difference between partnership and company

Distinction between partnership and company

These are the following differences between  partnership and company:-

(1) Regulating Act : A Company is regulated by companies Act, 2013, while a partnership firm is governed by the Indian Partnership Act, 1932.

(2) Registration : A company can not 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 company two. In case of partnership is two. The maximum number of members in case of a private company is two hundred but in case of a public company there is no such maximum number of Member. In partnership the number should not exceed twenty, while in case of banking business, it should not exceed ten. 

(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 Liablity of partners is unlimited. 

(5)   management  :  the affairs of a company are managed by its directors. It's 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 provide otherwise. 

(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 a partnership firm had no legal existence distinct from its partners. 

(8) transfer of interest : share 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. 

(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 on the preparation of accounts books of a company but in case of firm there is a no  specific legal direction  to this effect. 

(12) Audit  : Audit of accounts of a company is compulsory  whereas  it is generally  discretionary in case of a firm. 

(13) authority of members  : A shareholder us not 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 Liablities  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 fulfil legal  formalities.