Whether something is a partnership or company is easy to distinguish. A partnership is a business entity that is owned by two people. A company is an association formed for doing business collectively and involves two or more people.

What Is a Partnership?

According to the Indian Partnership Act of 1932, partnership is defined as a relationship between two (or more) people who have entered into an agreement to share all profits of a business that is carried on by the partners, or by any partner acting on behalf of the group as a whole. The members of a partnership firm are referred to as “partners.”

There are multiple kinds of partners, including active partners, sleeping partners, minor partners, and nominal partners. Partnerships have the benefits of capital contribution, along with quality decision making.

Creating a Partnership

A partnership firm is formally created by registering the partnership with the Registrar of Firms, as set forth in the Indian Partnership Act of 1936. It is a simple process to register a partnership firm. The application for the registration of the firm must contain certain details, including the following:

  • Names of all partners along with their addresses
  • The main office of the firm
  • The name of the firm
  • The location where the business takes place
  • The partnership tenure between all partners

What Is a Company?

A company, as defined by the Indian Companies Act of 2013 is an entity that is formed and registered under the Companies Act or any other previous company law, as well as an association of two or more persons that was formed for doing business collectively. Members of a company are referred to as shareholders of the company. Similar to partnerships, there are different forms of companies. Some of the different forms of companies include a one-person company, a public company, and a private company.

Registering with the Registrar of Companies

In order to formally become registered with the Registrar of Companies, the promotors of the company are required to file copies of the Articles of Association and the Memorandum of Association. The Articles of Association and the Memorandum of Association consist of various different types of information that relate both to the external management of the company as well as internal management.

Special Characteristics of a Company

A company has special characteristics specific to it, which include the following:

  • A separate legal entity
  • A common seal under the company's name
  • Limited liability
  • The company acts as an artificial person

The Differences Between a Company and a Partnership

A company is known as any voluntary association of persons that are registered as a company and also was formed for the specific purpose of a common object. A partnership is considered a relationship between two or more persons that have reached an agreement to share in the profits of a business that is to be carried on by all persons involved, or by any of them acting on behalf of the group as a whole. The partners within the partnership are collectively referred to as a “firm.”

Another difference is that companies are controlled and regulated by the Companies Act of 1956, while a partnership firm is actually regulated by the Partnership Act of 1932.

The Differences Between a Company and a Partnership – Legal Position

A company is distinct from a partnership legally, as a company is a corporate body as well as a legal entity having a corporate persona separate and distinct from its members. This means that the members of the company are not legally responsible or liable for the acts of the company.

A partnership, however, does not have a distinct legal existence from its members. For this reason, partners can be legally responsible for acts of the firm.

The Differences Between a Company and a Partnership – Registration Requirements

Under the Companies Act, it is required that a company is compulsorily registered. Forming a company properly under the Companies Act can be very difficult, and a company will not exist unless it is registered. A partnership differs in that registration of the partnership firm is not required under the Partnership Act. Instead, the firm is based on the deed of the partnership. The formation of the partnership firm is quite easy.

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