This article will help you to learn about the difference between a partnership form and company.
Difference between Partnership and Company
Partnership
1. Act:
A partnership is governed by the Indian partnership Act, 1932.
2. Registration:
The registration of partnership is not compulsory but it is expected to be registered so that partners may exercise their rights between themselves and against outsiders.
3. Liability:
In partnership, the liability of partners is limited. All the partners are liable jointly and severally for all debts and obligations of the firm to an unlimited extent.
4. Transferability of Shares:
In partnership, a partner cannot transfer his share and interest without the consent of all other partners.
5. Number of Members:
In partnership the minimum number of members is 2 and maximum number is 20 and 10 in case of banking business.
6. Continuity of Existence:
The partnership comes to an end on the death, lunacy or insolvency of any one of the partners.
7. Legal Status:
A partnership firm has no separate legal entity apart from its members.
8. Capital:
A partnership has to depend on the resources of partners. It may borrow from banks or individuals but it cannot issue debentures to general public as company can.
9. Management:
In the case of partnership, all the partners have a right to take part in the management of business.
10. Audit:
A partnership is not required to have the accounts audited.
11. Alteration:
In partnership, partners can, by mutual agreement, change the objective at any time they like.
12. Winding Up:
No legal formalities are required for the winding up of partnership. It can be dissolved easily.
Company
1. Act:
A company is governed by the Indian Companies Act, 1956.
2. Registration:
The registration of company is compulsory under the Companies Act.
3. Liability:
In company, the liability of shareholders is limited to the value of shares held by them.
4. Transferability of Shares:
A shareholder can transfer his shares to anybody else whenever he feels so. There is no restriction on the transfer of shares of a public company.
5. Number of Members:
The minimum number of members is 2 in private company and 7 in public company. In a private company the maximum number of members is 50 and in the case of public company the number is unlimited.
6. Continuity of Existence:
A company has perpetual succession. The continuity of a company is not affected by the death, lunacy or insolvency of any member.
7. Legal Status:
A company has a separate legal entity. Members of the company can also enter into a contract with the company.
8. Capital:
A company raises its financial resources from the savings of large number of people, usually in small amounts.
9. Management:
In the case of company, the shareholders cannot manage the affairs of the company. A company is managed by the elected representatives of the shareholders, known as ‘directors’.
10. Audit:
A company by law is required to have the accounts audited once a year by chartered accountant in practice.
11. Alteration:
A company can change its objects and powers only with the permission of court.
12. Winding Up:
The winding up of the company is possible through court only. A proper procedure is to be followed for the winding up of a company.