The main difference between these two types of business agreements is the distribution of profits, losses, and liabilities.
Contractual agreements usually limit the scope of their relationship to a single project or a specific duration of time. This type of joint venture often involves competitors (or at least separate businesses in their own right) working together on a short-term, mutual goal.
For example, two construction companies may work together in a joint venture to research and develop a new product: a lighter weight, more resilient building material. They pool their resources together to complete the project, then part ways to market and sell it individually.
In this case, by creating a contractual joint venture agreement, one company does not share the profits of the other. Similarly, each company limits its liability for disputes or damages that may occur as a result of the other company's actions. For example, if Company A leaves out important information in their advertisements, causing inappropriate use of the product and consumer injuries, Company B would not likely be held responsible.
In contrast, each member of a general partnership joint venture commits to the long-term profitability of the business.
For instance, someone who's an expert in the daily operations and management of real estate projects may partner with an individual or organisation that can finance down payments on multiple properties. They work together to buy, restore, and sell old houses.
The parties in this agreement share both the profits from this project, as well as the liabilities. If one party cannot pay off a debt, debt collectors may hold the other party responsible for payments.