Partnership and Company: Everything You Need to Know
A partnership and company is an important relationship to maintain. A partnership is a relationship between multiple people who shares profits of the business.3 min read
A partnership and company is an important relationship to maintain. A partnership is defined as a relationship between multiple people who agree to share any profits of their business that the partners are acting for. This is also a type of business that is owned by at least two people. A company has owners who will contribute management skills, make decisions, and provide resources on how the business should operate each day.
What is a Partnership?
Partners are the members of a partnership firm, and there are many types. These include a sleeping partner, minor partner, active partner, and nominal partner, among others. Partners enjoy a variety of benefits, including capital contribution and decision making. Partners may also have some challenges since they have to share the organization's profits.
It's easy to register for a partnership firm. You need to include the following on the application:
- Firm's name
- Partner names and addresses
- Physical address where business is conducted
- What the partnership tenure is between the partners
- Where the main office for the firm is
What is a Company?
A company is created when two or more people form an association where they operate a business together. The members are known as the company's shareholders. There are different kinds of companies such as a one-person company, a public company, and a private company. To register a company, promoters of the business must send in copies of the Memorandum of Association and Articles of Association which have different information when it comes to internal and external management of the business.
The company must have specific characteristics, including a separate legal entity, limited liability, a common seal under their name, and it should act as an artificial person. There are different advantages of a company, such as making quality decisions and being a legal entity. However, one of the main challenges of having a company is the government's strict regulation.
Differences Between a Company and Partnership: Legal Position
A company is a legal person and corporate body that has a different corporate personality from its members. The members aren't liable for any acts of the company. However, a partnership doesn't have a legal existence that's different from the members and partners are liable for any acts the firm commits.
Differences Between a Company and Partnership: Registration
A company should register themselves under the Companies Act. However, registering a partnership firm is not mandatory according to the Partnership Act. This is based on the partnership deed and is easy to form. A company can't exist until it registers, where a partnership firm can exist without registering. A company needs to comply with different legal formalities and file documents with the Registrar of Companies before they can begin conducting business, while a firm does not need to fulfill any legal formalities.
Differences Between a Company and Partnership: Number of Members
A public company should have at least seven members, and there is no limit on a maximum number. A company that's private should have at least two members and no more than 50. However, a partnership can have two minimum members and 20 maximum people, or 10 if they're in the banking business.
A shareholder isn't an agent for a company and doesn't have any power to bind the company by their acts. A partner is considered an agent of the firm and can enter contracts with those who are not in the company. They can also acquire liabilities as long as they act according to the regular course of the business.
Differences Between a Company and Partnership: Documents
An agreement document or partnership deed is required when creating a partnership firm. The main documents needed to incorporate the company are Articles of Association and the Memorandum of Association.
A company is simply an abstraction of law, and its existence doesn't get affected by members changing or dying. A company's life can essentially last forever due to this structure. Just because there is insolvency with a member does not mean the company's life will end. However, there are some situations where the life of a partnership will end. This includes insolvency, insanity, or death of any of the members.
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