Introduction
Want to know which is better amongst the partnership and a company? Then, here is the article informing you about the distinguishment between partnership and company.
Difference between partnership and company
| DIFFERENCE | PARTNERSHIP | COMPANY |
| Meaning | Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. | means a company formed and registered under this Act or an existing company as defined in the companies act 2013. |
| Legal Status | a Partnership firm has no separate existence apart from it’s members | a company is a separate legal entity distinct from it’s member. |
| Governing Act | Partnership is governed by Partnership Act 1932 | a company is governed by Companies Act 2013. |
| Minimum members | 2 persons are required to form a Partnership firm. | for private limited company, 2 members. For public limited companies, 7 members. For One Person Company, one member. |
| Maximum members | a Partnership with object of acquisition for gains cannot be formed beyond 50 numbers of partners. | for private limited company 200 members and for public limited company, unlimited. |
| Registration | registration of Partnership is not compulsory but Partnership Act 1932 has made it indirectly essential to enjoy certain benefits. | Registration of company is compulsory under the Companies Act 2013. |
| Management | all partners have a right to take part in the day to day affairs of the firm. | affairs of company are managed by Board of Directors. Members cannot take part into day to day business. |
| Mutual Agency | Every partner is principal as well as an agent of other partners. | a member of company is not an agent of other members of company. |
| Transfer of Interest | a partner cannot transfer without consent of all other partners. | a shareholder can freely transfer his shares. However, private can put restrictions on transfer. |
| Liability of member | liability of a partner is unlimited | liability of a member is limited up to unpaid amount on share. |
| Audit | it is not compulsory for partnership firm to get their accounts compulsorily audited. | company has to get their accounts compulsorily audited as per the provisions of the Companies Act 2013. |
What is the main difference between partnership and a company?
The main difference between partnership and a company form of business organization is that of “ownership”. Thus, in the partnership form of business, the partners are responsible for owning and running the business. Whereas, in case of a company, the shareholders own the company but directors are responsible for operating it.
It simply concludes that the partnership enjoys no “separate legal entity” benefit. While the company is a separate legal entity and separate of the members and shareholders existing in the company.
When partnership is better than company?
Where the business requires two equally responsible persons to run and manage the business then, in that case, you can start with a partnership firm. Also, where the business is easy to establish and start-up cost are low inclusive of good amount of capital.
Conclusion
Hope you have gained good knowledge and know you can easily differentiate and decide between two of them as to which is better for you to start with. For more clarification and confusion if any, feel free to consult EAdvisors experts who are there for you to serve you.
Interestingly, both forms of business organization have its own merits and demerits. According to the expert opinion, choosing a private limited company would be profitable. But, there are various factors that you must consider before deciding to start either a partnership or a company.
Consult the best of experts and know the suitable forms of business entity for you.
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