25-08-2017, 09:32 PM
JOINT VENTURE & PARTNERSHIP
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Joint venture
A joint venture is when two or more companies perform a business project together for a set period of time.
It is a usually temporary partnership without firm name.
The parties in a joint venture are known as co-ventures.
Characteristics of a joint venture
It is a temporary partnership and comes to an end after the completion of a particular venture.
The partnership is for a specific venture, so it is a particular partnership.
The main purpose of a joint venture is to make profit/loss and to distribute that profit/loss among all co-ventures.
Partnership
According to section 4 of the Partnership Act of 1932, which applies in both India and Pakistan, "Partnership is defined as the relation between two or more persons who have agreed to share the profits according to their ratio of business run by all or any one of them acting for all".
A partnership firm is not a legal entity apart from the partners constituting it. It has limited identity for the purpose of tax law as per section 4 of the Partnership Act of 1932
Case study on Joint venture
Hero Honda is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two wheeler manufacturer in India. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108.
In 2010, When Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity. On 4th June 2012,Hero Motocorp approved a proposal to merge the investment arm of its parent-Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motor.
Termination of hOnda joint Venture
In December 2010, the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export. Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone.
Summary
Joint Venture and Partnership are normally considered one and the same but strictly speaking there is a lot of difference between the two.
Two or more companies join together to get into business in the case of a joint venture. On the other hand two or more individuals join together to get into business in the case of a partnership. This is the chief difference between joint venture and partnership.
There is a difference in the very definition of the two terms, namely, joint venture and partnership. Joint venture is in fact an agreement in the form of a contract between two or more companies that join together in business to perform a business task like generating a product or so. The agreement may aim at the sharing of profits and losses that result in the business.
Case study on partnership
Facebook.
Mark Zuckerberg, Facebook’s founder and chief executive
Facebook has announced a partnership with Skype to add video chat to the social networking site.
September 2011: Facebook partners with Heroku for Facebook application development using the Facebook Platform