DIFFERENCE BETWEEN A PRIVATE LIMITED COMPANY AND A PARTNERSHIP FIRM
A Private Limited Company in accordance with the Companies Act. 1994 and its subsequently amendments, while a partnership is regulated by the Partnership Act. 1932.
The points of the Company Vs Partnership Firm can be summered up as follows:
Private Limited Company |
Difference |
Partnership Firm |
|
Company comes into existence only after registration under the companies act. 1994. |
Registration |
In the case of a Partnership Firm, registration in not compulsory. |
| The number of persons required to form a Private Limited Company is 2 and cannot have more than 50 members. |
Member |
The number of persons required to form a Partnership Firm is required 2 and for carrying on banking business cannot have more than 10 members and carrying on other types of business cannot have more than 20 members. |
| Private Limited Company is regarded by law as single person. Company has a legal personality. |
Legal Status |
Partnership Firm is a collection of Individuals, it is not considered to be a single person. |
|
The property of the Private Limited Company belongs to the Company. A shareholder in his individual capacity cannot bind the company the Company in any way. |
Authority of Members |
The Property of the of a Partnership Firm is the joint property. Each partner has authority to bind the Partnership Firm by his acts. |
| The Shareholder of a company can enter into contract with the company and can be an employee of the Company. |
Contractual Capacity |
Partners can contract with other partners but not with the Firm as a whole. |
| Company is managed by the Board of Directors. |
Management |
Firm is managed by the partners themselves. The work of management can be distributed among them in any manner they like. |
| Company has a perpetual succession, the death of insolvency of a member does not affect its existence. It comes to an end only when liquidated according to the provisions of the companies Act. 1994. |
Length of Existence |
In the absence of a contract to the contrary, comes to end when a partner dies or becomes insolvent. |
| The Liability of the Private Limited Company is Limited. |
Liability of Members |
The Liabilities of the members of a partnership firm for the debts of the Firm is unlimited. |
| The creditors of a company are not creditors of the individual shareholders and a decree obtained against a company cannot be executed against any shareholder of the company. It can be only be executed against the assets of the company. |
Liabilities
|
The creditors of a firm are creditors of the individual partners, and a decree obtained against a firm can be executed against the individual partners. |
| The shareholder of a company can ordinarily transfers his share and the transferee become a member of the company. |
Transferability |
The partner of a firm cannot transfer his interest in the firm to an outsider and make the transferee a partner without the consent of all the other partners. |
