Difference between Partnership Firm and Company
|
Basis |
Partnership Firm |
Company |
|---|---|---|
|
Meaning |
A partnership firm is a business owned and operated by two or more people who share profits, losses, and responsibilities. |
A company is a business set up by people who invest money and share ownership, represented by owning shares. |
|
Legal Status |
Partnerships don’t have their own legal identity. Partners are fully responsible for all debts. |
Companies have their own legal identity, separate from owners, which limits owners’ responsibility for debts. |
|
Formation Process |
To start a partnership, partners write down rules in a Partnership Deed. Registration isn’t always needed. |
Companies need to register with the government and create articles of incorporation. |
|
Ownership Structure |
In partnerships, partners jointly own and run the business, sharing profits and losses. |
In companies, ownership is through shares of stock. More shares mean more ownership. |
|
Liability |
Partners are personally responsible for everything in a partnership, including debts. |
In companies, owners usually only lose what they invested if the company fails. Personal assets are usually safe. |
|
Management Structure |
Partnerships are managed by the partners themselves, who make decisions together. |
Companies have a board of directors chosen by shareholders to oversee business decisions. |
|
Taxation |
In partnerships, partners pay taxes individually on their share of profits. |
Companies pay taxes as a separate entity, and shareholders pay taxes on dividends they get. |
Difference between Partnership Firm and Company
In business, there are two main ways to organize: partnership firms and companies. Each has its own characteristics and pros and cons. Partnership firms involve multiple people running a business together, sharing profits and responsibilities. Companies, meanwhile, are separate legal entities owned by shareholders, with the company’s debts separate from their personal ones. Knowing these differences helps one decide how to set up their business.