The Company enjoys several benefits of the business organization over the partnership. It gave rise to the Company's evolution to acclimate several members. It's because, in a partnership corporation, at least 2 members agree to run the Business and mutually share the profits or losses in a specified manner. But, only a partnership company's maximum number of partners could have only 20. In this blog, we will learn about the differences between company and partnership.
What is Company?
A company is an association of individuals formed and functioning under the Indian Companies Act 2013. Depending on corporate law, a company arranges in diverse manners for taxation and monetary liability purposes. The Company will determine which business structure is appropriate for it by choosing among partnerships, proprietorships, or corporations, and it also denotes the Company's ownership structure. Amongst public and private companies, it can distinguish it. However, both have different ownership structures, regulations, and economic reporting requirements.
Features of a Company
A company assesses a juristic person with a separate legal entity distinct from its members. Let's look at some of the significant features of a company incorporated in India.
A Company has a Separate Legal Entity:-
A company that has a separate legal entity, unlike its shareholders or members. An individual or a group of members of a company can also purchase a total shareholding of a company so that the Company will continue to have its separate legal entity.
A Company is a Juristic Person:-
A company is a juristic person who can represent it before a Court of Law or any other place by a person competent to describe it. In case a company vests with the Company's Board of Directors and an individual Director who can institute a suit only if it is specifically empowered. However, Company cannot take an oath and be a witness.
The Company has Perpetual Succession:-
After a Company's incorporation will continue to exist until it's impaired. Even in the case of any tragedy to a shareholder holding most of the Company's shares, the Company will continue to exist.
The Company can own its Property:-
A company can own its Property and its assets, which belong to the Company itself and not its members. However, the Company's members have a right to participate in the Company's assets, which are surplus after they wind up the Company.
The Company can be a Trustee:-
A company can be a trustee if it has a pass from the objects clause in the Company's Memorandum of Association (MoA).
What is a Partnership?
A partnership is a formal agreement formed by 2 or more members to manage and employs a company and mutually share its profits. There are several types of partnership agreements. Firstly, there is a partnership in Business with all partners equally sharing liabilities and profits. In contrast, other partners, known as silent partners, may have limited liability and are not involved in the Company's day-to-day business operations.
Features of Partnerships
The crucial features of partnership are as follows:
It considers 2 or more members:-
An individual cannot ally with himself; there must be at least 2 persons to form a partnership. The maximum number of individuals in a partnership should be at most 10 in the banking industry and 20 in another corporate sector. If any instance, the number of partners exceeds the prescribed maximum. It will become an illegal association of members.
Agreement:-
The partnership is the outcome of a deal between individuals. The relation of partnership stems from the formation of a contract and not from status. The agreement may be verbal or in writing, but it must satisfy all the elements of a valid contract.
Lawful Business:-
A partnership firm registration is only to carry on a business. An association of members who own a place without carrying on a business is not a partnership.
Profit Sharing:-
There can be no partnership agreement between the partners without the intention of mutually sharing the business profits, which must distribute among the partners in an agreed ratio.
Limitation on transfer of shares:-
No partner can transfer his share in the partnership agreement without giving prior consent to all other partners.
What is the difference between a Company and a partnership?
As we know about both Company and Partnership. It's time to look at the difference between Company and partnership in the following points.
- The Indian Partnership Act of 1932 is the governing act of a partnership company. In contrast, the governing act of a company is the Indian Companies Act of 2013, which is the primary company and partnership difference.
- The formation of a partnership company is by mutual agreement between the partners. In contrast, the incorporation of a company is under the Companies Act.
- Company registration is obligatorily compared to the registration of a partnership, which is entirely voluntary. This is one of the major difference between a company and partnership
- The number of members is around 2-100 partners in the partnership, whereas the number of individuals is 2-200 in the case of a private company. For a public company, the members can start from 2, but it goes to unlimited members.
- The audit is not mandatory for a partnership. However, it can be mandatory for the Company.
- Partners themselves can manage the partnership company, whereas the directors are eligible to operate the Company.
- A partnership firm can have unlimited liability, but the Company has limited liabilities.
- There is no requirement for legal formalities to wind up a partnership firm. In contrast, there must be legal formalities for winding up the Company.
- The Company has a separate legal entity. However, a partnership firm does not need it.
- A partnership firm has a mutual agency compared to a company.
Conclusion:
It concludes that both entities carry enterprise as a group of individuals. The separate entity of the Company, in the eyes of the law, separation of ownership and management, and limiting the owners' liability make it easy for the members to continue the corporation smoothly. As such, with some partnership liabilities, the Company's concept came into being. However, both run smoothly into the field. Now that you know the difference between a company and partnership and need assistance to incorporate a partnership or a company, feel free to contact the experts at Lawgical India to do the same.
