Difference between Company and Partnership
1. Introduction:
A company is an association of several individuals formed for some common purpose. a company is capable of holding property, incurring debt, and suing and being sued in the same manner as an individual.
2. Definition of company:
Lord Justice Lindley:
A company is an artificial person created by law with a perpetual succession of a common seal. it has a legal entity, separate from the persons composing it. it can sue and be sued in its name.
3. Company limited by shares:
A company limited by shares is the most important and popular among the registered companies. it is a company that keeps the liability of its members limited upon the values of the shares purchased by them.
Essential:
Such companies need to use the word limited at the end of the names.
Object:
The object of using such a name is to inform the people that the liability of its members is limited.
4. Definition of partnership:
According to the Partnership Act 1932.
"Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all.
5. Features of partnership:
The following are the main features of partnership:
- Limited life.
- Unlimited liability.
- Co-ownership of property.
- Participation in income.
- Agreement.
Distinguished between company and partnership
As to liability:
Partners have unlimited liability.
Liability in a company is limited to the value of shares purchased.
As to life:
The partnership does not possess a long life.
The company possesses a long life.
As to books of accounts:
In partnership, there is no compulsion to maintain the books of accounts.
Books of accounts must be maintained in a company.
As to legislation:
The partnership is regulated under the Partnership Act 1932.
The company is regulated under the Companies Ordinance 1984.
As to legal entity:
The partnership has no legal entity.
The company has a separate legal entity.
As to members:
In partnership minimum of 2 partners and a maximum of 20 partners.
The partner is a minimum of 2 and a maximum according to the shares. in a company.
As to management:
In partnership, every partner may take an active part in the management of the business.
In company management is carried on by directors.
As to the distribution of profit:
In a partnership, the profit is distributed among the partners according to the partnership deed.
In a company, profit is distributed according to the article of association.
As to creation:
The partnership is created by a simple agreement between partners.
The creation of a company requires formalities to be observed.
As to audit:
In partnership, audit is not compulsory law.
Audit is compulsory by law in a company.
As to the transfer of shares:
In a partnership, a partner can not transfer his shares without the consent of another partner.
In a company, shares are freely transferable.
As to payment of tax:
In a partnership, each partner pays tax on his income individually.
In the case of a company, tax is paid by the company on the whole profit.
As to capital:
Capital is described in the partnership agreement.
The authorized capital of the company is mentioned in the memorandum of association of the company.
As to dissolution:
Partnerships can be dissolved easily.
There is a separate procedure for the dissolution of a company under the Companies Ordinance 1984.
As to the contract:
In a partnership, a partner cannot contract with his firm.
A shareholder in a company can contract with a company.
7. Conclusion:
To conclude I can say that when two or more than two persons carry on a legal business under an agreement it is called partnership. whereas a company is a corporate body. it enjoys a separate entity of its own which is distinct from its member.
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