Difference between Partnership and Company

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The difference between partnership and company is related to formation. The company is formed by getting registration under the company act. On the other hand, the partnership is formed by signing an agreement by all the partners without any registration.

Meaning of Partnership?

The meaning of partnership is an association of two or more persons who are jointly run the business with the aim to earn a profit. In partnership, partners agree to share the profit as well as loss in the business. This type of business removes the problem of a sole proprietorship. The partnership firm of business is governed by the Indian Partnership Act 1932.

Definitions:

A partnership is a relation between two or more persons who have agreed to share the profits of the business carried on by all or any of them acting for all.

– The Indian Partnership Act, 1932

Meaning of company?

A company is a legal entity formed by a group of individuals to engage in commercial or industrial business. We can classify the company as a partnership, joint-stock company, private company, public company. The company have its own common seal and it is an artificial person because it has its own name and bank account. 

According to the definition of a company by the Indian Act 2013

“A registered association which is an artificial legal person, having an independent legal, entity with perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability.”

The Chart of difference between Partnership and Company:

Points of differences

Partnership

Company
Meaning The meaning of partnership is an association of two or more persons who are jointly run the business with the aim to earn a profit A company is a legal entity formed by a group of individuals to engage in commercial or industrial business.
Formation The partnership is formed by the agreement between al the partners. The company is formed by getting registration under the company act.
Liability The liability of partners is unlimited under the partnership. The liability of the members is limited according to the capital invested by them.
Management

All the business operation are managed by all the partners.

The Board of directors and professionals are managing the operations of the company.
Continuity A partnership firm may be dissolved on the death, insolvency of any partner. The company stable and continues as the death of any member does not affect the existence of the company.
Legal entity In partnership, no separate legal entity from its members. The company is a separate legal entity from its members.
Governed by It is governed by a partnership Act. The company is governed by the Companies Act.

Conclusion:

Thus, the partnership is related to the association of two or more individuals who start, run and control the business operations. Whereas, the company have a separate legal entity all the operations are run and control by the board of directors of the company.

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References: –

https://vkpublications.com/

Also, Check our Tutorial on the following subjects: 

  1. https://tutorstips.com/financial-accounting/
  2. https://tutorstips.com/advanced-financial-accounting-tutorial/

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