, they both have many similarities there are some very distinct difference between the two entities. The basic similarities are they both are used when two or more individuals or entities decide to jointly participate in business activities. However, if you are considering doing business with another party is extremely important to understand the differences so you will make the right decision for your particular situation.
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. Joint ventures are usually short-term partnerships for a single business purpose. Once established, a joint venture can structure its business as a general partnership; a limited partnership; a corporation, which is treated as an individual with its own assets, liabilities and taxes; or a limited liability company, which limits partner liability and allows pass through of profits. In a joint venture both entities continue to operated independently and separate for the other party.
A partnership involves two or more individuals or entities. Each partner participates in business operations and is liable for company actions. Business debts and profits pass through to the partners. In a general partnership each partner is individually liable for the company’s actions and debts..
In partnership, the persons involved are co-owners of a business venture, aimed at making profit. Joint ventures are usually formed for specific purposes. For example, a contractor and land owner may enter into a joint venture to build a residential subdivision. The contractor will continue to operate independently as a contractor and the landowner will continue to operate independently. However, they contractual arrangement binds them as it relates to the residential subdivision.
Another difference that the joint venture and partnership have is with regard to tax. One of the main differences is regarding the Capital Cost Allowance (CCA). The members in a partnership can claim CCA as per the partnership rules. Joint ventures on the other hand can use as much or as little of the CCA as they wish. There is no need to file returns in a joint venture but it has to be filed in partnership.
In Partnership, the members cannot act as per their wishes and they do not have any individual identity; they belong to a group. However, a member of the joint venture can retain the identity of his firm or property.
To protect you and your business you must be sure that you are make the right decision when you entering into business with another party.