Company, Firm, Partner and Partnership

 1. Company

  • Definition: A company is a legal entity formed under the Companies Act, 2013 (in India), having a separate legal identity from its owners (shareholders).
  • Features:
    • Incorporated and registered with the Registrar of Companies (RoC).
    • Has limited liability.
    • Can sue and be sued in its own name.
    • Exists independently of its members.
    • Managed by a Board of Directors.
  • Examples: Reliance Industries Ltd., Infosys Ltd., TCS Ltd.

2. Firm

  • Definition: A firm refers to a business organization, especially a partnership firm, that is formed by two or more persons to carry on a business with the aim of earning profits.
  • Governing Law: Indian Partnership Act, 1932.
  • Note: The term “firm” is a collective name for the partners and is not a separate legal entity (unlike a company).
  • Types: Sole proprietorship firm, partnership firm, LLP (Limited Liability Partnership) [though LLP is registered separately].

3. Partner

  • Definition: A partner is an individual who enters into a partnership agreement with one or more persons to jointly carry on a business and share profits and losses.
  • Rights and Duties:
    • Share in profits and losses.
    • Right to participate in management.
    • Fiduciary duty towards other partners and the firm.
    • Personally liable for the debts of the firm (except in LLPs).

4. Partnership

  • Definition: A partnership is a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
  • Governing Law: Indian Partnership Act, 1932.
  • Features:
    • Minimum 2 and maximum 50 partners (for general business).
    • No separate legal entity.
    • Partners have unlimited liability.
    • Created through an agreement (oral or written, preferably registered).

Tabular Comparison

Aspect

Company

Firm

Partner

Partnership

Legal Status

Separate legal entity

Not a separate entity (except LLP)

Individual member of a firm

Relationship between partners

Governing Law

Companies Act, 2013

Indian Partnership Act, 1932

Indian Partnership Act, 1932

Indian Partnership Act, 1932

Formation

Through registration

By agreement (registration optional)

By agreement with other partners

By agreement among partners

Ownership

Shareholders

Partners

Co-owner of the business

Joint ownership by partners

Liability

Limited (except in unlimited co.)

Unlimited (except LLP)

Personally liable (except LLP)

Partners share unlimited liability

 

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