difference between firm and company

5. Stability – Partnership is dissolved with the death or insolvency of partners.

vi. Accounts and Audit – Provisions of Companies Act need to be followed in preparation and presentation of Annual Accounts, 16. At every stage it has to meet the requirements of Law. 6.

Types of activities.

Everything you need to know about the key differences between a partnership firm and a company. Transferability of in­terest – A partner cannot transfer his interest in the firm to an outsider without unan­imous approval from all other partners. ix. 2. Transparency – The operations are not subject to public scrutiny, 15. In a public company the minimum number is 7 and there is no maximum limit set by Law. Perpetual Existence – It enjoys continued, perpetual existence. Regulation of working – A company has to comply with several legal formalities right from incorporation till it is wound up.

Flexibility – Relatively difficult, as a special resolution is required to be-passed and procedure for altering the memorandum has to be followed. 5.

3. Legal status – Partnership does not get a separate legal status. The partnership comes to an end by the death, insolvency or insanity of any partner. Regulation Act – The Companies Act, 1956 applies.

6. (iv) Property of Business – The property of the firm is the property of the partners. Compulsory audit – A company is required by law to have its accounts audited once a year by a Chartered Accountant in practice. 3. Liability of members – The liability of members in a joint stock company is limited (to the amounts contributed.). 10. 5. Partnership is governed by the Partner­ship Act, 1932. xi. Legal restrictions – Legal restrictions are few.

They entrust it to the Board of Directors.

6. “A company is an association of many persons who contribute money or money’s worth to a common stock and employs it in some trade or business, and who share the profit and loss arising therefrom.” – James Stephenson. Transferability of Ownership – Shares of public limited company are freely transferable. Capital – Maximum amount of capital is limited to authorised capital. There are no statutory requirements in this regard for a partnership firm.

It is unaffected by the retire­ment, death, insolvency of its members. (ii) Number of Members – Minimum 2 persons constitutes a partnership.

Following are the differences between a partnership firm and a company: 1. v. Number of members- For public limited company, minimum number is 7 with no upper limit. Stability – The continuity of company is not affected by death or insolvency of any members. 3. All companies are governed by the Companies Act. Mode of formation – Through Incorporation. There is no maximum limit to the number of members in a public limited company.

Registration – A company is formed by registration under the Companies Act. (v) Contracts – A shareholder can have con­tract with the company in which he is holding shares.

A private company must have at least 2 members but not more than 50 members. Legal status – No separate legal entity different from its partners. 4. 5. 11. 7. 7. 20.

It is an artificial legal person in the eyes of law. Legal Status – It is an independent identity.

2. TOS4. 7. One or more part­ners can sign documents on behalf of others. 5. Mode of formation – It is established by an agreement between the partners. A partnership need not be registered. Distribution of profit – All the profits are distributed among partners in the agreed profit sharing ratio. Distribution of Profits – Profits are distributed according to the terms of the Partnership Deed or equally if there is no agreement. 9. A partnership has no legal existence apart from the partners. Ease of formation – Easy and Simple to form, 13. Number of members – In a public company, minimum number is 7 and there is no limit to maximum number. Transferability – A partner cannot transfer his partnership share to another person. Common seal – Every company should have a common seal of its own. 6. Stability – It is affected by death, retirement or insolvency of partner/partners. Law – Indian Companies Act, 1956 applies. 11.

Formation – It is formed by signing an agreement by all the partners. 6.

Continuity of existence – A company has perpetual succession. 12.

4. In partnership the majority rule does not apply in all important matters. 13. 1. 8. Separation of owner­ship from manage­ment – There is divorce between owner­ship and management. 3. 12. Maximum membership in case of partner­ship doing banking business is 10 persons and for other busi­ness are 20 persons. They have to entrust the management to an elected Board of Directors.

1. 7. 14. Liability – Liability of shareholders is limited to the extent of unpaid amount of capital contributed. Number of persons – Minimum 2 partners and maximum is limited to 20 partners but in case of banking company it is limited to 10 partners.

Members elect their representatives— called as directors—to run the show.

Liability – The liability of members is usually limited to the amount due on the shares held by them.

Management- Through a board of directors. Legal status – A company is an artificial person in the eyes of law. 11. vii.

10. Change of objects – A company can change its objects and powers only with the permission of the Court. 10. It may act in its own right without making shareholders liable for it. Moreover, regis­tration is not compulsory. Audit of Accounts – Under the Companies Act, 1956, audit of the accounts of a company is compulsory. Perpetual Existence – Limited life of the firm. Its incorporation is essential. Solve of account – Maintaining books of accounts is optional. Borrowing Capacity – Ability to borrow is restricted to personal capacity of partners. Number of Members – A private company can have a maximum number of 50 members and a public company has no limit.

11. Distribution of Profits – It depends on the Articles of Association or the Directors as to what share of profits, i.e., dividend (also approved by the shareholders) will be given to the shareholders.

But a partner can transfer his share with the consent of all the other partners. A partnership is, on the other hand, an association of persons based on mutual agreement among them, and is not compulsorily required to be registered under the relevant Act. A company raises its financial resources by the issue of a large number of shares of small value which is within the reach of an ordinary investor.

It cannot change its objects without legal sanction. 14. 6. 1. Liability – Partners have unlimited liability. 2. Legal status – It has a separate legal entity. A company is governed by the Companies Act, 1956. It may borrow from banks or individuals, but it cannot issue debentures to the general public, as can a company. Maximum Number of persons – 200 in case of private limited company. 12. 7. v. Number of members- Minimum two and maximum 20 for general business and 10 for a banking business. A partnership can, however, have a maximum of 20 members for ordinary business, and 10 members for banking business. Winding up – A company must adhere to the winding up procedures established by the Companies Act, 1956. i. Formation- By agreement among partners. The liability of the shareholders of a company is limited either to the nominal value of its shares or to the amount of guarantee given by them in case of companies limited by guarantee. 7.

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