Firm and company are two terms which are vastly used in the business line. All the businesses are run by the help of people. In a partnership firm two or more people run business mutually and agree for the loss and profit equally. On the other hand, a company is the group of people who come together with a common objective and distribute loss and profit equally.
While there are similarities between partnership firm and company, there are many differences between them. For business purposes it’s very important to understand the concept of partnership firm and business. In this article we will discuss the difference between the partnership firm and company. There are many other aspects which are related to the partnership firm and company. We will also discuss all the aspects related with partnership firm and company.
Partnership firm vs company
| Sr. No. | Partnership Firm | Company |
| 1 | Members are bound with the agreement for equal profit and loss. | Association of the different people which have separate identities. |
| 2 | Registration is not compulsory.
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Formed only after registration |
| 3 | Number of partners in the partnership firm is limited to 100 only | 200 for the private company and unlimited partners for the public company.
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| 4 | No capital is needed.
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Minimum capital is required for a private company is 1 lakh and for public company minimum capital is 5 lakh |
| 5 | No legal formalities | Comes under the legal formalities.
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| 6 | Liabilities on the partners is unlimited | Liabilities on the partners is limited.
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| 7 | Property, ownership belongs to all partners | All properties belong to the company only |
Partnership firm
In partnership two or more people start or run a business. In this case these persons are well known to each other or generally family members. In partnership firms in partnership all these members agree to carry the loss and profits on the behalf of the firm. When they purchase a property like land or building. Everyone has ownership of that property. Partnership firms are not legally distinct.
In case of credit if a firm takes a loan from the bank every partner has to return that money. Three aspects of the firm partnership are
- Agreement – all the partners are bounded with a agreement
- Profit – all losses and profit are distributed equally in partnership.
- Mutual Agency- every partner is an agent of the firm.
All the terms and conditions of the partnership are described in the partnership deed. In case of absence of the deed partnership act 1932 is referred. There is no separate name of the firm; it’s always known by the partners’ names.
Company
It’s an association of the known and unknown people who come together with the same goals and thinking. They invest their money for the projects of the company and get the benefits. Company is coming under the legal criteria. Company is registered with a specific name. All the work and legal works are done with the registered name.
There are many features of company
- Company is registered with a specific name.
- Company is known by the name, not the partners.
- Company has a separate legal entity.
- All the debts and the properties are owned by the company not by the individual persons.
Company is run by the person who is known as the board director. These directors are appointed by the members of the company. To start a company minimum capital requirements are 1 lakh for the private company and 5 lakh for the public company. The Liabilities of the companies are very less.
Main differencee between partnership Firm and Company
- Partnership firm in which members are bound with the agreement for equal profit and loss. Company is the association of the different people which have separate identities.
- Company is formed only after registration. But in the case of partnership registration is not compulsory.
- Number of partners in the partnership firm is limited to 100 only. While in case of company 200 for the private company and unlimited partners for the public company.
- For starting a company, a minimum capital is required for a private company is 1 lakh and for public company minimum capital is 5 lakhs. While in case of a partnership firm no capital is needed.
- In partnership there are no legal formalities. While the company comes under the legal formalities.
- In partnership liabilities on the partners is unlimited. While in the company liabilities on the partners is limited.
- In partnership if firms buy property, ownership belongs to all partners. While in company all properties belong to the company only.
Conclusion
Partnership firm and company have many similarities as well as diss similarities. Company is derived by the firms. These days only a few firms are left. These days firms changed to a new concept which is known as Limited liability partnership (LLP). The examples of the firms are law firms and the design firms.
This is all about the partnership firm and company. Hope this will be helpful for you if you have any doubt please feel free to comment on us. For more interesting topics like this please go through our website.
Partnership firm
In partnership two or more people start or run a business. In this case these persons are well known to each other or generally family members.
Company
It’s an association of the known and unknown people who come together with the same goals and thinking. They invest their money for the projects of the company and get the benefits.
Main differencee between partnership Firm and Company
In partnership there are no legal formalities. While the company comes under the legal formalities.
In partnership liabilities on the partners is unlimited. While in the company liabilities on the partners is limited.