| The major
difference between companies and partnerships may be considered under
the following headings : Formation: A company is created by
registration under the Companies Act. A partnership is created
by agreement which may be express or implied from the conduct of the
partners and is subject to the Indian Contract Act and the Indian
Partnership Act. No special form is required , though partnerships
articles are usually written.
Status
At Law: A
company is an artificial legal person with perpetual succession. Thus
a company may property , make contracts and sue and be sued. It is an
entity distinct from its members. A partnership is not a legal though
it may sue and be sued in the firm’s name. Thus the partners own the
property of the firm and are liable for the contracts of the firm
jointly as well as severally.
Transfer Of
Shares:
Shares in a company are freely transferable unless the company’s
constitution otherwise provides; restrictions may , of course , appear
in the articles of a private company. A partner can transfer his
shares in the firm , but the assignee does not thereby become a
partner and is merely entitled to the assigning partner’s share of the
profits.
Number Of
Members: A private
company must have at least two members and maximum 50 members. A
partnership cannot consist of more than 20 persons (10 persons in case
of banking business).
Management: Members of a company are not
entitled to take part in the management of the company unless they
become directors. Partners are entitled to share in the management of
the firm unless the articles provide otherwise.
Agency: A member of a company is not an
agent of the company or that of other members , and he cannot bind a
company by his acts. Each partner is an agent of the firm and his
partners, and nay bind the firm by his acts.
Liability Of
Members: The
liability of a member of a company may be limited by shares or by
guarantee. The liability of a partner is unlimited.
Powers: The affairs of accompany are
closely controlled by the Companies Act, 1956 and the company can only
operate within the objects laid down in the memorandum of association,
though these can be altered to some extent by special
resolution. Partners may carry on any business as they please so long
as it is not illegal and make whatever arrangements they wish with
regard to the running of the firm from time to time.
Termination: No one member of a company can
wind up the company, and the death, bankruptcy or insanity of a member
does not mean that the company must be wound up. A partnership may be
dissolved by any partner at any time unless the partnership is entered
into for a fixed period of time. A partnership is also dissolved by
the death or bankruptcy of a partner.
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