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Sunday, May 11, 2014

Difference between Partnership Firm and Company



Basis of Difference
Partnership
Joint Stock Company
1. Regulation
Partnership Firm is formed under Indian Partnership Act, 1932.
A Joint Stock Company is formed under Indian Companies Act, 1956.
2. Number of persons

Minimum number of partners is 2 and maximum 10 in case of banking business and 20 in other kind of business.
Minimum numbers of members are 7 in case of a public company and there is no limit for maximum.  In a private limited company minimum number of members is 2 and 50 are maximum.
3. Liability
Liability of a Partnership firm is unlimited.
Liability of members is limited to extent of shares held by him.
4. Management
Every partner can take active part in the management of the firm.
Boards of Directors manage a company.
5. Auditing
Auditing of books is not compulsory.
Auditing of books is compulsory.
6. Business
A Partnership firm can do the business as agreed upon by the partners.
A company can do only that business which is stated in Memorandum of Association.
7. Separate legal entity
A partnership firm do not have a separate legal entity
A company has a separate legal entity.
8. Insolvency
Insolvency of a Partnership firm means insolvency of all partners.
Winding up of a company does not mean insolvency of its members.