Distinguish between Partnership and Company



1.Definition Partnership is the relation between persons who  have agreed to share the profits of a business  carried on by all or any of them

acting for all.

A Company means a company formed and registered  under  this  Act  or  an  exiting Company.
2.A Legal


A firm is not a legal Entity. A Company on the other hand , is a Legal


3. Liability In a Partnership, the liability of partners is unlimited. In case of a company, which is limited, the liability  of  the  members  is  limited  to  the

extent of its share capital.

4.Transfer of


In a firm, a partner cannot transfer or assign the  whole of his share without the consent

of all the partners of the firm

In a company, a shareholder can transfer his share   subject   to   the   provisions   of   the

Articles of the Company.



In a firm, all partners are mutual agents. In a company, a member is not an agent of

the other member.


6.Registration Registration of  a  firm  is  not  compulsory

under the Partnership Act, 1932.

Registration of  a  company  is  compulsory

under the Companies Act, 1956.

7.Management Management  vests  in  the  hands  of  the

Partners  except  in  the  case  of  Sleeping


Management vests in the board of Directors, elected periodically by the shareholders.
8.Creditors Creditors of firm are also creditors of the partners individually as well. Creditors  are  only  the  creditors  of  the company    and     not    of    the    individual




A partnership has less statutory obligations A company is strictly regulated under the

Companies Act, 1956.

10.Accounts Accounts of a partnership firm need not be

audited by the auditor.

Accounts of a company must be audited by

an auditor.

11.To whom property


The property of affirm belongs collectively to the partners. The property of a company, on the other hand,  belongs to the company, and not to

the shareholders.

12.Effect of death of partners and


In the case of a firm, death or insolvency of a  partner  resolution the dissolution of the firm,   unless   there  is  a  contract  to  the


In   the   case    of   a    company,    death   or insolvency  of  a  member  of  the  company does  not  result  in  the  dissolution  of  the


13.Contract with the firm or company A Partner cannot enter into a contract with the  firm,  in which he is a partner, because the firm is not a legal person. A shareholder, on the other hand, can enter into a contract with the company, of which he is a  member, because the company is a

legal person.

14.Power to dispose of


A partner can dispose of the property of the firm. A   Shareholder    cannot    dispose    of    the property of the company.
15.Effect of Restrictions on authority In a partnership firm, when restrictions are imposed on the authority of a partner, they are of no avail against third person who has

no knowledge of it.

In the case of a company, the restrictions of a company are absolutely valid, because the memorandum and articles of company serve

as a public notice.

16.Limit on number of members In the case of a firm, the number of partners must not exceed 10 for carrying on banking business and 20 for any other business. In  the   case   of   a   company,   a   Private Company : Minimum 2 and Maximum 50 and in case of Public Company : Minimum

7 and Maximum unlimited.

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