A joint venture can be understood as a short-term partnership that comes to an end once its purpose is served. There would be a specific task that the joint venture is established to complete, and the concert ends upon completion. On the other hand, a partnership is usually set up for conducting continuous business.
Joint venture
A joint venture consists of two or more parties contributing resources to accomplish a specific task. It may have a separate legal personality from the parties. It can refer to several types of business arrangement between undertakings. There are two types of joint ventures in Hong Kong i.e., incorporated and contractual. Corporate joint ventures registered in Hong Kong are governed by the Companies Ordinance and the common law; while contractual joint ventures are largely regulated by agreement between the parties.
Partnership
Partnership is an arrangement where two or more individuals co-own the business with a plan to share the profits in the manner mutually agreed between the partners. There are in general two types of partnership, namely general and limited partnerships. They are governed by the Partnership Ordinance, the Limited Partnerships Ordinance and the common law in Hong Kong.
To see more on partnership, read the FAQ on Partnership.
Comparison
| Joint Venture | Partnership |
| If the joint venture is set up as a limited liability company then the parties will be liable only to the extent of their investment. In case of contractual joint venture, each party may give the other an indemnity in respect of loss caused by his failure | The partners are jointly and severally liable for any debts or liabilities of the Partnership |
| It involve two or more companies combining their resources and efforts for a common business goal | It is comprised of individuals who are running the business together |
| Ends once the task is completed | Usually last for a longer period of time and ends when the partners decide to dissolve or exit the relationship |
It is easy to distinguish partnership from an incorporated joint venture because a partnership cannot be registered, formed or incorporated as a company under the Companies Ordinance. However, in case of a contractual joint venture, one can prevent creating a partnership inadvertently by: including an express provision in the joint venture agreement to reflect that no partnership is intended or created.
Key takeaway
- A joint venture can be understood as a short-term partnership.
- A joint venture ends upon completion of a specific task which it is set up for.
- Corporate joint ventures are of a different legal structure from partnerships.
- You can prevent setting up a partnership unintentionally by setting out terms to end the concert once the specific task is completed.