+91 76790 91881

Difference Between Partnership and Company

Difference Between Partnership and Company (Must Know Information)

The legal form of a company organization has many advantages compared to a partnership. This is because a partnership requires at least two people who mutually agree to operate the business in the manner specified in the contract and to share in profits or losses. In the given article, we will talk about the difference between a partnership firm and company. Read on.

A partnership society can have up to 20 partners. This has led to the development of societies in which any number of people can participate. 

What Are the Advantages of a Partnership over a Company

There are several advantages of a partnership over a company:

  1. Ease of formation: Partnerships are relatively easy to form, with less paperwork and fewer legal requirements than companies.
  2. Flexibility: Partnerships allow for more flexibility in management and decision-making, as partners can make decisions together and change the structure of the partnership as needed.
  3. Lower costs: Partnerships typically have lower start-up and ongoing costs than companies, as they do not need to file as many legal documents or pay as many fees.
  4. Personal liability: Partners are personally liable for the partnership’s debts, which means that they have more control over the business’s financial decisions.
  5. Taxation: Partnerships are not separate taxable entities, instead, the income and losses of the partnership are passed through to the partners and are reported on their personal income tax returns.
  6. Shared management: In a partnership, management is shared among the partners, which can lead to more efficient and effective decision-making.

What Are the Similarities between Company and a Partnership

There are some similarities between a company and a partnership:

  1. A company and a partnership are both legally recognized forms of business entities, which means that they can enter into contracts, sue, be sued, and own property in their own name.
  2. Companies and partnerships require a business plan, which outlines the goals and objectives of the business, as well as the strategies and tactics that will be used to achieve them.
  3. Both companies and partnerships are required to comply with relevant laws and regulations, such as tax laws, labor laws, and environmental regulations.
  4. Companies and partnerships have the ability to raise capital through the sale of shares or the issuance of debt.
  5. Both companies and partnerships are subject to taxes on their income and profits.
  6. Companies and partnerships are required to file annual reports with the relevant government authorities and make them publicly available.
  7. Both can enter into contracts, buy and sell assets, and hire employees.
  8. Both have a legal personality, meaning they can sue or be sued in court.

What Are the Types of Partnership

Types of Partnership

There are many types of partnerships, including:-

  1. General partnership: A general partnership is a business venture in which all partners are equally liable for the debts and obligations of the partnership. All shareholders participate in the management and interests of the company.
  1. Limited partnership: A limited partnership has one or more general partners who manage the business and are personally liable for its debts and obligations, and one or more limited partners who do not participate in the management of the business and are only liable for its debts and obligations to the extent of their capital contributions.
  2. Limited liability partnership (LLP): A limited liability partnership is a partnership in which the partners have limited liability for the debts and obligations of the partnership. This means that the partners’ personal assets are protected in the event of the partnership’s debts or legal liabilities.
  3. Joint venture: A joint venture is a temporary partnership formed to undertake a specific project or business venture. The partners in a joint venture share in the management and profits of the venture, but do not establish a continuing partnership beyond the completion of the venture.
  4. Cooperative: A cooperative is a form of partnership in which a group of individuals or businesses come together to achieve a common goal, such as pooling resources or sharing expertise.
  5. Silent partnership: A silent partnership is a type of partnership in which one partner, the silent partner, provides capital to the business but does not participate in its management.

What Is the Difference between Sole Proprietorship Partnership and Company

A sole proprietorship, a partnership, and a company are all different forms of business entities, each with its own set of advantages and disadvantages.

A sole proprietorship is a business that is owned and operated by an individual. It is the simplest and most common form of business structure. The owner of a sole proprietorship is personally liable for all debts and obligations of the business, and all profits and losses are reported on the owner’s personal income tax return.

A partnership is a company that is owned and operated by two or more people. Partners share in the management and profits of the business and are personally liable for its debts and obligations.

A company is a separate legal entity that is owned by its shareholders. Shareholders elect a board of directors to manage the company, and shareholders are not personally liable for the company’s debts and obligations.

