Difference between joint venture and partnership in india
Please contact customerservices lexology. What are the key types of joint venture in your jurisdiction? As per the provisions of the Companies Act , a joint venture is defined as a joint arrangement, whereby the parties that have joint control of the arrangement have the rights to its net assets. Joint ventures can be classified under the following categories.SEE VIDEO BY TOPIC: Difference between Joint Venture and Partnership -Minute Differences & effects-Part 2 - CA(CPT)
Joint Venture (JV)
Joint Venture can be defined as a partnership between two or more parties companies or individuals coming together to form a separate legal entity with an intention to carry out certain commercial objectives. The parties coming together to form Joint Venture take an active role in all the decision making.
In Joint Venture, each party contributes finance, technology, marketing techniques or physical assets as required for the project. What makes Joint Venture different and beneficial from other modes of investment is that when Joint Ventures are created between two or more parties, the Joint business in no manner interferes or affects the individual business of the respective parties.
Therefore, they are free and independent to maintain their respective businesses whilst handling Joint Venture. Joint Venture can be formed for a specific purpose or for the continued business relationship. There are many business forms in which Joint Venture can be created such as, company, partnership firm or limited liability partnership.
Agreement forming the Joint Venture is called Joint Venture Agreement which provides for the manner in which shareholders of the respective companies decide the ratio of the distribution of shares among them. In Equity Joint Venture, a separate legal entity is created under which various parties provide for the required resources to fulfill their objectives.
This type of venture is usually suited for long-term broad projects. Formation of Joint Venture agreement or shareholders agreement is very important and should not be overlooked as something trivial.
This document is not executed for filing any procedural law or for any government use but is formed to create an understanding between the parties through clauses which are binding in nature.
Such an agreement should be created with precision. The important aspects covering this agreement are:. As an investment decision, Joint Ventures are being considered better by most businessmen today. Joint Venture gives an edge over other investment methods because one can easily access new markets and new customers. Sharing technology or finance with other parties bring greater and better efficiency in the work.
A huge amount of risk is shared with other participating parties, thus risky decisions can be made with confidence. There is greater access to specialized resources like efficient staff and better technology. The participating companies can continue doing their respective business without any interference from outside. Winding up of Joint Ventures will not affect the businesses of the participating parties. Though being attributed to many such advantages, Joint Venture also contain certain disadvantages which should be well understood.
When Partners bring in different kinds of resources and expertise, management of both the companies are mixed together due to which co-operation might suffer. Exclusive business deals with other parties might be restricted by participating parties due to competition issues. Joint Venture has proved to be very successful in India and this can be understood from one of the recent successful venture — TATA Starbucks private limited. Starbucks had intentions of accessing Indian markets in the early but it was only in that a joint venture with TATA Global Beverages was formed.
On 19 th October , the first Starbucks outlet was opened in Mumbai city of India. All espressos sold in Indian outlets are made from Indian roasted coffees supplied by Tata Coffee .
Starbucks Reserve Tata Nullore Estates became the first Indian coffee to be roasted and sold at Starbucks home city of Seattle in . Strategic Investment is very similar to Joint Ventures in which an investing company makes an investment in a smaller company, usually a startup, with an aim not just for simple profit but for a bigger commercial goal. Usually, when an investor takes risk of investing funds into a new company or a project, their foremost aim is for better returns.
In Strategic Investment, investments are made with much larger and broader aspects, which vary from company to company. Strategic Investments are done to raise the credibility of the targeted smaller companies which are having difficulty in accessing markets. There are various reasons for large companies to strategically invest in smaller companies such as the small companies might be having better technology.
Also, small companies might become a prospective client of investing companies sometime in future and many more. Smaller companies prefer acquiring funds from Strategic Investment and not forming any Joint Venture with them is that when investments are raised from the strategic alliance, the autonomous status and independence of these smaller companies are still intact, they are free to operate and work in the manner they prefer.
Also, in this kind of investment, smaller companies can avail funds from more than one company, which is definitely not possible in the Joint Venture.
Investing companies too prefer Strategic Investment over joint ventures as less risk is involved and profits are made to available only when smaller companies are doing well. It is rather easy and convenient to exit from such an investment as compared to joint ventures.
Strategic Investment as a mode of investment suits those companies which are looking forward to sharing technology with other companies. Thus, instead of spending time and efforts on building new technology, investors can simply provide funds to smaller companies and share technology with them.
This method saves cost to the large extent. This being said, such investments have their own downfalls because in reality the process of identifying such target companies and evaluating further procedures can be very expensive and there is no guarantee of such experiments to be accurate and profit worthy. If investors are looking for better returns and to grow together with other companies, both Joint Ventures and Strategic Investment are valid options but the ideal choice should be made only after understanding and comparing the two.
