11/2/2020 Difference Between Partnership And Company

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Difference between Partnership and Company
updated on FEBRUARY 23, 2017

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11/2/2020 Difference Between Partnership And Company

Partnership and Company are the most familiar terms for the people who are pursuing business education or commerce
education. Besides being very familiar, many of us can’t able to correctly di erentiate these two forms of business. This
article presents you the top di erences between Partnership Firms and Companies.

PARTNERSHIP

Indian Partnership Act, 1932 de nes Partnership as ” Partnership is a relationship between two or more persons who have
agreed to share the pro ts of a business carried on by all partners or any one partner acting for all”. The members of the

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Partnership rm are called as Partners. There are di erent types of partners such as Active partner, Sleeping partner,
Nominal partner, Minor partner, Etc.

Partnership Frim is created by agreement between two or more people by registering the partnership rm with Registrar of
Firms according to Indian Partnership Act, 1936.

Registration of a partnership rm is very simple process and Application for registration of rm must contain the following
details

✔ Name of the rm
✔ Names of the partners and their addresses
✔ location where the business is carried on.
✔ Partnership tenure between the partners
✔ The main o ce of the rm, etc.

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COMPANY

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Indian Companies Act, 2013 de nes Company as ” A Company formed and registered under this Companies Act or under
any previous company law”. A company is de ned easily as an association of two or more persons which is formed for
doing business collectively and registered with Registrar of Companies according to Indian Companies Act, 2013.There are
di erent types of companies like One Person Company, Private company and Public Company
(https://topdi erences.com/di erence-between-private-company-and-public-company/), etc.

To get registered with Registrar of Companies, the promoters are required to submit the copies of Articles of Association
and Memorandum of Association (https://topdi erences.com/di erence-between-memorandum-of-association-and-
articles-of-association/) which consists of various information relating to internal management and external management
of the company.

The company exhibits certain special characteristics, such as

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11/2/2020 Difference Between Partnership And Company

✔ It have a Separate Legal Entity

✔ It contains Common Seal under its name
✔ It has limited liability
✔ It acts as an arti cial person, Etc.

COMPARISON TABLE

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11/2/2020 Difference Between Partnership And Company

PARTNERSHIP COMPANY

The members of the Partnership rm are called The members of the company are called as shareholders of a

as Partners. company.

 Enacted by

Partnership Form of business is governed by Company Form of business is governed by "The Indian Companies

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"The Indian Partnership Act, 1932." Act, 2013”.

 Number of Members

A Company must have Minimum of 2 and maximum of 200 in the

Partnership rm must have Minimum of 2
case of private company. Minimum 7 and maximum is unlimited
partners and maximum of 20 partners.
number of members in case of public company

 Created by

Partnership Firm is Created by Contract Company Firm is Created by Law i.e created by incorporation of a

between two or more people. company under company law.

 Regulation Authority

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11/2/2020 Difference Between Partnership And Company

PARTNERSHIP COMPANY

It is regulated by the Registrar of Firms which It is regulated by the Registrar of Companies which comes under

comes under State Government. Central Government.

 Registration procedure

The registration of a Partnership rm is Not The registration of Company with Registrar of Companies is

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Mandatory. Mandatory.

 Documents Required

Partnership Deed(Agreement Document) is the Memorandum of Association(MoA) and Articles of

mandatory document for creation of a Association(AoA) are the main documents to the incorporation of

Partnership Firm. the company.

 Separate Legal Entity

Partnership rm is not a separate legal entity

A company is a separate legal entity, It is a separate entity from its
from partners. The Partners of the rm are
members, directors, promoters, etc.
collectively referred as a Partnership rm.

 Liability of Members

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PARTNERSHIP COMPANY

The partners have Unlimited Liability in all the The Shareholders and promoters have Limited liability to Capital

matters relating to Partnership Firm. of the company.

 Accounts and Audit

Partnership Firm has to maintain accounts as A Company should maintain accounts and auditing of accounts by

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per the conditions stated in partnership deed. certi ed Chartered Accountant are Compulsory.

 Common Seal

A Common Seal is not required for Partnership A Common Seal in the form of a stamp is required for the

Firm. company for legal and functional purposes.

 Management

Management of the activities of a Partnership Management of the activities of a Company is done by Board of

Firm is usually done by the working partners. Directors.

 Change of Name

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PARTNERSHIP COMPANY

The name of the Partnership Firm can be

The name of the company cannot be changed easily and a prior
changed easily by having a discussion between
approval of Central Government is required to change the name.
partners.

CONCLUSION

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The Indian Partnership Act, 1932 laid down certain rules and regulations on matters relating to Rights of partners,
Liabilities of Partners, Duties of Partners, etc. Indian Companies Act, 2013 laid down various principles relating to the
functioning of companies to protect the shareholders and investors of companies. Both Partnership and Company form of
businesses is very prevalent in the world.

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11/2/2020 Difference Between Partnership And Company

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