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LAW 6000 Business And Corporate Law
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LAW 6000 Business And Corporate Law
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Course Code: LAW6000
University: Laureate International Universities
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Country: United States
Question:
Prepare a Consultative report that Critically analyses:
The key features of a partnership as compared to those of a joint venture
Legislation applicable to both the partnership and to the joint venture
The differences between the two business structures
The advantage and disadvantages of each method of business organisation
Answer:
Introduction
In Australia, there are different forms of unincorporated business structures which can be selected by the parties, in order to carry forward their business. The two key options are that of partnership and joint venture. Making the decision between which one is the most suitable for the business of the person requires a comparison to be made between the available choices and to consider the different advantages and disadvantages of the two options. In the following parts, an attempt has been made to analyse which unincorporated business structure proves best for Xiaojing, Lance and Nick, particularly with regards to their herbal product business.
Partnership vs. Joint Venture
A partnership is a business arrangement which takes place between two or a higher number of parties, in order to carry on business in combined manner and to share the profits and losses in an equal manner. Joint venture on the other hand, refers to the business which is formed between two or a higher number of parties, but for a limited time period or for a specified purpose. Thus, joint venture can be deemed as a partnership undertaken for a limited time period or for undertaking only a particular task. This makes the ambit of partnership quite larger than that of a joint venture. A joint venture is formed where two different firms come together to run a common business for a limited time period; whereas a partnership is formed for carrying unified business as a going concern by different partners (Latimer, 2012).
In Australia, each state and territory has their own partnership act, which applies over the partnerships undertaken in that jurisdiction. For instance, in the jurisdiction of New South Wales, the Partnership Act, 1892 is applicable; and for Victoria, the Partnership Act, 1958 applies (Australian Government, 2017). In Australia, a joint venture can be established in a contractual manner, as a corporate or in certain specified manners. The manner of formation of contract dictates the regulation of joint venture. When the same is formed in contractual manner, it is regulated through contract law; when it is drawn as a corporate, the Corporations Act, 2001 (Cth) applies; and depending upon the other form, the other laws apply (Handley, Knox, Davis, Caddy & Zambotti, 2017). Hence, for joint ventures, there is no unified or particular law which applies, as is still present in cases of partnership, through different yet common partnership acts.
In a partnership, the business of the partnership firm is carried on by the partners, whereas, in a joint venture, the business is carried on by the parties of the joint venture. A key feature of partnership firms is that minors can be partners in a partnership firm and thus, can obtain the benefits of the partnership firm. However, a minor cannot be a party to the joint venture. A partnership is formed with the aim of sustaining it for a long time and is deemed as a going concern; whereas the joint venture is made for a particular period (Gibson & Fraser, 2014). The joint venture agreements usually cover a clause of the manner in which the joint venture is to be liquidated. It also provides the manner in which the profits (or losses) would be shared between the parties upon the completion of period of joint venture or upon the competition of the task for which the joint venture had been formed. So, a joint venture provides the manner of its end. The partnership on the other hand is ended through dissolution of partnership firm, owing to the death of partners or a deadlock being the partners (Singh, 2015).
It is important for a partnership to have a trade name, which is not an obligation for the joint venture. When it comes to the ascertainment of profits, the same is done in partnerships in an annual manner; and for joint ventures, it is done when the venture is ended or as per the term covered under the joint venture agreement. The valuation of the joint venture is done at its end, whilst the valuation of the partnership is done each time a new partner is added or an old partner leaves the partnership firm. It is obligatory to maintain separate books of accounts in cases of partnerships, whereas the same is not an obligation for the joint ventures. The aim of partnership is to earn profits, whereas in joint ventures, the key aim is to fulfil the venture which has been undertaken and simultaneously earn profits (Gabriel & Marcus, 2010).
Each form has its own advantages and disadvantages. In a partnership, the biggest drawback is that the partners have unlimited liability. This means that the partners can be made personally liable for the debts of the partnership. Apart from this, upon the death of all the partnership, the partnership comes to an end. Also, each partner is jointly and severally liable towards the partnership firm and the agency law makes the firm liable for the acts of the partners. However, there are a number of benefits of partnership in the sense that it is easy to establish and the cost of starting a partnership is very low; a higher resource availability is also attained both in financial and non financial terms, including the talent pool; there is a limit on external regulations; and the business of partners remains a private affair (Tasmania Government, 2017).
A joint venture has benefits as it allows the capacity to be increased, allows new markets and distribution networks to be accessed, allows access to higher resources as two firms combine their resources; and also allows sharing risks and costs with the co-venture party. The drawbacks of joint venture include high cost of setting up; lack of clarity in responsibility; lack of proper leadership; and the lack of full interest of the parties owing to the same being carried on for a specified period (Invest Northern Ireland, 2017).
Conclusion
In the preceding parts, the discussion carried on highlighted the different aspects of partnership and joint venture. On the basis of the comparison carried on between the two forms, it is recommended to Xiaojing, Lance and Nick to opt for a partnership form for running their herbal product business, particularly due to the going concern status and the ease of formation of partnerships.
References
Australian Government. (2017). Partnership. Retrieved from: https://www.business.gov.au/info/plan-and-start/start-your-business/business-structure/business-structures-and-types/partnership
Gabriel, J., & Marcus, A. (2010). Financial Accounting. New Delhi: Tata McGraw Hill.
Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne: Pearson Education Australia.
Handley, A., Knox, M., Davis, B., Caddy, M., & Zambotti, L. (2017). Joint ventures in Australia: overview. Retrieved from: https://uk.practicallaw.thomsonreuters.com/0-616-8149?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
Invest Northern Ireland. (2017). Joint ventures and business partnerships. Retrieved from: https://www.nibusinessinfo.co.uk/content/joint-venture-benefits-and-risks
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.
Singh, S. (2015). Difference Between Joint Venture and Partnership. Retrieved from: https://keydifferences.com/difference-between-joint-venture-and-partnership.html
Tasmania Government. (2017). Partnership – advantages and disadvantages. Retrieved from: https://www.business.tas.gov.au/starting-a-business/choosing-a-business-structure-intro/partnership-advantages-and-disadvantages
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