The summary of this comparison is given below:. Thus after analyzing both Joint Venture and Strategic Investment, it can be observed that while making the investment decision in profit worthy projects is important for every growing company, the final decision should be made only after considering all the aspects. Sign in Join. Sign in. Log into your account.
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Subscribe so that you never miss another post! Just complete this form…. Rules applicable to the Substance of Disputes in Arbitration Act. What updates do you want to see in this article? Joint Venture. Strategic Investment. Joint ventures are formed like a business organization wherein the principal parties work together with an aim to carry out certain financial activity. Strategic investment, on the other hand, is an agreement between two two or more companies to work together for better results.
On forming a Joint Venture, a separate entity may or may not be created. In Strategic Investment, there is no need to create a separate entity. Joint Ventures are formed with an objective of sharing risk between two or more parties.
In joint ventures parties are more confident in their new line of business as not only profit but also risk and liabilities are shared between them. In Strategic Investment the objective is to gain maximum reward out of the alliance.
Businesses are more credible and better in economic value when assets of two or more companies are brought together. The management involved in Joint Venture is bilateral. The new company formed or the new project assigned will have employees and staff from both the companies, this ensures neutrality and confidence in teamwork.
On the other hand, the relation of companies in Strategic Investment is more like an acquisition, hence team involved in it are delegated from the investing company. In order to exit from the arrangement of Joint Venture, the principal parties can either file for dissolution of the new company or liquidate the company by selling its shares for a price.
In strategic investment, when returns are not up to the mark or parties wish to terminate the agreement they can stop investing in smaller companies on proving them a notice for the same. Exiting from such arrangements is comparatively simpler in strategic investments.
In Joint Venture principal parties are free to work independently in their respective businesses. Forming a joint venture will not harm their autonomy in their other private activities. In Strategic Investment, independence of smaller companies is usually lost.
Distinction Between Joint Venture and Partnerships
A joint venture is a business entity created by two or more parties, generally characterized by shared ownership , shared returns and risks , and shared governance. Companies typically pursue joint ventures for one of four reasons: to access a new market, particularly emerging markets ; to gain scale efficiencies by combining assets and operations; to share risk for major investments or projects; or to access skills and capabilities. According to Gerard Baynham of Fire Street Partners, there has been much negative press about joint ventures, but objective data indicate that they may actually outperform wholly owned and controlled affiliates. He writes, "A different narrative emerged from our recent analysis of U. Department of Commerce DOC data, collected from more than 20, entities.
We invite you to access our services online or by phone. A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared. The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas. Your business may have strong potential for growth and you may have innovative ideas and products.
Difference Between Joint Venture and Partnership
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Joint Venture vs Partnership
A joint venture JV is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture JV , each of the participants is responsible for profits , losses, and costs associated with it. However, the venture is its own entity, separate from the participants' other business interests.
Joint ventures can have great advantages for small businesses. Properly chosen and implemented, joint ventures can be a way for your small business to get in on opportunities and profits that otherwise you would miss out on. They're like diamonds on the beach.SEE VIDEO BY TOPIC: Difference between joint venture and partnership
Joint Venture is a form of business organization which is temporary in nature. It is established for a specific purpose or to accomplish a certain task or activity and when this purpose is completed the joint venture comes to an end. Joint venture is not exactly same as partnership , which is also a type of business entity, that come into existence when two or more persons come together to share business profits. The partnership business is understaken either by all the partners or by one partner acting on behalf of all the partners. The main difference between partnership and joint venture is that partnership is not limited to a particular venture, whereas joint venture is limited to a particular venture. Similarly, there are other distinguishing points between the two terms, that you can learn in the given article.
Key Difference Between Joint Venture and Strategic Investment
Joint Venture can be defined as a partnership between two or more parties companies or individuals coming together to form a separate legal entity with an intention to carry out certain commercial objectives. The parties coming together to form Joint Venture take an active role in all the decision making. In Joint Venture, each party contributes finance, technology, marketing techniques or physical assets as required for the project. What makes Joint Venture different and beneficial from other modes of investment is that when Joint Ventures are created between two or more parties, the Joint business in no manner interferes or affects the individual business of the respective parties. Therefore, they are free and independent to maintain their respective businesses whilst handling Joint Venture. Joint Venture can be formed for a specific purpose or for the continued business relationship. There are many business forms in which Joint Venture can be created such as, company, partnership firm or limited liability partnership.
Joint Venture and Partnership