Introduction

There are many ways to set up an entity in the business world in which, there are two popular choices which are partnerships and companies.

Where a few people come together, agree on how to run a business, and share the profits can be called as Partnership firm as per the provisions of The Partnership Act, 1932.

On the other hand, a Company is like a bigger team where members, known as shareholders, join association under rules prescribed in the Companies Act, 2013. Both have their way of working and benefits. 

HUF is “Hindu Undivided Family” is a form of business organization where common ancestors and all the lineal male descendants can their wives including unmarried daughters come together and run a business.

In this note, we will discuss the key differences between the Company & Partnership and also difference between Company & HUF.

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.
• The registration of the partnership firm is not compulsory whereas to form a company; it needs to be registered.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• A member of a company can contract with his company. A partner cannot contract with his firm.
• Member of a company are not its agents. Partners are the agents of the firm.
• Property of company belongs to the company and not to the members. In partnership the firm’s property is the property of its partners.
• Death of a member of a company has no effect on the company. But unless the partnership deed provides otherwise, death of a partner dissolves a firm.
• A company have a common seal where as law does not prescribe any seal for a partnership firm.
• Insolvency of a member of a company has no effect on the company. Whereas in partnership, unless the partnership deed provides otherwise, insolvency of a partner dissolves a firm.
• Governing Acts : The Companies Act, 2013 & The Indian Partnership Act, 1932.
• A company can raise public money by issuing a prospectus. A partnership firm cannot do so.

Distinction between Company and Hindu Undivided Family Business

• A Hindu Undivided Family Business consists of homogenous (unvarying) members since it consists of members of the joint family itself whereas . A company consists of heterogeneous (varied or diverse) members.
• A person becomes a member of a Hindu Undivided Family business by virtue of birth. There is no provision to that effect in the company. A person becomes member of a company by acquiring share and whose name is entered in the registere of members.
• No registration is compulsory for carrying on business for gain by a Hindu Undivided Family. Registration of a company is compulsory.
• In the company, profit is distributed according to the number of shares of the members. In Joint Hindu Family Business, distribution of profit is equal in all members.
• In a Hindu Undivided Family business the Karta (manager) has the sole authority to contract debts for the purpose of the business, other coparceners cannot do so.  There is no such system in a company.