WHAT IS THE DIFFERENCE BETWEEN A PARTNERSHIP AND A JOINT VENTURE?
Do you want to start a business or a commercial venture but are unsure where to start? It can be difficult to know which business structure is right for you. You may be considering a Partnership or Joint Venture. But what are the differences between the two? Here, De Marco Lawyers explains the difference between a Partnership and a Joint Venture.
What is a Partnership?
A Partnership is a business structure which is formed between two or more Parties to create an ongoing business relationship with a view to profit. The Parties of the Partnership can either be individuals or companies. It is important to understand, however, that a Partnership is not a separate legal entity, despite having an ABN and TFN. Unlike other business structures, parties in a partnership are jointly and severally liable for any debts or liabilities that fall due.
To establish a Partnership, a Partnership Agreement will need to be drawn, naming the Partners and defining the rules of the Partnership. All Partnerships in Victoria are regulated by the Partnership Act 1958 (Vic).
What is a Joint Venture?
A Joint Venture is a structure in which two or more Parties (either individuals or companies) combine resources to achieve a specific goal. Once this goal is achieved, the Joint Venture ends. A Joint Venture is governed by a Joint Venture Agreement. Such an Agreement will outline the roles and responsibilities of the parties when working towards their goal. Under a Joint Venture structure, the individual parties are responsible for their own debts and liabilities.
There are two key differences between a Joint Venture and a Partnership:
Unlike a Partnership, Joint Venture’s are created to allow parties to reach a specific goal, and once that goal is reached, the Joint Venture will end. Partnerships, on the other hand, will continue until the parties either agree to dissolve the partnership or one partner decides to exit the partnership.
Under a Partnership, partners are jointly and severally liable for any debts or liabilities of the Partnership. This differs to a Joint Venture where the individual parties to the Joint Venture are responsible for their own actions and debts.
If you are considering entering a Partnership or a Joint Venture, or if you are unsure as to which structure will suit you best, please do not hesitate to contact our Bronte Strong on (03) 9304 9500.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from De Marco Lawyers and other relevant experts.