Differences Between Partnership Firm and Company

Differences Between Partnership Firm and Company
The principal points of distinction between a partnership firm and a company are as follows:
Partnership Firm
A partnership firm is not distinct from the several persons who form the partnership.
A company is a distinct legal person.
In a partnership, the property of the firm is the property of the individuals comprising it.
In a company, it belongs to the company and not to the individuals who are its members.
Creditors of a partnership firm are creditors of individual partners and a decree against the firm can be executed against the partners jointly and severally.
The creditors of a company can proceed only against the company and not against its members.
Partners are the agents of the firm. A partner can dispose of the property and incur liabilities as long as he acts in the course of the firm’s business.
Members of a company are not its agents. A member of a company cannot dispose of the property and incur liabilities in the course of the company’s business.
A partner cannot contract with his firm.
A member can contract with his company.
A partner cannot transfer his share and make the transferee a member of the firm without the consent of the other partners.
A company’s share can ordinarily be transferred
A partner’s liability is always unlimited.
The liability of shareholder may be limited either by shares or a guarantee.
The death or insolvency of a partner dissolves the firm, unless otherwise provided.
A company has perpetual succession, i.e. the death or insolvency of a shareholder or all of them does not affect the life of the company.
The accounts of a firm are audited at the discretion of the partners.
A company is required to have its accounts audited annually by a chartered accountant.
A partnership firm, on the other hand, is the result of an agreement and can be dissolved at any time by agreement among the partners.
A company, being a creation of law, can only be dissolved as laid down by law.

Next Post »