In different type of business registration there are two important options if there are more than one owner of the business. One option is Company Registration and other option is Partnership registration. So we need to understand the difference between two different business models
The 10 principal points of distinction between a company and a partnership firm are as follows:
- A company is a distinct legal person. A partnership firm is not distinct from the several persons who form the partnership.
- In a partnership, the property of the firm is the property of the individuals comprising it. In a company, it belongs to the company and not to the individuals who are its members.
- Creditors of a partnership firm are creditors of individual partners and a decree against the firm can be executed against the partners jointly and severally. The creditors of a company can proceed only against the company and not against its members.
- Partners are the agents of the firm, but members of a company are not its agents. A partner can dispose of the property and incur liabilities as long as he acts in the course of the firm’s business. A member of a company has no such power.
- A partner cannot contract with his firm, whereas a member of a company can.
- A partner cannot transfer his share and make the transferee a member of the firm without the consent of the other partners, whereas a company’s share can ordinarily be transferred.
- Restrictions on a partner’s authority contained in the partnership contract do not bind outsiders whereas such restrictions incorporated in the Articles are effective, because the public are bound to acquaint themselves with them.
- A partner’s liability is always unlimited whereas that of shareholder may be limited either by shares or a guarantee.
- A company has perpetual succession, i.e. the death or insolvency of a shareholder or all of them does not affect the life of the company, whereas the death or insolvency of a partner dissolves the firm, unless otherwise provided.
- A company may have any number of members except in the case of a private company which cannot have more than 200 members (excluding past and present employee members). In a public company there must not be less than seven persons in a private company not less than two.