OCT 2010
Explain the differences between partnership and
company.

PARTNERSHIP
The relevant statute applicable-
Partnership Act 1961
S3(1) Partnership Act defines
partnership as the relation which
subsists between persons carrying on
business in common with a view of
profit.
 Relation - existence of an agreement
between persons
 Persons - means more than one

 Carrying on business –defines business as ‘
include every trade, occupation or profession also
means to do an act repeatedly.
 In common – means on behalf of both or all the
partners.
 Profits – means profit motive.

GULAZAM V NOORZAMAN (1957)
Facts : the plaintiff claimed that the defendants,
who were cattle dealers, had made
arrangements to form a partnership a
partnership with him to purchase, keep, and
sell cattle. The conditions were that the plaintiff
was to provide capital for the purchase of the
cattle and the defendants were to look after
and sell them, with the profits to be divided
equally amongst them. After a while, the
defendants failed to render accounts to the
plaintiff, neither did they pay his share of the
profits. The plaintiff, therefore claimed for an
account to be taken and payment of any sum of
money found due to him. The defendants
defense was that the partnership never existed

Issue – whether a partnership existed between the parties.
Held :
1. On the facts, a partnership existed between the parties
2. Section 8 of the Registration and Licensing Business
Ordinance 1953 did not affect the rights of one partners
in a firm which had failed to comply with the Ordinance
to bring an action against his co-partners. Claimed
allowed.

COMPANY
 Company is a business organisation that is
registered (or "incorporated") under the
Companies Act, 1965 or its predecessor
legislation.
 Section 4 of a companies act 1965 says that a
company means a company incorporated pursuant
to this act or pursuant to any corresponding
previous enactment.
 As a legal entity which has its own name, a
perpetual life with its own common seal.
 An incorporated association
- Once it is formally incorporated, it becomes a
separate legal person. It has existence apart from

 section 361 companies act: a
company is incorporated when it
receives its certificate of
incorporation.
Co is born or its life start from the
date stated on the certificate.

SALOMON V SALOMON & CO LTD (1897)
FACTS :
Solomon was a prosperous boot and shoe manufacturer. He ran the
business as a sole trader under the style of ‘A. Salomon & CO’.
Salomon was married and he had five children. All his children
pestered him for a share in the business. Salomon then decided
to incorporated his business as a limited liability company. He
gave one share each to his wife and his five children and he
himself took 20,001 shares. The business was then transferred to
the company, and in consideration thereof debentures were
issued to Salomon. But Salomon continued to run the business
as before. The business floundered. Salomon was unable to
salvage the company and the company was put into liquidation.
There was enough assets to pay off the secured creditors
including Salomon himself who was a debenture holder. But the
unsecured creditors were left stranded. The liquidator sued
Salomon. The Court of appeal held that he was liable to
indemnify the company against the losses. Salomon appealed.

 Issue :
whether Salomon was liable for the debts of the
company.
 Held :
The House of Lords] incorporation of a company
created a separated person. Even though the business
of the company was the same as before and the same
person managed the business and with the same hands
that received the profits, yet the company was not an
agent or a trustee for the members. The members were
not liable in respect of the company’s obligations.

COMPARISON BETWEEN COMPANY AND PARTNERSHIP
COMPANY PARTNERSHIP
Structure Company is a person Two or more persons
separate from its members carrying on business with
a view of profit
Registration Need to be registered with Need to register their
the Registrar of business under the
Companies as a company Registration of Businesses
Act, 1956
Transferability Shares in a company are Generally, a partner
generally transferable cannot transfer his status
although the right of as partner to someone else
transfer may be restricted without the con-sent
of all the other partners

Number of members There is no maximum The maximum is twenty
number of members is (there is no ceiling on the
twenty (except where it is a number of members for
private company, in professional
which case the maximum is firms)
fifty).
Constitution A company must be A partnership may be
constituted in writing, i.e. formed orally or in writing
by a Memorandum and
Articles of Association.
Capital and liability Capital subscribed by Partners may with-draw
members for their shares capital but their liability for
cannot ordinarily be the firm’s debts to its
returned to them, but (in a creditors is
limited company) they are unlimited.
not liable for its debts once
they hold fully paid shares.

Borrowing powers Companies can borrow for Partners have un-restricted
purposes covered by their powers of borrowing in
objects as contained in their terms of amount and
Memorandum of purpose
Association
Security over assets Companies can use current Partners cannot create
assets as security by floating charges but they
creating floating charges. can mortgage the firm’s
assets.
A sole-proprietor cannot
create floating charges but
can mortgage the firm’s
assets.
Rules, procedure and Companies are subject to Partnerships are formed
information to public various statutory rules of informally and information
procedure and are required about the firm need not be
to supply certain published.
infor-mation to the public

Dissolution A company is dissolved Partnerships may be
by winding up and dissolved in-formally,
liquidation which is a e.g. by agreement of the
formal procedure partners.

CONCLUSION
 Based on discussion above,
partnership and company have a
various characteristic to form.