Meaning of Company
The word ‘Company’ has no exact legal or technical connotation. In the terms of the company’s act 2013, a company means a company formed and registered under the companies act. Companies Act, 2013, the extent of application (section-1(4)) the provisions of the are to apply to the following companies and bodies corporate:-
- Corporations established under this act or under any preceding company law.
- Insurance companies – this application is only to the extent to which the provision of the act is not inconsistent with those of the insurance act, 1938 and the IRDA Act 1999.
- Banking companies – subject to the provision of the Banking Regulation Act, 1949, banking company means a company as defined in section-5(c), Banking Regulation act.
- Companies engaged on generations or supply of electricity, to the extent to which the provision of the act not inconsistent with those of the electricity act, 2003.
- Any other company governed by any special act except to the extent the said provisions are inconsistent with the provisions of such special act.
- Any such body corporate, incorporated by any act as the central government may by notification specify for such application subject to such exception, modifications or adaptations as may be specified in the notification.
Meaning of Partnership
The partnership is a legal form of commercial establishment amongst two or more persons who share administration and revenues. The central government identifies numerous categories of partnerships. The two most well-known are limited and general partnerships. In India, all the characteristics and roles of the partnership are managed under ‘The Indian Partnership Act 1932‘. This particular law elucidates that partnership is a relationship between two or more persons or parties who have acknowledged to share the revenues made from the commerce under the administration of all the associates or on behalf of other associates. The body is collectively called a ‘Partnership firm’ and all the individual associates are the ‘Partners’.
Difference between Partnership and Company
1. Definition
Any voluntary group of individuals established as a company and molded for the aim of any mutual purpose is called a company. But a partnership is the relation between two or more individuals who have agreed to share the profit of a business carried on by all or any one of them acting for all.
2. Creation
A partnership firm is created by a contract between two or more persons where a company is created by law that is registration.
3. Registration
A company should be compulsory registered under the companies act. Its establishment is much tough but registration of a partnership firm is not obligatory under the partnership act. The firm is founded on the deed of partnership. Its formation is very easy.
4. Documents
The mandatory documents in the case of a partnership are partnership deed whereas in the case of a company the mandatory documents are the memorandum of association and article of association.
5. Law
A Corporation is managed and administered by the companies act but a partnership firm is managed by the partnership act, 1932.
6. Legal Position
A company is a body corporate and artificial legal person having a corporate persona separate from its associates. The members are not liable for the acts of the company. But a partnership has no lawful presence separate from its associates. Partners are responsible for the deeds of the firms.
7. Regulator body
The rules of a partnership are to be registered by the state government whereas in the case of the company it is to be regulated by the central government also the registration of a firm is not necessary whereas the company registration is mandatory.
8. Distribution of profits
In a partnership, the revenue is dispersed amongst the associates as per the deed of partnership. However, in a company, the members get a share in profits only when the dividends are declared by the board of directors and approved by all the members.
9. Life time
A company is a mere abstraction of law. Therefore its presence is not affected by the modification of association or demise or bankruptcy of its associates but a partnership is a mere accumulation of persons. So the life of a partnership ends on the death or insolvency or insanity of anyone partners.
10. Seal
The Seal (stamp) is not required for a partnership whereas in the case of company stamp is required.
11. Use of words
In the case of a private corporation, the term is to be used ‘Pvt. Ltd.’ But in the case of a public company, the word is to be used ltd. Only whereas such words are not required in case of the partnership firm.
12. Liability
The maximum liability of the shareholders, in case of a limited company, is limited up to the face value of the shares purchased by them. In case of companies limited by guarantee, the liability of the shareholder will be up to the amount guaranteed by them. But in the instance of a partnership, the burden of the partners is limitless. The partners are jointly and severally liable for all the debt of the partnership firm.
13. Transfer
Stocks of a corporation are easily movable except limited by the articles. But a partner can not transfer his share without the consent of all other partners.
14. Name changing
The title of the partnership firm can be altered simply by having conversation amongst the associates and by ensuing the simple process given in section-60 of the statute whereas the name of the company cannot be changed easily and prior approval of the central government is required.
15. Contract
A member of a company can enter into a contract with the same company. But a partner of a firm can not enter into a contract with the same partnership firm.
16. Entity
A partnership firm is not a separate legal entity from its partners whereas a company is a separate legal entity.
17. Number of members
A private company should minimum have two members and can have a maximum of 50 members. A public company should have a minimum of seven members and there is no maximum limit. But a partnership should have a minimum of two and can have a maximum of twenty person and ten in case of banking business.
18. Audit
The accounts of a company should be audited by a qualified auditor. But in the case of a partnership, the accounts need not be audited. Although the partners elect to organize for the audit of their partnership firm, the auditor need not be a qualified person. The powers, duties and liabilities of an auditor of a company are regulated by the companies act. But in the case of a partnership audit, the duties are governed by the provision of the contract entered into by the partners with the auditor.
19. Implied agency
In case of a company, a shareholder is not regarded as its agent in dealing with third parties. But in case of a partnership, a partner is an agent of the firm and of all other partners in dealing with the third parties.
20. Good faith
Since they are more in number, most of the shareholders of the company may not know each other. We can’t presume that entirely the shareholders are fair and truthful to each other nonetheless in the instance of a partnership the associates recognize each other very well. The partnership settlement is founded on paramount good faith. So the partners are to be just honest to one another.
21. Management
The management of a company is in the hands of a group of elected representatives of the shareholders. Even this group finds it difficult to administer the day-to-day affairs of the company. It is carried on mostly by salaried people such people cannot be expected to take an active part in the management as the owner.
The bit in the case of a partnership, the management is in the hands of the partners themselves. They work in absolute sincerity. They can provide individual consideration to the clients and thus reinforce the patron firm affiliation.
22. Decision making
In case of companies taking decisions on important issues requires a fairly long time. But in case of a partnership firm, a quick decision is possible.
23. Issue of debentures
Joint Stock Corporation is the lone commercial organization which is sanctioned to appropriate money through the issue of debentures. A partnership firm can not issue debentures.
24. Minimum paid-up capital
There is no minimum capital prescribed in the case of a partnership firm. However, in case of a private company the minimum paid-up capital is one lakh and in case of a public company, the minimum paid-up capital is five lakh.
25. Restrictions
The strangers who transact with a corporation should be conscious of the provisions of its articles of association. This is because the restrictions on directors affect the outsiders. Nevertheless in case of a partnership constraint on any companion does not disturb the strangers. So they need not be aware of the provision of the partnership deed.
26. Secrecy
The companies have to file their documents, returns reports, balance sheet, profits and loss account etc. With the registrar, few of them are accessible to the public. So there is no privacy at all in case of corporations. But in case of a partnership, the firm need not make and organize and submit such documents. So its secrets are not leaked out. outsiders can not know the in and out of the firm.
27. Capital formation
Even individuals with inadequate assets can become the stockholders of a large corporation. This lures them to save something out of their revenue for prospects. This is a green sign for resource formation in the nation. Such a resource creation is not conceivable in the case of a partnership.
28. Dissolution
A corporation, being a legal person, can only be wound up as provided by law. A partnership firm on the other hand is the consequence of a contract and can be ended at any time by a pact.
This Article is written by Deepanshu Ashava, 4th Year B.A.LL.B Student at IMS Law College, Noida.
