JOINT VENTURE

A joint venture is an agreement between two or more parties where each party keeps its separate identity but works together through a joint venture, for a specific purpose and for a limited time.

The agreement may be oral or written where both the parties combine their assets, property, knowledge, skills, experience, time, or other resources and agreeing to share the profits and the losses and every having a point of control over the venture.

Form of business which is temporary in nature. So basically joint venture means joint business. The rights and obligations under joint venture are determined by the contributions of capital made or ownership of shares. The agreement determines how profits and losses are shared. Merely sharing an economic interest isn’t sufficient to make a venture.

The parties that have control over the enterprise must be shown through evidence. It is a form of organization that is temporary in nature.

ADVANTAGES

1. Share investment- Each party in the venture shares a certain amount of initial capital to the project thus alleviating some of the financial load placed on each company.
2. Shared costs- Each partner contributes equal amounts of initial capital to the project thus reducing some of the financial burden to be found on each company.
3. Venture are often flexible- venture can have a limited lifespan and may only cover only a fraction of what you are doing therefore limiting your business's exposure.
4. Expertise and knowledge gain- Business usually brings specialized expertise and knowledge, which helps make the joint venture strong.
5. Barriers to the competition: collaborating with other companies to drive market penetration builds barriers to the competitors that are effectively difficult to permeate.
6. Improved economies of scale: A bigger company always enjoy the economies of scale which again is enjoyed by all the parties in the joint venture
7. Large market reach: Companies with similar or identical products can collaborate through a joint venture, encompass a larger market to reach than they had before

DISADVANTAGES

1. Vague objectives: The objectives of a joint venture aren’t 100% clear.
2. Great imbalance: As different companies are working together, there could also be a greater imbalance of experience, assets, and investment.. This can make a negative impact on the effectiveness of the joint venture.
3. Lot of research and planning are needed: The accomplishment of a joint venture depends highly on research and analysis.
4. Lack of communication: As it involves different companies from different horizons, there is often a strict lack of communication between partners.

PARTNERSHIP

A partnership is a relationship between two or more parties (maximum 20 either individuals or entities) carrying a common business with a view of profit. The partnership is an ongoing relationship between the partners. The members of this firm- individually referred to as partners and jointly referred to as a firm.

- An association of two or more than two individuals but not more than 20

FEATURES

- An agreement for carrying on business

- Business is to be carried on by all or by any one of the partners on behalf of all the partners.

- Partners shared profit and losses in an agreed ratio.

ADVANTAGES

1. Easy formation- Agreement can be made either orally or printed to establish a firm.
2. Large resources- In partnership partners of the firm can contribute more capital and other resources as required in the firm.
3. Flexibility- the partners can make any changes if they think it is required to meet the needs.
4. Sharing risks- all losses that are incurred by the firm are equally distributed amongst each partner.
5. Combination of different skills- the partnership has an advantage of the knowledge, skill, and talents of different partners.

DISADVANTAGES

1. Inflexible and onerous fiduciary duties between the partners during, and sometimes, after the duration of a partnership.
2. The necessity of preparing and lodging a tax return for the partnership.
3. The capacity of 1 party to bind the others in accordance with the laws of partnership.
4. Partners aren't entitled to remuneration for his or her efforts in running the business.
5. There is Joint instead of several liability for debts of the partnership.
6. Joint and a number of other liabilities in tort for the actions of any of the opposite partners undertaken within the ordinary course of the business.

WHAT IS A JOINT VENTURE AND HOW DOES IT WORK? | JOINT VENTURE AGREEMENT | TO KNOW MORE, VISIT -

DIFFERENCES BETWEEN JOINT VENTURE AND PARTNERSHIP

1. Meaning

It is formed by two or more than two persons formed for a limited period and for a specific purpose. Whereas in partnership a business arrangement, where two or more members agrees to carry on business and have an equal share in the profits and losses.

2. Scope

The joint venture is limited for an exact period in which business is carried on by two or more persons. Whereas, in a partnership, the duration is not fixed and it is mainly ongoing in which business is carried by two or more persons as per mutual understanding.

3. Governing act

There is no specific legislation for the Regulation of Joint Venture. Whereas Partnership is Governed by the Indian Partnership Act, 1932

4. Ascertainment of profit or loss

Profit or loss is ascertained at the end of a specific venture in a joint venture. Whereas, profit is distributed annually in partnership

5. Basis of accounting

Liquidation, whereas in a partnership it is based on going concerned concept

6. Accounting

It is not necessary to maintain a separate set of books, whereas It is required in partnership to maintain a separate set of books

7. Purpose

Joint ventures are designed to accomplish a specific purpose. Whereas, partnership purpose is not limited to an only a single goal rather it is long term process and making a profit

CONCLUSION

A lot of big enterprises come together for definite purposes to form a joint venture so when that purpose is consummated the venture also ceases to exist. The partnership lasts longer and their no needs a particular purpose for partnership.

According to my point of view, the partnership is beneficial especially when the firm is established for the long-term period.

BY- MUSKAN MANGAL