A partnership company is formed when the parties involved agree to share the business’s profits or losses proportionately. This business is a separate entity, jointly owned and operated by the people in the partnership. An alliance is formed when businesses agree to collaborate without giving up their independent status.
Partners invest finances and personal assets in the business concern, equally or proportionally, according to the terms of their partnership agreement or contract. Assets belong to the partnership, and any cash profits and property acquired by the business, also are considered to be partnership property. In alliances, the parties contribute specific assets and finances according to the terms of the alliance. For example, if two companies form an alliance to develop new products, members of the alliance might agree to contribute the resources needed for the project; however, these resources do not belong to the alliance
In a partnership, the partners are responsible for the financial obligations of the company. If the company defaults on an obligation, the partners are liable for these defaults and have to honor them, even if it means selling off their personal assets. In the case of an alliance, the partners are not liable for the losses incurred by each other in their individual operations. This is because the firms in an alliance are independent identities by themselves.
Authority to Act
When a partner authorized to act on behalf of the company conducts business transactions, the other partners are bound by the dealings. In an alliance, however, members are not responsible for transactions or business agreements that the others enter; they are bound to honor only the commitments agreed upon in the alliance. For example, if the parties entered into the alliance to share new technology, they are not liable for the stock purchase deals of the others.
Business owners form partnerships to conduct business, but they form alliances to achieve particular goals, such as providing better services to customers, promoting products, sharing know-how and developing new products. Alliances contribute to the growth of their members because they can offer a wider range of services to customers and clients. For example, two businesses may manufacture products that complement each other. By forming an alliance, they can market both products as a combination deal, leading to better sales for both.
A partnership may dissolve if one of the partners expires, becomes bankrupt or quits the partnership for any reason. Even if the remaining partners continue working together on the goals and objectives of the partnership, the business is considered a new partnership, and they must create and sign a fresh agreement or contract. When alliances dissolve, the parties continue to conduct business as usual because most alliances are entered into for a specific goal and are dissolved when the goal is achieved.