Definition of Partnership Firm

The kind of business organization in which, two or more persons

agree to carry on the business, on behalf of the firm or partners and
to share profits & losses mutually. There are three major points in
this definition, they are:

Agreement There must be an agreement between partners,

irrespective of oral or written.

Profit The profit & loss of the business must be distributed

among the partners, in the specified ratio.

Mutual Agency Each partner is an agent of the firm as well

as of the other partners who carry on the business.
The persons are known as partners in their individual capacity,
while they are jointly referred to as the firm. The agreement in
which the terms and conditions of the partnership are written is
known as Partnership Deed. However, in the absence of any
partnership deed, Indian Partnership Act, 1932 is referred. The
primary objective of the creation of the partnership is to carry on
business.
It must be noted that the partners are responsible for the acts of the
firm, as there is no separate identity of the firm itself and therefore
the partners are held liable for the same. Moreover, the partners
cannot transfer their shares without the consent of the other
partners.
Definition of Company

A company is an association of persons, formed and registered

under the Indian Companies Act, 1956 or any other previous act.
The following are the major features of a company:

It is an artificial person.

It has a separate legal entity.

It has limited liability.

It has perpetual succession.

It has a common seal.

It can possess property in its own name.

There are two types of company: Public Company and Private
Company
The company can file a suit in its own name and vice versa. The
company is run by its representatives known as directors, which are
appointed by the members of the company at the Annual General
Meeting. In addition to this, there is no restriction on the
transferability of shares in case of a public company, but if we talk
about a public company there are certain restrictions.

Key Differences Between Partnership Firm and

Company
1.

A partnership is an agreement between two or more persons

who come together to carry out a business, and share profit & losses
mutually. A company is an incorporated association, also called an
artificial person having separate identity, common seal and
perpetual succession.

2.

The registration of the partnership firm is not compulsory

whereas to form a company; it needs to be registered.

3.

For the creation of a partnership, there must be at least two

partners. For the formation of a company, there must be at least 2
members in case of private companies and 7 in regard to public
companies.

4.

The limit for the maximum number of partners in a

partnership firm is 10 in the case of the firm doing banking
business, and 20 if the firm is engaged in trading business. On the
other hand, the maximum number of partners in case of a public
company is unlimited and in the case of a private company that
limit is 50.

5.

The next major difference between them is, there is no

minimum capital requirement for starting a partnership firm.
Conversely, the minimum capital requirement for a public company
is 5 lakhs and for a private company it is 1 lakh.

6.

In the event of dissolution of the partnership firm, there are no

legal formalities. In opposition to this, a company has many legal
formalities for winding up.

7.

A partnership firm can be dissolved by any one of the partners.

In contrast to this, the company cannot be wound up, by any one of
the members.

8.

A partnership firm is not bound to use the word limited or

private limited at the end of its name while a company has to add
the word limited if it is a public company and private limited if it
is a private company.

9.

The liability of the partners is unlimited whereas the liability

of the company is limited to the extent of shares held by every
member or guarantee given by them.

10.
As a company is an artificial person so that it can enter into
contracts in its own name, the members are not held liable for the
acts of the company. But in the case of a partnership firm, a partner
can enter into a contract in their own name with the mutual consent
of the other partners, and they can also be sued for the acts done by
the firm.
Conclusion

Due to various drawbacks in the partnership firm the concept of the

company came into being. This is the reason, now a very little
number of partnership firms can be seen, these days. It has also
evolved a new concept of Limited Liability Partnership (LLP).