Which of the following is not a characteristic of joint venture ?

The correct answer is - One of the partners acquires complete stock of the other

Key Points

• Joint Ventures
  • A joint venture is a business arrangement where two or more parties agree to pool their resources for a specific purpose or project.
  • All partners maintain their independent legal status, and ownership is typically shared based on the agreed equity ratio.
• Incorrect Statement
  • The statement "One of the partners acquires complete stock of the other" is not a characteristic of a joint venture.
  • This refers to a merger or acquisition, not a joint venture, as it involves one partner taking full control of another.

Additional Information

• Key Characteristics of Joint Ventures
  • Equity Position: Partners share ownership based on their equity contributions, which are agreed upon at the start.
  • Legal Entities: A joint venture can only be formed between legally incorporated entities or individuals.
  • Shared Management: All partners intend to actively participate in the management and decision-making process of the venture.
  • Defined Purpose: The collaboration is for a specific project, purpose, or duration, unlike mergers which aim at long-term integration.
• Comparison with Other Business Models
  • Merger: One company absorbs or combines with another, often leading to a single surviving entity.
  • Acquisition: One entity buys the controlling stake in another, gaining full ownership.
  • Partnership: An ongoing relationship between parties to jointly run a business, without the specific project focus seen in joint ventures.