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Joint Ventureship vs. Partnership

Though smaller construction firms have more to gain from partnerships or joint ventures, businesses of all sizes stand to benefit from the support of another. In 2023, with labor shortages and supply-chain issues acting as a wet blanket for productivity, the need for these types of arrangements may be at an all-time high.

Joint ventureships and partnerships might accomplish similar goals, but they differ in a number of key ways — and each will need the right type of contract in place to protect all parties involved. Below, MNCLS will outline the ways in which the two are similar (and different) and why the right type of arrangement can be so crucial for construction business owners.

Joint Ventureship or Partnership: What’s the Difference?

Despite the slight overlap between these two terms, they can have dramatically different impacts on business owners — and legally, business owners must be sure they choose the right path. Here are some of the key differences between joint ventures and construction partnerships:

The Parties Involved

In a joint venture, two or more people — or businesses, or even governments — join forces. Partnerships, on the other hand, are typically made up solely of individuals.

The Intention of the Arrangement

The intention of joint ventures and construction partnerships are where the two differ most, in that a joint venture is formed for a single project while a partnership is an ongoing collaboration. For smaller construction firms, joint ventures can be the key to landing larger projects — as two firms may combine their resources and bid as one under a joint venture.

They (Can Be) Formed Differently

In addition to offering different benefits to construction professionals, there are legal differences between joint ventures and partnerships. Both construction partnerships and joint ventures should have a well-defined agreement or contract in place, but joint ventureships can be formed through as little as a verbal contract.

They’re Taxed Differently

How your arrangement is defined can greatly affect how the parties involved are taxed. Partnerships are pass-through entities, meaning both profits and losses pass through the business to the partners — who are then taxed accordingly. A joint venture, on the other hand, may be taxed as a corporation. If this is the case, parties can expect to be taxed at both the corporate and individual level. The distinction between joint ventures and partnerships can impact your bottom line, so construction professionals should be sure they’re entering into the right arrangement for their business.

When Joint Ventureship May Be the Better Pathway

No two situations and businesses are the same, and construction professionals may benefit from either of these arrangements for a number of reasons. With that said, many MNCLS clients have found a better fit in joint ventureship due to the liability benefits this arrangement can bring. In construction partnerships, both parties share equal liability. This means that if your partner’s subcontractor makes a mistake, you’ll find yourself equally responsible.

In a joint venture that is set up through a limited liability company (LLC), however, parties only bear responsibility for their individual interests. Therefore, in order to take full advantage of a joint venture, the right business entity will need to be established.

MNCLS: Go Forth With Confidence

Whether you are entering into a joint ventureship or a partnership, MNCLS can help you clearly define the nature of the relationship and draft an ironclad agreement for either. Further, our team has lived the hard hat life — and can steer you in the right direction from both a legal and business perspective. To discover the unique benefits of each of these arrangements or draft agreements to protect your business, call on MNCLS.

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