difference between firm and company

2. TOS4. (i) Mode of Creation – A company is created by reg­istration under the Companies Act. 7. Audit of accounts – Accounts and audit of company accounts is compulsory and should be earned out in accord­ance with procedures set by law. 15. Insolvency – Insolvency or death of a partner does no result in winding up of a company. Legal restrictions – Legal restrictions are many. 7. Transferability of shares – The shares in a company is transfer­able, with the result that shareholders can go on changing. 2. Transferability of in­terest – A partner cannot transfer his interest in the firm to an outsider without unan­imous approval from all other partners. 15. Regulation Act – The Indian Partnership Act, 1932 applies. Difference Between, Partnership Firm, Company. Registration – A company is formed by registration under the Companies Act. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. All partners are bound by the acts of one partner, 12. The two forms of organisation may be distinguished on the following bases: A company is formed through registration under the Companies Act or incorporation in pursuance of an Act of Legislature. 5. 2. (ii) Number of Members – Minimum 2 persons constitutes a partnership. Number of members – In a public company, minimum number is 7 and there is no limit to maximum number. No limit in case of public limited company. (v) Contracts – A shareholder can have con­tract with the company in which he is holding shares. 2. Share Your PDF File 18. This is not obligatory for a partnership firm. Status of members – Every partner enjoys an im­plied authority to represent the firm. Separation of owner­ship from manage­ment – All partners can participate actively in the day-to-day affairs of a firm. Ease of formation – Time consuming and difficult. Liability of members – The liability of members in a joint stock company is limited (to the amounts contributed.). Flexibility – Relatively difficult, as a special resolution is required to be-passed and procedure for altering the memorandum has to be followed. 9. Survival- It is uncertain and depends upon death, lunacy or insolvency of any partner. Legal Person – A company, being a legal entity, is a person distinct from its members. A company is governed by the Companies Act, 1956. 5. xi. Commencement of business – There is no need to get any certificate to commence any business. Distribution of profit – All the profits are distributed among partners in the agreed profit sharing ratio. Control by states- Number of restrictions. Registration is not compulsory under the Indian Partnership Act, 1932. 7. 3. Legal status – A company gets a separate legal status apart from its members. 10. Winding up – A partnership may be wound up by an agreement or by an order of the court. 10. Debentures may be issued likewise to a large number of investors to raise loan capital for the company. A partnership firm cannot have more than 20 partners. Government control – The Government that creates a company reserves the right to regulate its actions more closely than those of partnerships. The death or insolvency of any or all the shareholders does not affect the life of the company, as it is distinct and separate from their lives. The partnership comes to an end by the death, insolvency or insanity of any partner. Law – Indian Partnership Act, 1932 applies. 8. There are no statutory requirements in this regard for a partnership firm. Share Your Word File Number of Members – A private company can have a maximum number of 50 members and a public company has no limit. But a partner can transfer his share with the consent of all the other partners. Legal Status – It is an independent identity. Moreover, regis­tration is not compulsory. Stability – Partnership is dissolved with the death or insolvency of partners. 13. One or more part­ners can sign documents on behalf of others. 11. 3. 3. 12. Liability – A partner’s liability is unlimited and also joint and several. Capital – Limited ability to raise capital, 17. 10. (i) Mode of Creation – A partnership is formed through an agreement which may be writing, oral, express or implied. In a private company, minimum number of members is 2 and maximum (excluding present or past employees) is 200. (iv) Property of Business – The property of the firm is the property of the partners. 10. Content Guidelines 2. Majority Rule – Decisions are normally taken by consensus, and. While firms are mainly involved in professional services, companies are involved … iii. 4. 6. Under the Companies Act, every company must get its account audited annually by a qualified Chartered Accountant. The firm and the partners are one and the same. Winding up – A company can be wound up only by carrying out the process laid down in the Companies Act. 19. A partnership is an association of two or more persons, who agree to combine their financial resources and managerial abilities to run a business and share profits in an agreed ratio. That is why the acts of the firm bind the partners, and the acts of individual partners ordinarily bind the firm. A partnership being based on a contract requiring utmost good faith, no partner can transfer his interest in the firm to another person without the unanimous consent of all the remaining partners. Management- Through a board of directors. 4. 2. (iii) Separate Entity – It is a separate legal person. Legal status – A company is an artificial person in the eyes of law. vi. 8. 8. 7. of members in a private company is 2 and the maximum is 50. Legal status- No separate legal status. A company enjoys perpetual succession or continuous existence. Members elect their representatives— called as directors—to run the show. Change of objects – A company can change its objects and powers only with the permission of the Court. A company raises its financial resources by the issue of a large number of shares of small value which is within the reach of an ordinary investor. 1. 4. 6. 2. Maximum membership in case of partner­ship doing banking business is 10 persons and for other busi­ness are 20 persons. 3. 4. Liability of owners – Liability of partners is Unlimited, 9. Unaffected by any event except winding up. In a partnership, every partner is entitled to take part in the management of the firm’s business. (iii) Separate Entity – A partnership has no separate legal existence from its mem­bers. Unity in partnership being the rule, all partners must concur in matters of policy. Distribution of Profits – Profits are distributed according to the terms of the Partnership Deed or equally if there is no agreement. Management and Ownership – Shareholders are owners but management is by professionals. Distribution of profit – Only a part of the profit is distributed to members as dividend, another part is transferred to various reserves and the balance profit left is kept in the P&L A/c. Welcome to EconomicsDiscussion.net! It is unaffected by the retire­ment, death, insolvency of its members. All companies are governed by the Companies Act. “A company is an association of many persons who contribute money or money’s worth to a common stock and employs it in some trade or business, and who share the profit and loss arising therefrom.” – James Stephenson. Legal status – It has a separate legal entity. Legal restrictions – Legal restrictions are few. 6. Only elected representatives can run the show on behalf of all members. It acts in its own name. 7. Capital of a company is divided into shares of uniform value. Transfer of interest – Partners cannot transfer their interest. Number of Members – In the case of a public company, the minimum number is 7 without any maximum limit. vii. Management – Only board of directors have to manage the company. Number of persons – In case of private company minimum members is 2 and maximum limited to 50 members. Liability of owners – Liability of shareholders is limited. Its incorporation is essential. Audit of Accounts – Audit is compulsory if stated in the Partnership Deed or if Income Tax Act so requires. There are a few restrictions on transfer of shares of private limited company. Right from its inception, a company has to comply with numerous and varied statutory requirements. Liability – Partners have unlimited liability. No such obligation is placed upon a partnership firm. Commencement of business – A public company can commence benefit only after obtaining certificate to commence business. Number of members – In a private company the min­imum number is 2 and the maximum is 50. 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