For the Commerce students who pursue the career of business education or Commerce, they need to study the terms like - partnership firms and company in accountancy. Both these terms will sound very familiar and hence students have problems differentiating between the two. In this section, we are going to give thorough knowledge to the students giving them insights about differences between such terms. Foremostly, we will study the difference between Partnership Farm and a Company next we will move to such other differences which will be helpful for the students.
Difference Between Partnership Firm and Company
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The Difference Table Depicting the difference between Partnership Firm and Company are as follows:
Point of Difference | Partnership Firm | Company |
Meaning | A partnership firm is a mutual agreement set by two or more partners who agree to run a business and share the profit and losses incurred from the business. | A company is an organization created by many people with a common objective and interest. |
Which Act is applied? | Indian Partnership Act, 1932 | Indian Companies Act. 2013 |
Number of members required | Two members are the requirement. | 7 members for public lt. companies and 2 for private limited companies. |
Maximum no. of members | 100 | For private limited – 200. For public limited it is unlimited. |
Essential Documents required | The partnership deed is required to create the partnership firm. | The Memorandum of Association and the Articles of Association are mandatory for an incorporating company. |
What is the capital requirement? | No such amount is certified. | Minimum 1 lakh for Pvt. Ltd. While 5 lakhs in case of Public Ltd. |
Audit requirement | No audit is required here | Mandatory requirement of an audit. |
Share transferability | Consent is required from all partners before transferring the shares | No such consent is required before the transfer. |
Is it a legal entity? | Not considered as a legal entity. | Considered as a legal entity. |
Difference between LLC and LLP
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The differences between LLC and LLP are as Follows:
Point of Difference | LLC | LLP |
Allowance of starting the business (in the U.S.) | All states allow LLCs | Some states might restrict LLPs to some group of professionals, like accountants, attorneys, etc. |
Members | Owners of LLC are called members | Owners of LLP are called partners. |
Taxation | LLP prepares their taxes like the partnership tax return. | LLC with more than one member will prepare their taxes like partnership tax return else will follow their own guideline. |
Difference Between LLP and Company
The difference between LLP and Company are as follows:
Point of Difference | Company | LLP |
Registered under which Act? | Companies Act 2013 | Limited Liability Partnership Act 2008. |
How many Directors are required? | Minimum 2 directors are required. While a maximum of 15 directors is required. | Minimum designated partners are 2. While maximum designated partners are not applicable here. |
How many members are there? | Minimum there are 2 members. Maximum there are 200 members. | Minimum there are 2 members. Maximum there is no limit.
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What is the capital requirement? | There is no minimum share capital required. | There is no minimum share capital applicable here. |
Frequency of meetings | Minimum there are four board meetings during one financial year with 120 days gap between two meetings. | There is no requirement for partners meeting in LLP. |
Abiding | Abiding the AOA or the MOA of the company. | They abide by the LLP agreement. |
Statutory audit | A mandatory audit is required. | The audit is not required unless the partner’s contribution exceeds 25 lakh rupees or more or the annual turnover exceeds 40 lakhs. |
Legal Compliance | High Legal Compliance is present. | Less legal compliance than companies. |
What is the tax structure? | This is complicated. | Less complication |
Reliability | Confidential | This is less reliable |
Investment | The companies are required to go through section 73 before investment procedures. | There are no criteria as per the investment of third parties. |
Difference between LLP and Partnership Firm
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The difference between LLP and Partnership Firm is as follows:
Point of Difference | LLP | Partnership Firm |
Separate Legal Entity | LLP is a separate legal entity that can hold assets in its own name. | The status of a partnership firm does not a separate identity from the partners. |
Liability of the Partners | The liability of the partners is limited to the extent of their contribution to the LLP | The liability of the partners is not limited and thus can extend to their personal assets the Partners as well. |
How many members? | Minimum two designated members are required to start an LLP with no ceiling limit. | Here the maximum or the ceiling limit of the partners is 50. |
Existence | LLP goes on disregard any members coming or going. | Partnership gets dissolved with partners leaving or dying. |
Registration | LLP is registered mandatorily with the registrar of companies. | A partnership firm is not mandatorily registered. |
The uniqueness of the Name | The name of LLP is unique and not identical or similar. | While there is no restriction for using the name in the case of Partnership. |
Difference between Partnership and Partnership Firm
The difference between Partnership and Partnership firms are as follows:
Partnership | Partnership Firm |
A partnership is a formal agreement or an arrangement between two or more parties. They manage and operate the business and share the profit and losses of the business among the partners | Persons who enter the partnership are individually known as ‘partners’ while together they are called the ‘partnership firm’. A partnership firm is not a separate legal entity from its members or partners. |
This is an agreement | This is the collective name of all the partners. |
Difference between Partnership and Private Company
The difference between a Partnership and a Private Company is as follows:
Partnership | Private Company |
A partnership is an agreement which is between two or more persons who come together to carry out the business activities and thereby share the outcome of the activity that is the profit of the business. | While a company is an artificial person having a separate identity of its own, common seal, and perpetual succession, this is formed by the law. |
Registration is not compulsory. | Compulsory registration. |
The minimum capital requirement for starting a partnership is not ascertained. | The minimum capital requirement to start a private company is 1 lakh. |
A partnership firm is regulated under the Registrar of Firms. Registrar of Firms of the State Government. | Private Ltd. Company is regulated under the Registrar of Companies. Registrar of Companies is of the Central Government. |
Dissolution will not attract many legal formalities. | Winding up private companies will involve many legal compliances. |
A partnership firm is not bound to use the acronym ‘Pvt. Ltd.’ | The private limited company must mandatorily use the acronym. |
The shares are unlimited in the case of Partnership. | The shares are limited to the extent of shares held by each member in a Private Limited. |
