What are the differences between partnership and company
Your first step is usually deciding on a business structure. This article will talk about two of the most common business structures — a partnership and a company. But what exactly is the difference between the two? The pros? Partnerships are quite easy to set up and also easy to dissolve, with little administration costs. Unlike a sole trader, you can share the workload and management of your business with your fellow partners.SEE VIDEO BY TOPIC: Difference Between an LLC and General Partnership
SEE VIDEO BY TOPIC: DIFFERENCE BETWEEN PARTNERSHIP AND COMPANYContent:
- Difference Between Partnership Firm and Company
- What Is The Difference Between A Partnership Structure And A Company Structure?
- Difference between Partnership and Company
- Differences Between Partnership and a Company
- Difference between partnership firm and company
- 19 Differences between a Company and Partnership
- Difference between Partnership and a Company
Difference Between Partnership Firm and Company
The special features of a joint stock company can be well understood if we compare the features of a company form of organization with that of a partnership firm. The important points of distinction between the company and partnership are given below:. Any voluntary association of persons registered as a company and formed for the purpose of any common object is called a company.
But a partnership is the relation between two or more individuals who have agreed to share the profits of a business carried on by all or any of them acting for all.
The partners are collectively called as a firm. A company is regulated and controlled by the Companies Act. But a partnership firm is regulated by the Partnership Act, A company should be compulsorily registered under the Companies Act.
Its formation is very difficult. But registration of a partnership firm is not compulsory under the Partnership Act. The firm is based on the partnership deed. Its formation is very easy. A company is a body corporate and a legal person having a corporate personality distinct from its members. The members are not liable for the acts of the company. But a partnership has no legal existence distinct from its members.
Partners are liable for the acts of the firm. A company is a mere abstraction of law. So its existence is not affected by the change of membership or death or insolvency of its members. But a partnership is a mere aggregation of individuals.
So the life of a partnership ends on the death or insolvency or insanity of any one partner. The maximum liability of the shareholders, in case of a limited company, is limited to the face value of the shares purchased by them. In case of companies limited by guarantee, the liability of the shareholders will be up to the amount guaranteed by them. But in case of a partnership. The partners are jointly and severally liable for all the debts of the partnership firm.
Shares of a company are freely transferable unless restricted by the Articles. But a partner cannot transfer his share without the consent of all other partners. A member of a company can enter into a contract with the same company. But a partner of a firm cannot enter into contract with the same partnership firm. A private company should have a minimum of 2 members and can have a maximum of 50 members. A public company should have a minimum of 7 members and there is no maximum limit.
But a partnership should have a minimum of 2 and can have a maximum of 20 persons [10 in the case of banking business]. The accounts of a company should be audited by a qualified auditor.
But in the case of a partnership, the accounts need not be audited. Even though the partners decide to arrange for the audit of their firm, the auditor need not be a qualified person. The powers, duties and liabilities of an auditor of a company are regulated by the Companies Act. But in the case of a partnership audit, the duties are governed by the provisions of the contract entered into by the partners with the auditor.
In case of a company, a shareholder is not regarded as its agent in dealing with third parties. But in case of a partnership, a partner is an agent of the firm and of all other partners in dealing with third parties.
Since they are more in number, most of the shareholders of the company may not know each other. We cannot expect that all the shareholders are just and honest to one another. But in the case of a partnership, the partners know each other thoroughly.
The partnership agreement is based on utmost good faith. So the partners are to be just and honest to one another. The management of a company is in the hands of a group of elected representatives of the shareholders.
Even this group finds it difficult to administer the day-to-day affairs of the company. It is carried on mostly by salaried people. Such people cannot be expected to take active part in the management as the owners. But in the case of a partnership, the management is in the hands of the partners themselves. They work in absolute sincerity. They can give personal attention to the customers and thus strengthen the customer-firm relationship. In case of companies, taking decisions on important issues requires a fairly long time.
