Comparison Of Partnership & Joint Venture

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Comparison Of Partnership & Joint Venture

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Question:
Discuss about the Key Features of Partnership as Compared to Joint Venture.

Answer:

Partnership
Risks and rewards
In a partnership the risk and rewards of the business is shared by all individuals
Share of profits
In a partnership every partner has the right to share profit and losses equally if the contrary is not mentioned in the partnership agreement. The sharing may also depend upon the investment made by the partners.
Unlimited Liability
The partners in a partnership business are severally and jointly responsible for all the obligations and debts of the business to an unlimited extent. This includes damages and loss from wrongful omissions or acts of the other partners and the potential liabilities towards any third party.
Decision Making
All partners have the right to make decisions in relation to the business which they own unless they are not dormant partners.
Ownership sharing
The ownership of the assets of the business is shared by all the partners of the business. However there may be an agreement that the business may utilize the assets which solely belongs to one of the partners.
Flexibility
The structure of partnership is flexible and provides freedom in relation to how the business should be financed and managed as in case of a sole proprietorship.
Privacy the constitutional and financial matters of a partnership are totally private and confidential. Any disclosure in relation to such matters are undertaken as per the interest of the partners
Taxation
The partnership business does not have any separate business identity and therefore it does not have to pay any tax. The partners are liable to pay all the tax in relation to the business as they and the business are the same.

Tenure
A partnership is not dine for the purpose of one or two projects but it is initiated for long term business
End
A partnership comes to an end by the death of its partners
Joint venture

A joint venture is carried for the purpose of a specific project and comes to an end once the purpose has been received.
It is a form of special partnership which does not have a firm name
The “going concern” accounting concept is not followed by a joint venture
The parties to a joint venture are called co-ventures.
It is a form of temporary business activity
Profit and losses are distributed in agreed proportion and where there is no agreement than equally
It is an agreement for poling business abilities and capital to make profit (Mann and Roberts 2011)

Legislations governing partnership and Joint venture in Australia
There are legislation which given partnership in Australia. However Joint ventures do not have any specific law and are governed by common law such as Contract law, Negligence and Agency Law.
List of partnership legislations in Australia

Jurisdiction

Legislation

Commonwealth

Partnership Act 1963

New South Wales

Partnership Act 1892

Queensland

Partnership Act 1891

Tasmania

Partnership Act 1891

South Australia

Partnership Act 1891

West Australia

Partnership Act 1895

Victoria

Partnership Act 1958

Northern Territories

Partnership Act 1997

Source: Created by Author
Differences Between partnership and Joint venture
A joint venture is a contractual agreement which take place between two or more individuals of companies which aims to undertake a prescribed operation. On the other hand a partnership is an agreement between two or more parties through which they agree to share both profit and losses.
The partnership comes to an end only where there are differences among the partners or one of the partners have died or a new partner has been admitted. On the other hand a joint venture comes to an and as soon as the specific purpose of the venture has been accomplished (Mann and Roberts 2011).
Advice to the parties
For the purpose of choosing a business structure it is important to assess the features of the structure and the requirements of the business. It has been provided that Xiaojing, Lance and Nick wish to work together to operate an herbal product business. This is a form of business which needs to be continued in the long run. Therefore the structure required for the purpose of carrying out the business activity has to be in accordance to the business needs. Upon the analysis of joint venture and partnership it can be clearly identified that partnership is a better form of unincorporated business as compared to a joint venture for carrying out long term business operations. According to Werneck and Saadi (2015) people or organization who carry out joint ventures usually has the purpose of property developments, transportation agreements, Mining syndicates or publishing agreements. These activities are generally for a short term period. Therefore it can be said that partnership is the best possible unincorporated business structure for the herbal product business as it would only be successful in the long run. In a partnership the partners would be more responsible for the overall functioning of the business and not only take care of their own functional areas but also the operational areas of their partners as they would be directly affected by it. It may be argued that a joint venture may provide the parties advantages in relation to tax benefits. However a partnership business may give them scope for significant expansion and the tax implications are to an extent which may persuade selecting joint venture as a form of business.
The courts do not assess whether a business is a joint venture or a partnership based upon the name which has been provided to it but based on the features of the business. Here it is clear that the business is to be carried out on a permanent basis and not a temporary basis by the three individuals. The structure of partnership would also allow the partners to have significant control of the business and change the structure to an incorporated company in the future. In addition it has been provided by Hynes and Loewenstein (2011) that in joint venture although functions are sorted out the commitment of the co-ventures are not as much as that in a partnership business. Therefore it is advised to Xiaojing, Lance and Nick to carry on the herbal product business in form of a partnership.
References
Cheeseman, H.R. and Garvey, J.R., 2014. Business law. Pearson.
Hynes, J.D. and Loewenstein, M.J., 2011. Agency, Partnership, and the LLC: The Law of Unincorporated Business Enterprises: Cases, Materials, Problems. LexisNexis.
Mallor, J., Barnes, A.J., Bowers, L.T. and Langvardt, A., 2012. Business law. McGraw-Hill Higher Education.
Mann, R.A. and Roberts, B.S., 2011. Smith and Roberson’s business law. Cengage Learning.
Werneck, B. and Saadi, M. eds., 2015. The public-private partnership law review. Law Business Research Limited.

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