11/2/2020 Difference between Partnership and a Company
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Difference between Partnership and a
Company
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Some of the major distinction between partnership and a company are as follows:
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1. Regulating Act:
A company is regulated by Companies Act, 1956, while a partnership firm is governed by the
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11/2/2020 Difference between Partnership and a Company
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2. Registration:
A company cannot come into existence unless it is registered, whereas for a partnership firm
registration is not compulsory.
3. Number:
The minimum number in a public company is seven and in case of a private companies two. In case
of partnership the minimum number of partners is two. The maximum limit of members in case of a
private company is fifty but in case of public company there Export-Import
is no maximum limit. In partnership
Procedures (With Flow Chart)
the number should not exceed twenty, while in case of banking business, it should not exceed ten.
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11/2/2020 Difference between Partnership and a Company
4. Liability:
In case of joint stock company the liability of shareholders is limited (except in case of unlimited
companies) to the extent of face value of shares or to the extent of guarantee, whereas, in case of
partnership the liability of partners is unlimited.
5. Management:
The affairs of a company are managed by its directors. Its members have no right to take part in the
day to day management. On the other hand every partner of a firm has a right to participate in the
management of the business unless the partnership deed provides otherwise.
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6. Capital:
The share capital of a company can be increased or decreased only in accordance with the provisions
of the Companies Act, whereas partners can alter the amount of their capital by mutual agreement.
7. Legal Status:
A company has a separate legal status distinct from its shareholders, while
Export-Import a partnership
Procedures firm
(With Flow has no
Chart)
legal existence distinct from its partners.
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11/2/2020 Difference between Partnership and a Company
8. Transfer of Interest:
Shares in a public company are freely transferable from one person to another person. In private
company the right to transfer shares is restricted, while a partner cannot transfer his interest to
others without the consent of other partners.
9. Insolvency/Death:
Insolvency or death of a shareholder does not affect the existence of a company. On the other hand a
partnership ceases to exist if any partner retires, dies or is declared insolvent.
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10. Winding up:
A company comes to an end only when it is wound up according to the provisions of the Companies
Act. A firm is dissolved by an agreement or by the order of court. It is also automatically dissolved
on the insolvency of a partner.
11. Books:
The provisions of Companies Act, 1956 have their bearing onExport-Import
the preparation of accounts
Procedures (With Flowbooks
Chart) of a
company but in case of firm there is no specific legal direction to this effect.
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11/2/2020 Difference between Partnership and a Company
Audit of accounts of a company is compulsory whereas it is generally, discretionary in case of a firm.
13. Authority of Members:
A shareholder is not an agent of a company and has no power to bind the company by his acts. A
partner is an agent of a firm. He can enter into contracts with outsiders and incur liabilities so long
as he acts in the ordinary course of firm’s business.
14. Commencement of Business:
A company has to comply with various legal formalities and has to file various documents with the
Registrar of Companies before the commencement of business while a firm is not required to fulfill
legal formalities.
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