Difference between Partnership and LLP

PointPartnershipLimited Liability Partnership
MeaningPartnership is an arrangement where two or more person agree to carry on a business and share profits & losses mutually.Limited Liability Partnership is a form of business operation that combines the features of a partnership and a body corporate.
LawIndian Partnership Act, 1932Limited Liability Partnership Act, 2008
Separate legal entityA partnership firm cannot be a separate legal entity An LLP can be a separate legal entity 
It does not have perpetual succession. This depends upon the will of partners It has perpetual succession and partners may come and go 
Common SealPartnership Deed is a charter of the firm that denotes rights and duties of the partnersLLP Agreement is a charter of the LLP that denotes the rights and duties of the partners and LLP
Ownership of AssetsPartners have joint ownership of all the assets of partnership firm The LLP is independent of ownership of assets
Liability of PartnersUnlimited liability. Partners are severally and jointly liable for actions of other partners and the firm and liability can extend to their personal assets. Limited, to the extent their contribution towards LLP. Except in case of intentional fraud or wrongful act of omission or commission by the partner
Annual FilingNo return is required to be filed with the Registrar of FirmsMust file annual Statement of accounts and Solvency & Annual with Registrar of Companies every year

What Are Three Examples of Partnership Businesses

There are 3 examples of partnership businesses:

  1. Law Firm: A law firm is a type of partnership business in which two or more lawyers come together to practice law. Partners in a law firm share in the management and profits of the firm and are personally liable for its debts and obligations.
  2. Restaurant: A restaurant is a type of partnership business in which two or more individuals come together to operate a food service establishment. Partners in a restaurant share in the management and profits of the business, and are personally liable for its debts and obligations.
  3. Real Estate Agency: A real estate agency is a type of partnership business in which two or more real estate agents come together to provide real estate services. Partners in a real estate agency share in the management and profits of the agency, and are personally liable for its debts and obligations.

What Are 3 Disadvantages of a Partnership

There are 3 disadvantages of a partnership:

  1. Unlimited personal liability: Partners in a partnership have unlimited personal liability for the debts and obligations of the partnership, which means that their personal assets are at risk if the partnership is unable to pay its bills or is sued.
  2. Difficult to Raise Capital: Partnerships cannot raise capital as it relies on the partners’ personal investment or adding more partners, which can be difficult and may not be possible.
  3. Decision-making can be difficult: Making decisions and reaching agreements can be difficult in a partnership due to the presence of multiple partners with differing opinions and priorities, which can lead to delays and inefficiencies.

Three examples of partnership businesses

Starbucks & Spotify

Starbucks has transformed the upscale coffee shop experience into a renowned global brand by using music to set the mood. Nearly 25 billion hours of music playback were supported by the music streaming service Spotify.

Starbucks and Spotify have joined forces in an innovative co-branding deal to create a music ecosystem. This made the musician more accessible to Starbucks customers, who gave access to extensive Spotify discography.

Starbucks employees will be able to access Spotify Premium accounts. With this account, customers can create playlists that customers can access from Starbucks’ mobile app and play during business hours. The goal of this music ecosystem is to expand the familiar Starbucks coffeehouse atmosphere while increasing artist awareness among Starbucks customers.

The Music Ecosystem collaboration benefits both sides by making each other’s audiences accessible without compromising their respective brands. 

Red Bull & GoPro

Both Red Bull and GoPro are driving sales of wearable cameras. Both are lifestyle companies with similar goals. 

GoPro gives athletes, adventurers, and sports enthusiasts the equipment they need to document stunts, matches, and races from an athlete’s perspective. In return, RedBull organizes and funds the event.

Stratos was the largest initiative and event these companies worked on together. In this commercial, Felix Baumgartner flew 24 miles into space with GoPro strapped to his body. They broke three world records while demonstrating the human power that makes Red Bull and GoPro. 

Nike & Apple

With the introduction of the initial iPod line in the early 2000s, technological behemoth Apple and athletic apparel manufacturer Nike collaborated.

Fitness trackers, footwear, and apparel were developed by Nike+iPod to monitor exercise while providing access to music. The relationship has subsequently changed into Nike+, which uses activity monitoring technology embedded into athletic clothes and gear to sync with Apple iPhone apps to track and record workout data.

Shoes, armbands, and even basketballs can be equipped with tracking transmitters to track time, distance, heart rate, and calories burned. With the rise of fitness tracking technology, Nike+ makes curves for athletes to track while they play. 

Frequently Asked Questions (FAQs):

Is partnership legal or illegal?

Partnerships are legal business entities and are recognized by most countries’ laws.

Can you have shares in a partnership?

No, shares are typically associated with companies, not partnerships. In a partnership, ownership is represented by the partners’ capital account, which shows the partners’ respective share of the partnership’s profits and losses.

Which is better a partnership or limited company?

Whether a partnership or a limited company is better for a particular business depends on the specific circumstances and goals of the business.

Closing up

Now you got to know about the difference between a partnership and a company. A company is a collection of people who unite for a common goal and share the gains and losses. Despite the fact that there are some similarities between a company and a partnership company, there are also many differences. 

Recommended Articles

Certificate of Incorporation of a Company (Complete Guide)

Vendor Registration Request Letter to Company (With Example)

Request A Callback

    You may Also Call Us At

    +91 76790 91881
    Scroll to Top