Partnership vs Joint Venture
Last updated: February 2025
Quick Comparison
| Aspect | Partnership | Joint Venture |
|---|---|---|
| Duration | Ongoing, indefinite business relationship | Typically limited to a specific project or purpose |
| Legal identity | Not a separate legal entity (unless LLP) | May or may not have a separate legal entity |
| Liability | Joint and several unlimited liability | Depends on JV structure; can be limited |
| Scope | Covers all business activities of the firm | Limited to the defined JV activity |
| Creation | Can arise informally without a written agreement | Usually requires detailed written agreement |
What Is a Partnership?
A business structure where two or more persons carry on business in common with a view of profit, governed by the Partnership Act 1890.
Key Features
- • Created automatically when people trade together for profit
- • Partners are jointly and severally liable for debts
- • Governed by Partnership Act 1890 unless varied by agreement
- • Profits shared equally unless agreed otherwise
Best For
- • Ongoing business ventures between trusted parties
- • Professional services firms such as solicitors or accountants
- • Small businesses wanting a simple structure
What Is a Joint Venture?
A commercial arrangement where two or more parties collaborate on a specific project or business activity while remaining separate entities.
Key Features
- • Formed for a specific project or defined purpose
- • Parties remain separate legal entities
- • Can be structured as a company, LLP, or contractual arrangement
- • Profits and losses shared per the JV agreement
Best For
- • Specific projects with defined scope and duration
- • Combining complementary resources or expertise
- • Entering new markets while sharing risk
When to Use a Partnership
Use a partnership when you want to run an ongoing business with one or more other people, particularly in professional services. Consider an LLP for limited liability protection.
When to Use a Joint Venture
Use a joint venture when collaborating on a specific project or market entry with another business. You maintain your separate identity and limit your commitment to the defined activity.
Which Does Your Business Need?
If you are starting an ongoing business with others, a partnership or LLP is the standard structure. For a defined collaboration between existing businesses, a joint venture is more appropriate. Always get a written agreement regardless of which you choose.
FAQ
Can a joint venture accidentally become a partnership?
Yes. Under the Partnership Act 1890, if parties are carrying on business in common with a view of profit, a partnership may exist regardless of what they call the arrangement. Clear JV agreements should expressly state the relationship is not a partnership.
What is an LLP and how does it differ?
A Limited Liability Partnership is a separate legal entity registered at Companies House that combines the flexibility of a partnership with limited liability for its members. Unlike a general partnership, members are not personally liable for the LLP's debts.
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