Differences between a Company and Partnership

1. Definition
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.
2. Law
A company is regulated and controlled by the Companies
Act,2013. But a partnership firm is regulated by the
Partnership Act,1932.

3. Registration
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.

4. Legal Position
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.

5. Life Time
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.
7. Liability
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 liability of the partners is unlimited. The
partners are jointly and severally liable for all the debts of
the partnership firm.

8. Transferability of Shares
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.

9. Contract
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.

10. Number of Members

A private company should have a minimum of 2 members
and can have a maximum of 200 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.

11. Audit
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.

12. Implied Agency

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.

13. Good Faith

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.

14. Management
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.

15. Decision-Making
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.

16. Issue of Debentures

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.
17. Restrictions
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.
18. Secrecy
The companies have to file their documents, returns,
reports, balance sheet, profit and loss account etc. with the
Registrar. 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.

19. Capital Formation

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.

20. Dissolution
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.

Difference between Private and Public Company:

1.Private Company- In the case of Private Company, the
minimum number of persons required to form a company
is 2 but in the case of Public Company the minimum
number of persons required is 7.

2.In the case of Private Company, the maximum number

must not exceed 200 but, in the case of Public Company
there is no ceiling.

3.In the case of Private Company, the right of members to

transfer their shares is restricted, they have to transfer to
their members but, in the case of Public Company there is
no restriction on transfer of shares.

4.Private Company is prohibited from issuing a

prospectus because it cannot invite offers from the general
public to subscribe for its shares and debentures but, it is
not prohibited in the case of Public Company.

5.Private Company must have minimum of 2 directors

but, Public Company must have minimum of 3 directors.