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Partnerships and Joint Ventures: What’s the Difference?


So you’ve got a  business idea, and someone else or another company that wants to do it with you. Congratulations! Time to go into business, with your new partnership. Or your joint venture. Wait-which is it? The words are often used interchangeably. Is there a difference?

Differences and Similarities

Partnerships and joint ventures are separate legal entities—although it can get confusing because members of a joint venture are often called “partners.”

As a general rule, a partnership constitutes people or businesses coming together to carry on a business venture. Imagine you and your friend who decide to buy property, fix it up and resell it for a profit. You both have some stake in the profits or losses, if there are any of either one (although it is not required that you share in the profits or losses equally).

Your partnership can do this with a property one or a hundred times—however long the two (or more) of you want to work together.

A joint venture is very similar, but with subtle differences. In a joint venture you and others are working together to work on a single project—for example, fixing up and reselling a single property. Joint ventures are usually temporary. You do still share in the profits or losses of the joint venture.

To Incorporate or Not?

A joint venture is also different because although it is a joint venture, it can also be a corporation or a limited liability company. For example, you and the construction company that will fix up the properties that you sell can form a company, and still be engaged in a “joint venture.”

That means you get greater protections legally with a joint venture, because you get whatever protections you would get for legally incorporating as a company. If you don’t incorporate your joint venture as a separate legal entity, you can simply remain a joint venture. But if you do, all parties remain equally and individually liable for any debts that the company may incur.

With a partnership, you are all jointly and severally liable for losses, lawsuits, or problems that arise through the partnership.

If taxes are a concern, remember that in a partnership, the profits and losses of the partnership are assumed to be those of the individual partners. This is not the case with a joint venture, which can, in some cases, be taxed separately as a corporation would be.

Get it in Writing

With both entities, a written document – a joint venture agreement or a partnership agreement – is not legally necessary but is highly suggested. Don’t assume that because your business partner is your buddy that there won’t be problems.

A solid and clear agreement memorializing each parties’ obligations can save you a lot of money and headaches down the line, and if anything ends up in court, a judge will look to whatever document you agree to, in determining who is right and who is wrong.

Call the West Palm Beach business litigation lawyers at Pike & Lustig to help with any business law litigation problem you may have.



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