A company is regulated in accordance with the Companies Act, 1956 and its subsequent amendments, while a partnership is regulated by the Partnership Act, 1932. The points of difference between a Company and a Partnership can be summed up as follows.
Difference Between A Company And A Partnership :
1. Registration : A company comes into existence only after registration under the Companies Act. In the case of a partnership, registration is not compulsory.
2. Minimum number of members: The minimum number of persons required to form a company is two in the case of private companies and seven in the case of public companies. The minimum number of persons required to form a partnership is two.
3. Maximum number of members: A public company may have any number of members. A private company cannot have more than 50 members. A partnership carrying on banking business cannot have more than 10 members and partnership carrying on other types of business cannot have more than 20 members.
4. Legal status: A company is regarded by law as a single person. It has a legal personality. A partnership is a collection of individual’s. It is not considered to be a single person.
Authority of members: The property of a partnership is the joint property of the partners. Each partner has authority to bind the firm by his acts. The property of the company belongs to the company. A shareholder in his individual capacity cannot bind the company in any way.
5. Contractual capacity: The shareholder of a company can enter into contracts with the company and can be an employee of the company. Partners can contract with other partners but not with the firm as a whole.
6. Management: A partnership firm is managed by the partners themselves. The work of management can be distributed among them in any manager they like. A company is managed by the Board of Directors or Whole Time Directors or Managing Directors or Manager’ who are selected in the manner provided by the Act. A shareholder, as such, cannot participate in the management.
7. Length of existence: A company has perpetual succession. The death or insolvency of a company does not affect its existence. It comes to an end only when liquidated according to the provisions of the Companies Act. A partnership, in the absence of a contract to the contrary, comes to an end when a partner dies or becomes insolvent.
8. Liability of members: The liability of the members of a partnership for the debts of the firm is unlimited. The liability of the members of a company is limited.
9. Liability of firm and company: The creditors of a firm are creditors of the individual partners, and a decree obtained against a firm can be executed against the individual partners. The creditors of a company are not creditors of the individual shareholders and a decree obtained against a company cannot be executed against any shareholder. It can only be executed against the assets of the company.
10. Transferability: A partner of a firm cannot transfer the interest in the firm to an outsider and make the transferee a partner, without the consent of all the other partners. The shareholder of a company can ordinarily transfer his share to the transferee who becomes a member of the company.
11. Statutory obligations: A company is required to comply with various statutory obligations regarding management, e.g., filing balance sheets, maintaining proper account books and registers. In the case of, partnership there are no such statutory obligations.