ALL THE DIFFERENCES BETWEEN FIRM AND COMPANY, PARTNERSHIP AND COMPANY, PARTNERSHIP AND LLP
There is always confusion between the terms such as a firm, company, or partnership business and most often they are used interchangeably. Here are a few key points and comparisons that distinguish one from the other.
Firm vs Company
A firm is a revenue-driven business organization, for example, a corporation, limited liability company (LLC), or partnership—that offers professional services. Most firms have only one location. Be that as it may, a business firm comprises one or more physical locations or branches, in which all fall under the same ownership and utilize the same employer identification number (EIN).
In the current scenario, the utilization of the word firm has gotten outdated and is confined to legitimate, consultancy, and accountancy businesses. For every different business, the word company is preferred. Indeed, even in the callings referenced, there is an ever-increasing number of individuals who today incline toward the utilization of the word company against their names rather than the firm. In contrast to a firm, an organization has been enrolled and has investors. Here is the definition is given by the Oxford word reference to clarify the term organization. A company is “a commercial business.” This basic definition causes us to comprehend that firm may allude TO a specific sort of business while the company is the name used FOR business by and large.
Here are a few differences
- Despite the fact that they seem equivalent and are frequently used reciprocally, there is a distinction between a firm and a company. A company can be any trade or business wherein goods or services are sold to make income. Further, it incorporates all business structures, for example, a sole proprietorship, partnership, and corporation. Then again, a firm ordinarily excludes the sole proprietorship business; it by and large alludes to revenue-driven business overseen by at least two partners offering professional services, for example, a law firm.
- A company has to mandatorily register itself to be called a company and not just a business organization whereas for firms it is not mandatory to get business registration with the Partnership Act of India.
- A company once registered becomes a separate legal entity and can sue and be sued under its name while the Firm is not a separate legal entity and it cannot enter into a contract with a third party under its name.
- There are a lot of legal formalities and complications to dissolve a company whereas there is no such legal formality in case of dissolution of a firm.
- One significant distinction between a Company and firm is that under a company’s founder or the partners of the company have restricted liabilities which implies that they are just restricted to their share of stake in the firm and are not actually committed to any debtor, on account of the bankruptcy of the company they can’t be held obligated. Then again, a firm who have partners have boundless liabilities and can be responsible for the extent of their own assets in the event that the firm fails to pay any debt. This is one of the significant downsides of the idea of the firm.
Partnership VS Company
- The members of the partnership firm are called partners while the members of the company are called shareholders.
- The partnership business is to be registered and governed by the Indian Partnership Act, 1932 though the matter of the company is controlled by the Indian Companies act, 2013
- A partnership firm is made by contract between at least two people while a company is created by law i.e registration with the government.
- The guidelines of partnerships are to be registered by the state government while on account of the company it is to be managed by the central government.
- Registration of a partnership isn’t fundamental though the company’s registration is required.
- The compulsory document in the case of partnership is the partnership agreement while for a company the obligatory document is the Memorandum of Association (MoA) and Articles of Association.
- A partnership is certainly not a separate legal entity from its partners while a company is a separate legal entity.
- Partners have boundless liabilities while shareholders have restricted liabilities.
- Seal ( Stamp ) isn’t needed for partnership whereas, for companies, a stamp is required.
- in partnerships, the management is done by dynamic partners while in the event of a company the management is taken care of by the board of directors.
- Decree against a firm can be executed against partners while in companies decree can’t be executed against shareholders.
- For a privately-owned company, the word P vt. Ltd must be used and for a public company, the word Ltd. is to be used. Such words are not needed for partnerships
- A partnership needs to keep up accounts according to the conditions expressed in the partnership agreement whereas a company ought to keep accounts and auditing of accounts by a certified Chartered Accountant.
- The name of the partnership can be changed effectively by having a conversation between the partners and by following the simple procedure given in s.60 while the name of the company can’t be changed effectively and prior approval of the central government is required.
Partnership vs LLP
- The partnership is characterized as an association of people who come together to earn profit from the business, undertaken by all the partners or any one partner representing all the partners. Limited Liability Partnership is a business operation which consolidates the features of a partnership and a body corporate.
- The organization is administered by the Indian Partnership Act, 1932 whereas an LLP is governed by the Limited Liability Partnership Act, 2008.
- The association of partners in a partnership is voluntary, while the registration of the LLP is mandatory.
- The report that controls the organization is called the Partnership Deed whereas the Limited Liability Partnership agreement is called Charter Document.
- A Partnership cannot enter an agreement in its name whereas the LLP can sue and be sued in its name.
- A partnership does not have a separate legal status apart from its partners, as the partners are exclusively known as a partner and aggregately known as a firm. Not at all like, LLP which is a separate legal entity.
- For Limited Liability Partner, the partner’s liability is limited to the degree of the capital contributed by them. As against this, the partners of a Partnership have boundless liabilities.
- A partnership can be begun with any name of choice conversely, the Limited Liability Partner must use “LLP” after its name.
- Any two people can begin a partnership or LLP, yet the most number of partners in a Partnership firm is restricted to 100 partners while there is no restriction of the maximum number of partners in LLP.
- An LLP has ceaseless progression whereas a partnership may disintegrate at any time.
- It isn’t obligatory for a partnership to maintain and audit books of account as against this, the LLP is required to maintain and audit books of accounts if turnover and capital commitment overreaches 40 lakhs and 25 lakhs individually.
- The partnership firm is not allowed to hold property in its name whereas the LLP is permitted to hold property in its name.
- In a Partnership, the partners work like an agent of the partners and the firm whereas the partners are agents of partners in Limited Liability Partnership.
- It is very certain that both General Partnership and Limited Liability Partnership are the two assortments of Partnership. Further, an LLP is not the same as a Partnership, in how partners are joints or severally liable for the acts of the partners and the firm whereas in LLP, the partners are not considered answerable for the acts of different partners.