Partnership Firm vs. Company — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Published on December 24, 2023
A Partnership Firm is an association of two or more individuals who run a business jointly, while a Company is a legal entity separate from its owners, offering limited liability.
Difference Between Partnership Firm and Company
Table of Contents
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Key Differences
In the realm of business structures, both Partnership Firm and Company are prominent choices for entrepreneurs. A Partnership Firm signifies an arrangement where two or more individuals collaboratively operate a business, sharing its profits and losses. Such a structure allows for direct decision-making, as every partner usually has a say in the business operations. On the other hand, a Company stands as a separate legal entity, distinct from its owners or shareholders.
While a Partnership Firm offers simplicity and direct control to the partners, it also comes with unlimited liability. This means that personal assets of the partners could be at risk if the business incurs debts. Conversely, a Company, especially in its limited liability variant, shields its owners from such risks. In the event of financial turmoil, the personal assets of the shareholders of a Company remain untouched.
The process of setting up a Partnership Firm is generally less cumbersome compared to incorporating a Company. Fewer legal formalities and documentation make it easier for individuals to start a Partnership Firm. Meanwhile, setting up a Company requires adherence to more regulatory norms, ensuring compliance with the stipulations of corporate law.
In terms of longevity, a Partnership Firm might face dissolution upon the death or withdrawal of a partner unless specified otherwise in the partnership agreement. In contrast, a Company enjoys perpetual succession, meaning its existence isn’t affected by changes in ownership or the demise of shareholders.
Comparison Chart
Legal Status
Not a separate legal entity from its owners.
Separate legal entity from its owners.
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Liability
Unlimited liability for partners.
Limited liability for shareholders.
Formation
Easier, with fewer legal formalities.
Requires adherence to corporate law norms.
Longevity
Might dissolve with death/withdrawal of a partner.
Has perpetual succession.
Ownership & Control
Direct control by partners.
Owners (shareholders) may not directly manage the Company.
Compare with Definitions
Partnership Firm
Partnership Firm can be dissolved upon certain events.
The Partnership Firm ceased when one partner decided to retire.
Company
Company is a distinct legal entity.
TechCorp is a Company specializing in software development.
Partnership Firm
Partnership Firm implies shared profits and losses.
The Partnership Firm agreed to divide profits equally among partners.
Company
Company has a structured management hierarchy.
The CEO of the Company presented the annual report to the board.
Partnership Firm
Partnership Firm is a business arrangement among multiple individuals.
Sarah and Jane established a Partnership Firm for their bakery business.
Company
A group of persons
A company of scientists.
Partnership Firm
Partnership Firm offers direct control to its members.
In their Partnership Firm, both partners had equal say in decision-making.
Company
One's companions or associates
Moved in fast company.
Is known by the company she keeps.
Partnership Firm
Partnership Firm comes with unlimited liability.
The debts of the Partnership Firm could impact the personal assets of the partners.
Company
A guest or guests
Had company for the weekend.
Company
The state of friendly companionship; fellowship
Was grateful for her company.
Friends who finally parted company.
Company
A business enterprise; a firm.
Company
A partner or partners not specifically named in a firm's title
Lee Rogers and Company.
Company
A troupe of dramatic or musical performers
A repertory company.
Company
A subdivision of a military regiment or battalion that constitutes the lowest administrative unit. It is usually under the command of a captain and is made up of at least two platoons.
Company
A unit of firefighters.
Company
A ship's crew and officers. See Usage Note at collective noun.
Company
To accompany or associate with.
Company
To keep company with someone; associate.
Company
A team; a group of people who work together professionally.
Company
A group of individuals who work together for a common purpose.
A company of actors.
Company
(military) A unit of approximately sixty to one hundred and twenty soldiers, typically consisting of two or three platoons and forming part of a battalion.
The boys in Company C
Company
A unit of firefighters and their equipment.
It took six companies to put out the fire.
Company
(nautical) The entire crew of a ship.
Company
An intelligence service.
As he had worked for the CIA for over 30 years, he would soon take retirement from the company.
Company
A small group of birds or animals.
Company
(legal) An entity having legal personality, and thus able to own property and to sue and be sued in its own name; a corporation.
Company
(business) Any business, whether incorporated or not, that manufactures or sells products (also known as goods), or provides services as a commercial venture.
Company
(uncountable) Social visitors or companions.
Keep the house clean; I have company coming.
Company
(uncountable) Companionship.
I treasure your company.
Company
To accompany, keep company with.
Company
To associate.
Company
To be a lively, cheerful companion.
Company
To have sexual intercourse.
