What is a Firm or Business Firm?
A firm is a Business Organization, which is not registered under MCA21 or not comes under Private Limited Company, or Public Limited or such companies.
What is a Company?
A Company is again Business Organization, which is registered under MCA21. Such companies are Private Limited, Public, LLP and Section 25 etc.
| Partnership Company
|| Private Limited Company
A partnership is governed by the Partnership Act, 1932
Registration: The registration of a partnership concern is not compulsory. There are certain privileges given to the registered firms which are denied to unregistered ones. These privileges indirectly encourage registration.
Number of Members: A partnership can be started by at least two persons. The maximum number is ten in case of banking and insurance business and it is twenty for any other business.
Legal Status: A partnership has no separate legal entity apart from its members. Members cannot enter into an agreement with the firm.
Liability: The liability of partners is unlimited. The partners are jointly and separately responsible for the liabilities of the business.
Transfer of Shares: A partner can transfer his share only with the consent of all other partners.
Management and Control: A partnership concern is managed and controlled by the partners. The partners have a right to participate in the administration of business.
Statutory Obligations: A partnership is not under statutory obligation fro the compliance of any rules and regulations. There is no compulsion to maintain certain books, get the accounts audited and to publish them.
Continuity: A partnership concern is dissolved on the death or insolvency of a partner.
Authority of Members: A partner can bin the firm by his acts. There is an implied authority. A partner is an agent of the firm.
Winding Up: A partnership concern can be dissolved easily. No legal formalities are required for winding up a partnership firm.
Private Limited Company is governed by the Companies Act, 1956
Registration: The registration of a company is compulsory. There are two stages in registering private limited company, the first is ‘Incorporation’ and the second is ‘Commencement of Business’. A private limited company can start business after obtaining certificate of incorporation.
Number of Members: There must be at least two persons for starting a private company and maximum number of members can be fifty.
Legal Status: A Private Company has a separate legal entity. It has a common seal and can enter into contracts by affixing its seal. Members of the company can also enter into contract with the company.
Liability: The liability of shareholders is limited to the value of shares held by them. The members are not personality liable for the obligations of the business.
Transfer of Shares: A shareholder can sell his shares whenever he feels so. There is no binding no the transfer of shares of a company.
Management and Control: A private company is managed by elected representatives of the shareholders.
Statutory Obligations: A private company is required to maintain prescribed books and have a periodical audit. Some information has to be supplied periodically to the Registrar of Companies.
Continuity: The continuity of a company is not affected by the death or insolvency of a member. The members may go on changing but the company will not be affected.
Authority of Members: A shareholder has not implied authority to bind the company. A shareholder cannot act on behalf of company.
Winding Up: A private company is wound up only through court. If the court is satisfied that there is a reasonable ground for winding up the company only then it is to be wound up. A proper procedure is also to be followed.