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Partnership vs. Joint Stock Company

A company can be understood as a voluntary association of persons. Such association of persons contributes money or money’s worth to a common stock and employs such common stock to some trade or business. The common stock so contributed is denoted in terms of money and is the capital of the company. Such capital is divisible into parts, known as shares. A company is always distinct from its members and is an artificial person created by law. It has perpetual succession and a common seal.

 

Basis

Partnership Firm

Joint Stock Company

Existence

Partnership comes into existence by an agreement between the partners.

A company comes into existence only by registration under the Companies Act, 1956.

Separate legal entity

It has no separate legal existence distinct from its members. It is merely the collection of persons.

A company is a separate legal entity distinct from its members. It is a legal person in the eyes of law.

Number of members

In banking firm, maximum number of members can be ten and in others, it can be twenty.

In a public company, the minimum is seven and there is no limit as to the maximum number of members. In a private company, the minimum is two and maximum is fifty.

Liability

It is unlimited. Partners are liable for the firm’s liability, jointly and severally.

The liability of the members is limited to the nominal value of the shares in the company.

Agency
relationship

Mutual agency relationship exists.

It does not exist.

Dissolution

It is dissolved on the death or insolvency of any of the partners.

A company has a perpetual succession and it is not disturbed by the death or insolvency of any of the members.

Management

Every partner has a right to take part in the management or affairs of the firm.

In a company, the management is placed in the hands of a special body called directors.

Contracts

A partner cannot enter into a contract with its own firm.

A shareholder of a company can enter into a contract with the company.

Governing Law

The Indian Partnership Act, 1932

The Companies Act, 1956

Partnership vs Hindu Undivided Family (HUF)

Basis

Partnership Firm

HUF

Formation

Partnership is created by an agreement between the partners.

It is created by status.

Admission of a new member

A new partner can be admitted to the firm only with the consent of all the partners.

A child becomes a member automatically on his birth.

Number of

members

In banking firm, maximum number of members can be ten and in others, it can be twenty.

There is no statutory limit as to the maximum number of members as the membership is decided by birth of children in the family.

Liability

It is unlimited. Partners are liable for the firm’s debts, jointly and severally.

Only the Karta is personally liable for the debts of HUF. Liability of other members is limited to the respective interest in the property of the family.

Agency

relationship

Mutual agency relationship exists.

There is no such agency relationship between all the members of the family.

Dissolution

It is dissolved on death or insolvency of any of the partners.

It cannot be dissolved on death or insolvency of any of the members.

Position of a

minor

A minor cannot be a full-fledged partner. He can only be admitted to the benefits of a partnership firm.

A minor is a full-fledged member.

Sharing of profits

The share of each partner is defined by virtue of an agreement between the partners.

The share of the member is not defined. It fluctuates because of the deaths and births of members in the family.

Governing law

The Indian Partnership Act, 1932

The provisions of the Hindu Law

Partnership vs Club

Basis

Partnership Firm

Club

Objective

Its objective is to earn profits through a business.

Clubs exist to provide some services to its members.

Property

Partners have a share in the firm’s property.

Club members have no interest in the club’s property.

Membership

Admission into the firm is based on the consent of all the partners.

The club membership is governed by the rules laid down for the purpose and the consent of other members is not required.

Liability

It is unlimited, as partners are liable for the firm’s debts, jointly and severally.

The club members do not have responsibility for the club’s liabilities.

Agency

relationship

Mutual agency relationship exists.

It does not exist.





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