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If you’re looking for the most suitable structure for your business in 2025, you’ve got several options to consider. A common one is a partnership – often quicker and cheaper to set up than a company, with fewer regulatory hassles. But how is this different to a joint venture?
In this article, we’ll explore the key differences between a joint venture and a partnership. When you’re weighing your options, it’s important to understand the pros and cons of each structure—and the types of agreements you’ll need to protect your interests. For more guidance on choosing the right business structure, you might also want to check out our article on Changing Your Business Structure.
What Are The Differences?
A partnership is an agreement between two or more parties (typically up to 20) to run a business together. This arrangement is generally designed for an ongoing business relationship, whereas a joint venture is focused on achieving a specific goal or project. Often, businesses opt for a joint venture for short-term projects—even though in some circumstances it can be extended.
An additional key difference is that in a joint venture, each party’s liabilities remain separate. If one business incurs debts, the other will not be automatically responsible. In a partnership, however, the parties share responsibility. Each partner can be held liable for the business debts under the principles of joint and several liability. This distinction plays a critical role when you’re considering the risks associated with each option.
So, in summary, the main differences between a joint venture and a partnership boil down to:
- Liability of the parties
- Cost responsibilities and how expenses are shared
- Whether business is conducted collaboratively or as separate entities
- Duration of the arrangement
- The overall business goal
What Is A Joint Venture?
A joint venture is when two or more individuals or companies pool resources to pursue a common objective, yet remain separate entities for legal and financial purposes. For example, companies might come together for a limited, short-term project to expand into a new market. One notable example is the ongoing collaboration seen in innovative mobility projects—similar to Uber’s early collaboration with Volvo, which has paved the way for further self-driving technology ventures in 2025.
Simply put, a joint venture involves separate parties combining their expertise and resources to achieve a shared objective, while each remains responsible for their own expenses and liabilities. The profits (or losses) are then divided in accordance with the terms agreed upon in the venture’s documentation.
Joint Venture Agreement
Because a joint venture involves collaborating with an external entity, it’s wise to have a Joint Venture Agreement in place. This document outlines all the key terms of your collaboration and manages the risks associated with working alongside another party. Your agreement should consider the following:
- The role and responsibilities of each party
- How profits (and losses) will be shared
- How costs and expenses will be allocated
- The duration of the venture
- Intellectual property and confidentiality measures
- Dispute resolution procedures
- Liability clauses
- Termination conditions
Before you consult a lawyer, it’s helpful to familiarise yourself with How A Joint Venture Agreement Works so you can better understand which terms are critical to your particular project.
Pros Of A Joint Venture
A joint venture is popular for several reasons, especially if you’re looking to expand your business without bearing all the costs or risks alone. In 2025, joint ventures offer:
- Flexibility for businesses of any size
- Opportunities for expansion without the need to secure extensive external financing
- Access to additional resources and specialised expertise
- A legally binding framework that clarifies roles and responsibilities—remember, two heads can be better than one when it comes to business innovation
Cons Of A Joint Venture
Like any business arrangement, a joint venture has its drawbacks. Some potential disadvantages include:
- Difficulty in establishing full trust between unfamiliar parties
- Uneven performance levels, where one party may not contribute as effectively as expected
- The possibility of conflicting objectives or ulterior motives
- Potential disputes over decision-making and profit sharing down the line
What Is A Partnership?
A partnership is a business structure involving at least two people working together as one entity. Unlike a joint venture, where parties collaborate on a specific project while remaining distinct, a partnership represents a long-term commitment to running a business together.
In a general partnership, each partner is typically subject to joint and several liability. This means if the partnership incurs debt or legal obligations, each partner can be held personally responsible—even for the full amount. (Do note that limited liability partnerships are available in some circumstances, but these are less common for small businesses.)
The key difference between the two structures is that while a joint venture focuses on a specific, often short-term goal with separate liabilities, a partnership is founded on a long-term business journey where financial risks and losses are shared among the partners.
Pros Of A Partnership
Partnerships remain a popular option for many new businesses because they offer several benefits:
- Lower setup costs and simpler registration requirements
- A flexible structure that can later evolve into a more complex arrangement—if needed, refer to our guide on Changing Your Business Structure
- An opportunity to share both profits and responsibilities equally among partners
Cons Of A Partnership
One major disadvantage of a partnership is the way liability is handled. If one partner encounters financial or legal problems, the other partners could be held responsible. This dual risk can affect personal relationships and the overall stability of the business.
Joint Liability
If one partner incurs a debt or faces claims from a third party, the other partners may be required to cover that liability as well. This concept of joint liability means that trust and clear agreement on roles are essential to avoid disputes.
To mitigate these risks, ensure that your Partnership Agreement includes robust dispute resolution procedures and clearly outlines how liabilities will be shared. You might find it useful to read more about this in our article on What Should Your Partnership Agreement Include?.
Unlimited Liability
In a general partnership, partners face unlimited liability. Unlike companies, where the business is a separate legal entity with limited liability, partners in a general partnership can be personally liable for any debts or losses incurred by the business.
It’s crucial that your Agreement details how any potential losses will be divided between partners. Consider linking this to strategies from our guide on Does Business Structure Matter? for broader insights into managing risk.
Partnership Agreement
A comprehensive Partnership Agreement is essential. This document should clearly set out the following:
- The roles and responsibilities of each partner
- How profits and losses will be shared
- The decision-making process within the business
- Procedures for resolving disputes
- The process to be followed if a partner wishes to exit the business
Given the inherent risks in a partnership, having a professionally drafted Agreement is vital. This not only protects your personal assets but also ensures clarity in moments of uncertainty. Consider reaching out for a review or update if your current agreement was drafted before 2023.
As business landscapes evolve, it’s also important to review your Agreements regularly. Many recent changes in Australian business law and consumer protection standards for 2025 mean that maintaining up-to-date legal documents can save you from unexpected liabilities down the track. For additional insights, our resource on some Legal Essentials may prove useful.
Need Help?
Choosing a business structure is a significant decision, and every option comes with its own set of pros and cons. Speaking with a lawyer can help you tailor your approach to meet your business’s specific needs, so you understand both the costs and the risks involved.
Whether you’re deciding on the best structure for your business or need an Agreement drafted, Sprintlaw has a team of experienced lawyers ready to assist you. Reach out to us at team@sprintlaw.com.au or call us on 1800 730 617 for an obligation-free chat. Also, check out our comprehensive resources on Registering a Business in Australia for further guidance.
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