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Joint ventures and partnerships

| December 9, 2022 

In the business world in Washington state, you sometimes need to collaborate with others to achieve specific goals. Two of these circumstances include the formation of a business partnership and that of a joint venture. However, these two things are not always synonymous. They are, in fact, quite often very distinct and come with different rules and regulations for their operation.

What is a joint venture?

A joint venture, in most circumstances, can be thought of as a collaborative action taken between two distinct businesses for their combined benefit. Their resources are combined to accomplish a specific task that would be difficult or impossible without the other business’s help. Examples of a joint venture:

  • A company that created a product forms a contract with a distributor to carry that product at a specific line of stores.
  • Two companies come together because it would be synergetic to do so such as a shipping company that owns a fleet of trucks and a storage company that owns warehouses that can store the products being shipped.
  • A company wants to enter a foreign market and teams up with a local business that better understands the market, culture and language to do so.

What is a partnership?

Alternatively, a business partnership is quite different even if a partnership can be thought of as a joint venture in a way. Instead, a partnership is not simply two business entities coming together for a joint project for shared benefit. Instead, it is a formal arrangement between two or more parties to run a business together and share directly in its profits or losses.

What are the legal differences between the two?

The largest legal difference that separates the two is the fact that the two parties in a joint venture are typically separate business entities while the parties in a partnership are conceptualized as the same business entity. The parties in a joint venture have no responsibility to each other beyond the terms of a specific contract. Partners, however, are legally responsible for things like business losses or liabilities even if one partner is more responsible than the others. After all, they are considered a single business much like a sole proprietorship. While disputes between partners may arise, they are still considered the same legal entity until the partnership is dissolved through a buy-out or other means.

Both joint ventures and partnerships do include business collaboration among parties. However, the similarities usually end there.

Further Reading

LLC operating agreements in Washington

January 18, 2023 
Many small business owners in Washington might be familiar with limited liability companies, also known as LLCs. Setting a business up as an LLC has a lot of financial and legal benefits for business owners that all come down to the operating agreements. What is an LLC operating agreement? The operating agreement essentially outlines the […]

Options for resolving partnership disputes

November 28, 2022 
Business partnerships in Washington usually work out well. But like with any partnership, things can go sour. Small disputes can become major problems that hurt the business. When business partners are unable to resolve their differences, they might have to look to business law for help. Here are some legal options for dealing with a […]
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