Partnership Firm and Company

A corporation is defined as any voluntary organisation registered as a business and created to achieve a shared goal. On the other hand, a partnership is a relationship between two or more people who have agreed to split the profits of a firm run by all or any of them acting for all. A firm is a name given to the partners as a group

A partnership company must have at least two people who mutually agree to operate the business and share earnings and losses in the way specified in the agreement.

A firm is a group of people that band together to achieve a shared goal and share profits and losses.

Differences Between Partnership Firm and Company 

Partnership Firm

The kind of business organisation in which two or more people agree to carry on the business on behalf of the company or partners and share profits and losses. This definition has three important points, which are as follows:

• Agreement – Whether oral or written, an agreement between partners is required.
• Profit – The business’s profit and loss must be split among the partners in the set ratio.
• Mutual Agency – Each partner acts as an agent for both the company and the other partners who carry on the business.

Individually, the individuals are referred to as partners, but together, they are referred to as the company. The “Partnership Deed” is the formal agreement outlining the partnership’s terms and conditions. However, in the absence of a partnership agreement, the Indian Partnership Act of 1932 is invoked. The major goal of forming the partnership is to do business.

Company 

A corporation is a group of people created and registered under the Indian Companies Statute, 2013 or any prior act. A company’s main characteristics are as follows:

• It is a fabricated person.
• It has its legal entity.
• It carries only minimal responsibility.
• It has a never-ending succession.
• Everything has the same seal.
• It may own property in its own right.
• There are two kinds of businesses: Public and private companies.

Litigation may be filed in the company’s name and vice versa. The corporation is controlled by its directors, who its members elect at the “Annual General Meeting.” Furthermore, there are no limits on the transferability of shares in the case of a public corporation, but there are some restrictions in the event of a public company.

Key Differences

Significance

A partnership firm is a commercial organisation in which two or more entities join forces to conduct a joint enterprise to benefit.

A corporation is an incorporated body made up of many members who have contributed to its capital and were founded to conduct a business.

Members

Partners are the members/owners of a partnership business.

Shareholders are the members/owners of a firm.

The Required and Maximum Number of Owners/Members

A partnership business must have at least two partners; the maximum number of partners is specified by jurisdictional legislation.

A company must have at least two shareholders. The maximum number of shareholders permissible for a private corporation (governed by territorial legislation) and a public company is different (unlimited).

Creation mode

A partnership business is formed when the partners engage in a partnership agreement.

A company is formed via incorporation under the jurisdictional companies’ legislation. The memorandum of association and articles of the association serve as the organisation’s charter papers.

The Need for Registration/Incorporation

A partnership company is not required to be registered.

Because a corporation is an incorporated body, it is required by law to register.

Governed by

Partnership businesses are controlled by partnership laws relevant to the country. Every state in the United States, for example, has its partnership legislation, as does India, which has the Indian Partnership Act.

Companies are controlled by the corporate laws of the jurisdiction in which they operate. In India, for example, the Companies Act 2013 governs business.

Legal responsibility

In an unlimited partnership, the partners are individually accountable for the business’s debts and responsibilities. Partners’ liability in a limited liability partnership is normally restricted to their capital contributions.

The responsibility of shareholders in a corporation is limited to their capital contribution. Shareholders are not individually accountable for the company’s debts and obligations.

Conclusion

The notion of the business arose as a result of several flaws in the partnership firm. This is why, these days, there are just a few partnership businesses to be found. It has also developed a new Limited Liability Partnership idea (LLP). Both the partnership firm and the corporation type of business organisation have advantages and disadvantages. As enterprises develop, the company form is preferable because it offers more options for expansion – via the injection of additional stock from a larger number of members, public involvement in equity, participation in numerous schemes and sops designated for companies, etc.