1. Legal Status: Company vs. Partnership
A company acts as a distinct legal person, separate from its members. In contrast, a partnership does not have a separate legal identity from its partners.
2. Property Ownership: Company Property vs. Partnership Property
In a partnership, the property belongs to the individual partners. However, in a company, the property belongs to the company itself, not to its shareholders.
3. Mode of Creation: How Companies and Partnerships Form
A company comes into existence only after registration under the Companies Act, 1956. On the other hand, a partnership does not require registration to be formed.
4. Agency Relationships: Partners as Agents vs. Company Members
Partners serve as agents of the partnership, while members of a company do not act as agents for the company.
5. Contracts: Partner Agreements vs. Company Contracts
A partner cannot enter into a contract with the partnership firm itself. Conversely, a member of a company can contract with the company.
6. Transferability of Shares: Company Shares vs. Partnership Interests
A partner cannot transfer their share and make the transferee a partner without the consent of other partners. In contrast, shares in a company can transfer easily unless restricted by the Articles of Association.
7. Liability: Unlimited Liability in Partnerships vs. Limited Liability in Companies
Partners generally have unlimited liability, while shareholders enjoy limited liability, either by shares or guarantees. However, the Limited Liability Partnership Act allows for limited liability in partnerships.
8. Perpetual Succession: Company Longevity vs. Partnership Dissolution
The death or insolvency of a shareholder does not impact the company’s existence. In contrast, the death or insolvency of a partner typically leads to the dissolution of the partnership unless otherwise agreed.
9. Audit Requirements: Company Audits vs. Partnership Audits
Companies must have their accounts audited annually by a chartered accountant. In partnerships, auditing occurs at the discretion of the partners, although firms must conduct a tax audit if their turnover exceeds ₹1 crore.
10. Number of Members: Company and Partnership Membership
A partnership requires a minimum of 2 partners and a maximum of 20 (10 for banking). For a private company, the minimum is 2 and the maximum is 50. Public companies require at least 7 members, with no upper limit. As per the Companies Act 2013, one person can now also form a company.
11. Dissolution: Ending a Company vs. Ending a Partnership
A company can only dissolve according to legal procedures, while partners can dissolve a partnership at any time through mutual agreement.
Company Law Notes: Incorporation, Capital, Directors, and More
