Differences Between Limited Liability Partnership and Joint Ventures
Sometimes a particular company wants to make a joint business venture with you in a specific project. It could be for a common cause like promoting health, environmental awareness, gender and development, women empowerment, and so on and so forth. So, why are some companies doing this? It’s simple. They just want to collaborate with other people to make their project a success. In theory, the bigger the workforce, the more the resources and people power. But you might ask, what if companies join together just like the one in a business joint venture. Do they become a Limited Liability Partnership (LLB)? To answer that question, we need to describe the characteristics of each other and describe in detail the differences between LLP and Joint Ventures.
LLP is a Partnership Company Joined Together by Business Partners
They gave their company a name and registered it at the Companies Commission of Malaysia whereas Joint Ventures are contractual agreements between two or more companies working together in a common project. Joint Ventures don’t need to register at the Companies Commission. What they need is a contract where both companies will both sign in an agreement.
The Duration of Partnership in LLP Takes Longer Compared to Joint Ventures
Since the reason why the two persons got into the LLP business is to make money, they would stay in business as much as they can as long as the business is earning. In Joint Ventures, however, once the duration of the project has been completed, the partnership is over.
The Persons in LLP Are Always the Business Owners
persons in LLP are always the business owners whereas, in Joint Ventures, some Non-Government Organizations and other parties might get involved. For example, if the Joint Venture is about Nature Conversation, the Ministry of Natural Resources and Environment may get involved if the two companies in Joint Ventures invite them.
The LLP is Always for Generating Money Whereas the Joint Ventures May or May Not Be for Profit
For example, two companies would like to make a Joint Venture about Energy Conservation. It’s not for the money as their target is to make people save energy. Their target market doesn’t need to buy anything or pay a concert ticket for a cause. Hence, it’s not for profiteering.
The People in LLP Don’t Have Their Individual Entity
Another difference between LLP and joint ventures is that the people in LLP don’t have their individual entity and therefore, can’t act according to individual wishes. The Joint Ventures, however, have their own separate entities. If one of the business companies in a joint venture wants to do something, it can.
The Scope of the LLP Business is Broader Than Joint Ventures
During meetings, the LLP can talk about the performance of the company, upcoming projects, programs for the development of its employees, and so on and so forth. In Joint Ventures, however, the scope is limited only on what they have agreed upon as stated in the contract where they have signed in.
The Relationship of the People in the LLP Business is Closer Compared to Joint Ventures
Since the duration of the LLP business is longer, people in the company develop family-like relationships. In Joint Ventures, however, the relationship is kind of friendly to one another since they just have to work on a specific project with a definite period of time.
Each Person in the LLP Business Has His Own Accountability
If something bad happens to one person that leads to a court case, only that person will be held accountable. In Joint Ventures, however, accountability is in each entity. For example, if A and B decided to go on a Joint Venture and one of the employees of A came to work drunk, B views this as the fault of A. B believes that it should be the management of A, giving sanctions to its employees.
To summarize, we can’t just say because a company enters into a joint venture, they become LLP. The partnership in LLP is different from Joint Ventures. An LLP is a kind of business entity that needs registration to the Companies Commission of Malaysia whereas a joint venture is not.
You can directly contact us if you have further questions regarding LLP and joint ventures. Also, we at 3E Accounting can help you with Malaysia LLP Setup.