But in case of a partnership firm, quick decisions are possible. Joint stock company is the only business organization which is authorized to borrow money through the issue of debentures. A partnership firm cannot issue debentures. The outsiders who deal with a company should be aware of the provisions of its Articles of Association.
This is because, the restriction on directors affect the outsiders. But in case of a partnership, restriction on any partner does not affect the outsiders. So they need not be aware of the provisions of the partnership deed.
The companies have to file their documents, returns, reports, balance sheet, profit and loss account etc. Some of them are open to public. So, there is no secrecy at all in case of companies.
But in case of a partnership, the firm need not prepare and file such documents. So its secrets are not leaked out. Outsiders cannot know the in and outs of the firm. Even people with limited resources can become the shareholders of a big company. This tempts them to save something out of their income for future. This is a green signal for capital formation in the country. Such a capital formation is not possible in the case of a partnership. A company, being a creature of law, can only be dissolved as laid down by law.
A partnership firm, on the other hand, is the result of an agreement and can be dissolved at any time by agreement. This site uses Akismet to reduce spam. Learn how your comment data is processed. Business Law. Table of Contents Differences between a Company and Partnership 1.
Definition 2. Law 3. Registration 4. Legal Position 5. Life Time 6. Liability 7. Transferability of Shares 8. Contract 9. Number of Members Audit Implied Agency Good Faith Management Decision-Making Issue of Debentures Restrictions Secrecy Capital Formation Related Posts.
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What Is The Difference Between A Partnership Structure And A Company Structure?
A company is regulated by Companies Act, , while a partnership firm is governed by the Indian Partnership Act, A company cannot come into existence unless it is registered, whereas for a partnership firm registration is not compulsory. The minimum number in a public company is seven and in case of a private companies two.
Nov 2, Finance. As businesses grow especially when there is more than one owner, they need to evolve into organisational forms beyond sole proprietorship. The form of business organisation can be decided keeping in mind several aspects such as nature and scale of the business as well as number of owners and relationship between them. This article looks at meaning of and differences between two forms of organisation — partnership firm and company. A partnership firm may or may not have a separate and identifiable legal entity from that of its partners depending on the nature of partnership — limited or unlimited partnership.
Difference between Partnership and Company
Partnership and Company are the most familiar terms for the people who are pursuing business education or commerce education. This article presents you the top differences between Partnership Firms and Companies. The members of the Partnership firm are called as Partners. There are different types of partners such as Active partner, Sleeping partner, Nominal partner, Minor partner, Etc. Partnership Frim is created by agreement between two or more people by registering the partnership firm with Registrar of Firms according to Indian Partnership Act, Registration of a partnership firm is very simple process and Application for registration of firm must contain the following details. A company is defined easily as an association of two or more persons which is formed for doing business collectively and registered with Registrar of Companies according to Indian Companies Act, To get registered with Registrar of Companies, the promoters are required to submit the copies of Articles of Association and Memorandum of Association which consists of various information relating to internal management and external management of the company. Previous Next.
Differences Between Partnership and a Company
The special features of a joint stock company can be well understood if we compare the features of a company form of organization with that of a partnership firm. The important points of distinction between the company and partnership are given below:. Any voluntary association of persons registered as a company and formed for the purpose of any common object is called a company. But a partnership is the relation between two or more individuals who have agreed to share the profits of a business carried on by all or any of them acting for all.
When starting a business, one of the first decisions you will be faced with is what kind of business to register. The type of business you decide on will affect your taxes, liability and how the company is run. If you are undecided on which business structure to choose, examining five major differences between a corporation and a partnership can help you decide the best option for your business. Corporations and partnerships differ in their structures, with corporations being more complex and including more people in the decision-making process.
Difference between partnership firm and company
When launching a new venture, you will want the business to be legally recognised. But which structure is right for you? Here we explain the difference between a partnership and a limited company, with consideration of the advantages and disadvantages of either arrangement. A partnership refers to two business partners sharing joint responsibility for a company.
19 Differences between a Company and Partnership
Difference between Partnership and a Company