These two terms differ in their meaning, but both of them are related to each other. The Partnership is not a different legal authority. Rather a Company is a purely different authority that is legal.
A Partnership is an association of more than one member. Rather, a Company is an association of all the people who are related to different sectors involved in a Company.
Key Takeaways
- A partnership is a business structure in which two or more individuals own and operate a business together. At the same time, a company is a legal entity separate from its owners.
- Partnerships are easier and less expensive than companies, but they also come with more personal liability for the owners.
- Companies can be more complex to set up and operate, but they offer the owners more protection from personal liability.
Partnership vs Company
If two or more people or a group of people are working together to run a business, then it is called a partnership. A partnership can be done between two or more parties. Partnerships can be divided into three main types. A company is a type of firm or corporation where people from different sectors work together. Shareholders have authority in a company.
A Partnership also needs management like a company. It has no board of directors, but the partners have the authority to look after the management of their firm.
They do have to get the central government’s approval like a Company. It does not have to take any limit after the name of an association-like company.
A Company has a board of directors who maintains management in the Company. A company has to work according to the approval given by the central government.
A Company cannot change its name whenever they want to. A company always has a common goal. A company is considered as a person.
Comparison Table
| Parameters of Comparison | Partnership | Company |
|---|---|---|
| Highest Authority | Partners | Shareholders |
| Legal Document | Partnership Deed | Memorandum Of Association |
| Limited Liability | No | Yes |
| Seal | Not required | Required |
| Addition of limited | Not necessary | Necessary |
| Law | Indian Partnership Act,1932 | Indian Companies Act,2013 |
| Government | State Government | Central Government |
What is Partnership?
A partnership is a group of more than one person. It should have a partnership deed to maintain the partnership.
The partners have the sole authority to look after the management of their association. It does not have to take any limit after the name of an association-like company.
A partnership can be between two or multiple parties, involving government or any non-profit organization. There are three types of partnerships available. Firstly, a general partnership states that all partners must share the profits and debts equally.
Secondly, limited liability partnerships state that the mistakes of another partner will not affect the other person. If one of the partners is found guilty of malpractice, the other partners will never be at risk. They can continue with their work.
The law makes some distinctions between the partners. Thirdly, limited partnerships are formed with a touch of both general and limited liability partnerships. Here there are two kinds of partners: a general partner and a silent partner.
A silent partner is a person who has a limited amount to invest in the association. India has an act under which partnerships fall under. This act is known as The Indian Partnership Act of 1932.
What is Company?
A company is an organization of all kinds of people who are related to different sectors related to the organization. The company has to register its name with limited.
The private company has to end with private limited, whereas the general has to complete with limited. They need to register themselves with the central government.
They have to follow the Indian Companies Act of 2013. The company should have a seal. They need to have an important document which is known as a memorandum of association. Once registered, the company cannot change its name.
A company always has a common goal. A company is considered as a person. A person has the right to buy the property and can register a case about another person; likewise, a company can also so a company is considered a person as an artificial.
A company does not have to pay any debts if any person in their organization is unable to. It is a particular entity and separates from the members.
The shareholders have limited liability in the company till their share price only. A company seal or a stamp is important to legalize any document in the name of the company.
A stamp should include the name and address of the company. It is the signature which the company will use in all the documents related to the company or any work related to the company.
Main Differences Between Partnership and Company
- The partnership has partners in the firm, whereas Company has shareholders in their firm.
- A partnership deed is important in Partnership, whereas a memorandum of association is needed in a Company.
- There is no restriction in liability in a Partnership, but it is limited in a Company.
- A seal is important in Company but not in Partnership.
- A company has to write limited after the name of the company, but a partnership does not require adding limited with the name of their organization.
- A partnership deed maintains accounts in the partnership, but a chartered accountant maintains accounts in the company.
- The partnership follows the Indian Partnership Act of 1932, but Company follows the Indian Companies Act of 2013.
- The state government looks after partnerships, but the central government looks after the company.
- http://thecommonwealthpractice.com/InGoodCompanyReview.pdf
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0262.2006.00719.x
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