Company v.

partnership

Basis of difference Company Partnership

1.Cost of Formation The cost of Formation is The cost of formation is negligible
statutory filling fees

2.Distinct Entity A Company has distinct Legal Partnership does not have a distinct
Entity of its own and operates Legal Entity, partners of firm are
like a artificial person personally liable for acts done by
firm
3.Minimum 2 in case of Private Company and 2 persons (natural or artificial) are
Number of 7 in case of Public Company required
Members
4.Maximum 50 in case of Private Limited and 20 except in case of banking
Number of unlimited in case of Public business, where it is 10.
Members Company

5.Ownership Ownership lies with members Ownership lies with partners

6.Flexibility in Ownership is easily changeable , Ownership is restrictive; any

Ownership as shares of Company are freely change in partnership requires the
transferable approval of other partners.

7.Business A Company has Perpetual Death, resignation or Insolvency of

Durability Succession, death or insolvency Partner, dissolves the firm
of members does not affect its
existence

8.Management Managed by Directors elected by Managed by Partners

members of company

9.Liability The liability of members is The liability of the

Limited and does not extends to Partners is unlimited and
personal property extends to personal
property
10.Ownership of A Company purchases its A Partnership firm purchases its
Property Property in its own name property in the name of its partners.

11.Creditworthiness Due to Stringent Compliances & The creditworthiness of Partnership

disclosures under various laws, firms depends upon its goodwill
companies enjoys high degree of and
Creditworthiness. Creditworthiness of its partners.

12.Chances of Negligible, all the decisions are Very High, any act of individual
individual fraud taken collectively by board of partner will bind the firm
directors
13.Dissolution/Ter A Company being a creation of A Partnership being a creation of
mination law, can be dissolved as per will (desire of partners) can be
procedures laid down in Law terminated as per will of partners.
14.Legal High compared to partnership Very Negligible.
Formalities

Partnership V. Hindu Undivided Family (HUF)

What is HUF? The term HUF has been defined under Hindu Law. According to Hindu Law,
“Hindu Undivided Family is a family which consists of all persons lineally descended from a
common ancestor and includes their wives and unmarried daughter.’’

Three successive generations in the male line (son, grandson, and great grandson) who inherit the
ancestral property are called ‘coparceners’.

The property which a man inherits form any of his three immediate male ancestors (his father,
grand father, and great grand father) is called ‘ancestral property’.

There are two schools of Hindu Law:

a. Dayabhaga (applicable to West Bangal and Assam) (a son acquires interest after
the death of his father)

b. Mitakshara (applicable to whole of India except West Bangal and Assam ) (a son
acquires interest on his birth.)

Basis of Partnership HUF (Hindu Undivided

difference
1.Agreement It arises from an agreement.
2.Regulating law It is governed by the Indian
Partnership Act, 1932.
3.Name of the The persons who form
persons involved partnership are called ‘partners’.
4.maximum limit The maximum limit of partner is
10 for a banking business and 20
for any other business.
5.Admission of A person can be admitted to the
new members existing partnership with the
consent of all other partners.
6.Minor member A minor can be admitted to the
benefits of partnership with the
Family)
It arises by status or operation of law.
It is governed by Hindu Law.
The persons who are members of the
HUF are called ‘coparceners’.
There is no maximum limit of
coparceners.
A male person becomes a member
merely by his birth.
A male minor becomes a member
merely by his birth.
 consent of all the partners.
7.Female A female can become a full A female does not become member by
member fledged partner. her birth.
8.Implied Each partner has implied Only the ‘karta’ has the implied
Authority authority to bind the firm by acts authority.
done in the ordinary course of the
business.
9.liability of Liability of all partners is Only karta’s liability is unlimited and
members unlimited. the liability of the other coparceners is
limited only to their shares in the family
property.
10.Effect of Unless otherwise agreed The Hindu Undivided Family continues
death of member partnership is dissolved on the to operate even after the death of a
death of any partner. coparcner.