Understanding the difference between a partnership and a joint venture
Business litigation over a business relationship between two parties often requires a legal determination as to what kind of relationship the parties have. Business litigation attorneys will often talk about “partnerships” and “joint ventures”. What is the difference between a partnership and a joint venture?
Common Attributes of Partnerships and Joint Ventures
Partnerships and joint ventures are almost indistinguishable. A partnership usually involves a continuing business while a joint venture is usually a one-off transaction. A joint venture exists where there is an agreement between the parties under which they have a “community of interest”, that is, a joint interest in a common business undertaking, an understanding as to the sharing of profits and losses, and a right of joint control. A hallmark of both partnerships and joint ventures is the right of joint participation in the management and control of the business. While the parties must have an understanding as to the sharing of profits, the sharing does not necessarily need to be equal.
Like partners, joint venturers are fiduciaries with a duty of disclosure and liability to account for profits.
Are You In A Joint Venture Or Partnership?
A party who contributes capital toward a business enterprise or who receives benefits in consideration of services rendered is not necessarily a partner or joint venturer. For example, an agreement by a landowner to share profits from the sale of the property with another party does not, without more, create a partnership or joint venture relationship.
Where a party receives a profit but does not exercise any control or participate in management, it is not a partnership or joint venture. For example, compensation for the use of money or interest on money lent would not qualify a relationship as a partnership or joint venture.
Both partnerships and joint ventures can be formed by a written agreement, orally or even from the course and conduct of the parties. Whether a partnership or a joint venture exists is a question of fact for the trier of fact to determine.
Is There A Difference Between A Partnership And A Joint Venture?
Case law in California does not make many substantive distinctions between a partnership and a joint venture. As the appellate court cases in California state, the difference between partnerships and joint ventures are not “sharply drawn” and a court will often apply partnership principals to a joint venture.
Los Angeles Business Litigation Attorney Laine T. Wagenseller is a business trial lawyer who handles lawsuits involving partnerships, joint ventures, co-owners and corporate shareholders. Wagenseller Law Firm is a downtown Los Angeles business litigation law firm. For more information please visit www.wagensellerlaw.com or contact Mr. Wagenseller at (213) 286-0371 or firstname.lastname@example.org.