Difference between Joint stock Companies and Partnership business

1. Key Differences Between
Partnership Firm and
Company

2. 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.

3. Definition of Company
• A company is an association of persons, formed and registered under the
Indian Companies Act, 2013 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.

4. 1. Key Differences Between Partnership Firm
and Company
•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 a separate
identity, common seal and perpetual
succession.

5. 2. Key Differences Between Partnership Firm
and Company
•The registration of the partnership
firm is not compulsory whereas to
form a company; it needs to be
registered.

6. 3. Key Differences Between Partnership Firm
and Company
•For the creation of a partnership, there
must be at least two partners. For the
formation of a company, there must be
at least two members in case of private
companies and 7 in regard to public
companies.

7. 4. Key Differences Between Partnership Firm
and Company
•The limit for the maximum number of
partners in a partnership firm is 100. 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 200.

8. 5. Key Differences Between Partnership Firm
and Company
•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.

9. 6. Key Differences Between Partnership Firm
and Company
•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.

10. 7. Key Differences Between Partnership Firm
and Company
•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.

11. 8. Key Differences Between Partnership Firm and
Company
•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.

12. 9. Key Differences Between Partnership Firm
and Company
•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.

13. 10. Key Differences Between Partnership Firm
and Company
•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.