Company
The state of being a companion or companions; the act of accompanying; fellowship; companionship; society; friendly intercourse.
Evil company doth corrupt good manners.
Brethren, farewell: your company alongI will not wish.
Company
A companion or companions.
To thee and thy company I bidA hearty welcome.
Company
An assemblage or association of persons, either permanent or transient.
Thou shalt meet a company of prophets.
Company
Guests or visitors, in distinction from the members of a family; as, to invite company to dine.
Company
Society, in general; people assembled for social intercourse.
Nature has left every man a capacity of being agreeable, though not of shining in company.
Company
An association of persons for the purpose of carrying on some enterprise or business; a corporation; a firm; as, the East India Company; an insurance company; a joint-stock company.
Company
Partners in a firm whose names are not mentioned in its style or title; - often abbreviated in writing; as, Hottinguer & Co.
Company
A subdivision of a regiment of troops under the command of a captain, numbering in the United States (full strength) 100 men.
Company
The crew of a ship, including the officers; as, a whole ship's company.
Company
The body of actors employed in a theater or in the production of a play.
Company
To accompany or go with; to be companion to.
Company
To associate.
Men which have companied with us all the time.
Company
To be a gay companion.
Company
To have sexual commerce.
Company
An institution created to conduct business;
He only invests in large well-established companies
He started the company in his garage
Company
Organization of performers and associated personnel (especially theatrical);
The traveling company all stayed at the same hotel
Company
The state of being with someone;
He missed their company
He enjoyed the society of his friends
Company
Small military unit; usually two or three platoons
Company
A band of people associated temporarily in some activity;
They organized a party to search for food
The company of cooks walked into the kitchen
Company
A social gathering of guests or companions;
The house was filled with company when I arrived
Company
A social or business visitor;
The room was a mess because he hadn't expected company
Company
A unit of firefighters including their equipment;
A hook-and-ladder company
Company
Crew of a ship including the officers; the whole force or personnel of a ship
Company
Be a companion to somebody
Company
Company offers limited liability to its shareholders.
As a shareholder, Mike's liability in the Company is limited to his investment.
Company
Company adheres to specific corporate regulations.
The Company underwent an audit to ensure compliance with business laws.
Company
Company enjoys perpetual succession.
Despite the founder's retirement, the Company continues its operations.
Common Curiosities
Can a Partnership Firm become a Company?
Yes, a Partnership Firm can be converted into a Company by following legal procedures and fulfilling specific criteria.
How is a Company different from a Partnership Firm?
A Company is a separate legal entity with limited liability for its shareholders, while a Partnership Firm has unlimited liability for its partners.
Are the assets of partners at risk in a Partnership Firm?
Yes, in a Partnership Firm, the partners have unlimited liability, putting their personal assets at potential risk.
What is a Partnership Firm?
A Partnership Firm is a business structure where two or more individuals collaboratively run a business, sharing its profits and losses.
What happens to a Partnership Firm if a partner dies or withdraws?
Unless stated in the partnership agreement, a Partnership Firm might dissolve upon the death or withdrawal of a partner.
Can a Company continue its existence despite changes in ownership?
Yes, a Company enjoys perpetual succession, meaning it continues to exist regardless of changes in ownership.
Do partners in a Partnership Firm have direct control over business decisions?
Yes, partners in a Partnership Firm typically have direct control and say in business decisions.
Which is more regulated, a Partnership Firm or a Company?
A Company is more regulated and needs to adhere to specific corporate laws, while a Partnership Firm has fewer regulations.
Can anyone start a Partnership Firm?
Yes, typically any two or more individuals can start a Partnership Firm, but it's essential to check local laws and requirements.
Which is easier to set up, a Partnership Firm or a Company?
Setting up a Partnership Firm is generally simpler and requires fewer legal formalities compared to incorporating a Company.
How does the liability of a Company's shareholder differ from that of a partner in a Partnership Firm?
Shareholders in a Company have limited liability up to their investment, whereas partners in a Partnership Firm have unlimited liability.
Are there any tax advantages in choosing one structure over the other?
Tax implications can vary based on the jurisdiction and specific circumstances. It's advisable to consult with a tax expert when choosing between a Partnership Firm and a Company.
Is a Company always a large entity with many employees?
No, a Company can range from a small single-shareholder entity to a large multinational corporation. Size doesn't define its legal structure.
Who manages the day-to-day operations of a Company?
The management or executive team, often appointed by the board of directors, handles the daily operations of a Company.
Which structure provides more protection for personal assets, a Partnership Firm or a Company?
A Company provides more protection for personal assets due to its limited liability feature.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
