Distinction between Partnership Firm and Company

The principal points of distinction between a partnership firm and a company are as follows:

  1. A partnership firm is not distinct from the several persons who form the partnership. A company is a distinct legal person.
  2. In a partnership, the property of the firm is the property of the individuals comprising it.In a company, it belongs to the company and not to the individuals who are its members.
  3. Creditors of a partnership firm are creditors of individual partners and a decree against the firm can be executed against the partners jointly and severally. The creditors of a company can proceed only against the company and not against its members.
  4. Partners are the agents of the firm. A partner can dispose of the property and incur liabilities as long as he acts in the course of the firm’s business. Members of a company are not its agents. A member of a company cannot dispose of the property and incur liabilities in the course of the company’s business.
  5. A partner cannot contract with his firm. A member can contract with his company.
  6. A partner cannot transfer his share and make the transferee a member of the firm without the consent of the other partners. A company’s share can ordinarily be transferred
  7. A partner’s liability is always unlimited. The liability of shareholder may be limited either by shares or a guarantee.
  8. The death or insolvency of a partner dissolves the firm, unless otherwise provided. A company has perpetual succession, i.e. the death or insolvency of a shareholder or all of them does not affect the life of the company.
  9. The accounts of a firm are audited at the discretion of the partners. A company is required to have its accounts audited annually by a chartered accountant.
  10. A partnership firm, on the other hand, is the result of an agreement and can be dissolved at any time by agreement among the partners. A company, being a creation of law, can only be dissolved as laid down by law.