Joint ventures and partnerships sound interchangeable, but in the legal world, the two terms are quite different. It might feel as if you’re parsing words, but the impact can be long reaching. Here are the differences between a joint venture and a partnership, as a business attorney in Charlottesville, VA, such as from Dale Jensen, PLC, can explain. If you’re considering either one for your business, you may want to discuss the long-term consequences with a business attorney.
Who Is Entering the Agreement?
A partnership is usually between people who come together to operate a business. A joint venture can be individuals or corporations or governments or other businesses.
What Is the Purpose?
A partnership is geared toward a long-term business that will turn a profit. A good example is Barnes & Noble partnering with Starbucks in their stores. Even though these are two businesses that partnered, both companies benefit through bigger sales. Joint ventures are more project-oriented and for a short-term. For example, Google and NASA formed a joint venture to develop Google Earth. Profit may or may not be part of the outcome.
What Is the Agreement?
Partnerships often have a long contract between the people involved to cover control of the partnership, what happens when one partner wants out and who shares in profit and loss. Joint ventures may have an agreement, but they often don’t. If there is an agreement, it addresses the project that is going to be done.
How Long Does the Agreement Last?
Partnerships are designed to last the life of the business. People come together to create a business that will benefit all parties. Joint ventures are only for the project lifetime. Google and Glaxo Smith created a joint venture of seven years to produce bioelectric medicines.
What Is the Scope?
Partnerships can be huge, like the Barnes & Noble and Starbucks partnership. Joint ventures are typically limited in nature. Google and NASA only came together to produce Google Earth.
Who Is Accountable?
Joint ventures are riskier than partnerships, because in a joint venture, if something goes wrong and results in negligence or criminal wrongdoing, both parties can be held liable. In a partnership, the accountability is only attributed to the person at fault. If a customer was injured at Starbucks in Barnes & Noble, it’s likely that Starbucks would be the entity that was sued. Of course, there are always variables.
Work out your partnership or joint venture with a business lawyer who can help you make the best decisions for your organization.