Introduction 

In this article you will get information about "Difference Between Company And Partnership " in easy language. But before knowing the difference we should know the meaning of company and partnership firm. Because this will help us to understand the difference. 

Meaning Of Company 

A company is a body corporate or an incorporated business organisation registered under the Companies Act. It is an association of many people who invests capital for a common purpose and for carrying on a business and shares profits and losses of the business. The Companies Act 2013 provides types of companies that can be registered under the act. Section 2(20) of the Companies Act 2013 define a company as, " A company incorporated under this act or any previous company law". Company has a seperate legal entity from its members. It has all legal rights which are seperate, and members of the company are not liable for it. Company never dies because it has perpetual succession and life of the company does not depend upon the life of members. It has a common seal which work as its signature. Company has limited liability. The company can file a suit in its own name and can be sued by others in its own name. The company is run by its representatives knows as directors, which are appointed by its members at the 'Annual General Meeting '. 


Meaning Of Partnership Firm 

A partnership is an agreement between two or more people where parties known as business partners agree to run the business on behalf of the partners and agree to share profits and losses mutually in the specific ratio. The persons in the partnership business individually known as partners and jointly known as firm. In partnership firm, liability of partners are Unlimited. But in Limited Liability Partnership (LLP) the liability of partners are limited. Any two person form a limited liability partnership. There is no special qualification is required to form partnership. There should be atleast 2 members to form the partnership and the maximum number of members are 100 . The agreement in which the terms and conditions of the partnership firm are written is called "Partnership Deed". In the absence of partnership deed the provisions of Indian Partnership Act, 1932 should be followed. In partnership there is no seperate identify of the firm so partners are liable for the acts of the firm. 




Difference Between Company And Partnership On The Following Basis 


1. Modes of creation

Company is an incorporated association of persons and it is formed by registration under Companies Act, 2013 or any previous companies act. A partnership is an agreement between two or more people who agree to run the business on the behalf of partners or share profits and losses mutually in specific ratio. 

2. Legal status

A company has a seperate legal entity from its members means in the eye of law company is different and its members are different. It has a common seal which work as its signature. In partnership, partners and firm are same. Partners are liable for the activities of firm. 

3. Liability

In company, liability of the members are limited upto the number of shares held by every member or upto guarantee given by them. Whereas in partnership there is unlimited liability of members except (LLP). 

4. Transfer of shares

In company, shares are transferable and transferee gets all the rights of the transferor. In partnership, ordinarily no rights of transfer of shares by a partner. 

5. Number of members

In private company, minimum number of members are 2 and maximum are 200 and in public company, minimum are 7 and maximum are unlimited. Whereas in partnership, minimum members are 2 and maximum are 100.

6. Governing body

In company, companies follow the provisions of 'Indian Companies Act 2013'. Whereas in partnership, firm needs to follow the provisions of 'Indian Partnership Act 1932'.

7. Registration

In company, the registration of companies are compulsory. In partnership the registration of firm is voluntary or not compulsory. 

8. Minimum capital for start up

For the formation of company, minimum capital requirement is 5 lakh for public company and 1 lakh for private company. Whereas there is no minimum capital requirement for the formation of partnership firm. 

9. Dissolution

Company may be dissolved only according to the provision of law. Usually by an order of the court. Death of members does not dissolve the company.Whereas partnership firm dissolved by agreement, by notice or by court. Death of partner dissolves the partnership. 

10. Use of word limited or private limited

A company has to add word ' limited ' in case of public company and 'private limited ' in case of private company in its name . Whereas a partnership firm has not use the word limited or private limited in its name.

 

Conclusion

The main conclusion we can draw is that company and partnership is very different from one another. We can differentiate these two on various basis like mode of creation, liability, legal formalities for formation, number of members, dissolution etc. These two have different features and we should know about these features. 

Frequently Asked Questions

Question 1. Who is eligible for partnership firm? 

In India, there are no special qualifications required by the Indian Partnership Act, 1932 for becoming a partner in a partnership firm. But, the general requirements are must like the person should be of legal age, sound mind and enter into partnership freely. 

Question 2. What are the types of partnership? 

There are three types of partnership that is ; General Partnership (GP), Limited Partnership (LP) and Limited Liability Partnership (LLP) . 

Question 3. What is the minimum and maximum number of member required in company for formation? 

In public company, minimum number of members are 7 and maximum are unlimited while in private company, minimum number of members are 2 and maximum are 200.

Question 4. Is registration of partnership compulsory? 

As per the Indian Partnership Act, 1932 , the registration of partnership firm is not compulsory because firm does not have seperate legal entity. 

Question 5. What is partnership deed? 

Partnership deed is the agreement between the partners in which terms and conditions of the partnership firm are written. In the absence of a partnership deed, the provisions of the "Indian Partnership Act, 1932" should be followed.