Sole proprietorship, Partnering business, and Public and Private limited are a few forms of business organization. Everyone has different features as well as advantages and disadvantages. Starting a business may be hard without knowledge of a country’s law.
UK Company law may be different from Germany. In general, the basics are the same. In this reading, you’ll be able to analyze the difference between a Partnership and Company [Public Limited].
The Difference Difference between a Partnership and a Company
| Partnership | Company |
|---|---|
| Easy Formation | Complex Formation |
| Full Liability | Limited Liability |
| Two to Twenty Seven Partners | Minimum Seven Members |
| Unable to Transfer | Easily Transfer |
| No Entity | Legal Entity |
| Easy Capital Management | Shareholder’s acceptance is required |
| Accounts at own choice | Everything in the accounts |
| Can manage Business | The Board of Directors manages business |
| Distribution in Partners | Distribution in shareholders |
| The audit isn’t mandatory | Audit is mandatory |
| Easy Termination | Hard Dissolution |
| Cannot sell business shares | Can sell business shares |
| Short Life | Long Life |
| No Reports required | Reports required |
| Can Change business | Can not change it easily |
| Meeting are not necessary | Should do Meetings |
1. Formation
Public Limited Company
There is a long and complicated process for the formation of a public company. Many legal documents are to be prepared and submitted to the registrar’s office which requires a long time.
Partnership
There is a simple process for the formation. No legal documents are necessary. Agreement by oral or written is required only for formation.
2. Liability
Public Limited Company
The liability of shareholders is limited to the unpaid value of the shareholders are not liable to settle the obligations of the company.
Partnership
It is one of the biggest disadvantages of a partnership is that every partner had unlimited liability in his firm. It means that the liability of partners is not limited to the invested amount but private assets are also liable to clear the liabilities of the firm.
3. Number of Members
Public Limited Company
There is no restriction on the maximum number of members. It may be a million or thousand but not less than seven.
Partnership
It consists of at least two partners but not more than twenty in the case of ordinary business and not more than ten in the case of banking business.
4. Transferability
Public Limited Company
There is no restriction for transforming of share of public company shareholders may easily dispose of their share in the stock exchange market.
Partnership
A partner cannot transfer his share and interest to another person without the consent of existing partners.
5. Entity
Public Limited Company
It is created by law and possesses a separate legal entity. So it can purchase property in its own name. it can sue in its separate position.
Partnership
The partnership’s important feature is to not have a separate legal entity from its members. Partners cannot be separated from the firm.
6. Capital
Public Limited Company
Its authorized capital is mentioned in the memorandum of association. It can be increased or decreased by special resolution which is passed in the shareholders meeting after the sanction of the court.
Partnership
Its capital is described in the agreement. It may be changed by mutual consent of the partners.
7. Maintenance of Books
Public Limited Company
Statutory books and other account books are to be maintained by law.
Partnership
There is no compulsion to keep statutory or definite books. Each partner is allowed to inspect and copy the accounts.
8. Legislation
Public Limited Company
The activities of public companies are controlled by the company ordinance 1984.
Partnership
It is controlled by the partnership Act 1932 which was adopted in our country after partition.
9. Management Authority
Public Limited Company
Shareholders who are the actual owners of the company are not allowed to participate in the activities of the company but the board of directors is elected by the shareholders and is elected by the shareholders which are considered the supreme authority of the company. so all the activities are conducted by these persons.
Partnership
Each partner is allowed to conduct personally the business activities. But generally, one or two partners are selected to manage the firm.
10. Profit
Public Limited Company
Profit is distributed among the shareholders according to the provision of the Articles and the decision of the Board of Directors.
Partnership
It is distributed among the partners according to the partnership deed.
11. Audit
Public Limited Company
Accounts must be audited by a qualified chartered accountant according to the company’s ordinance.
Partnership
The audit is not compulsory by law but it depends upon the agreement.
12. Dissolution
Public Limited Company
It cannot dissolve easily. There is a separate legal process for the winding up of the company. it can be wound up according to the provision of the Company Act.
Partnership
It can be dissolved easily by mutual consent of the partners. It may be dissolved by any one of the partners by serving notice of fourteen days to other partners
13. Right of Issue
Pubic Limited Company
It can issue shares, debentures, and other securities to increase its capital and business fund
Partnership
It cannot issue any type of securities in the market to increase its financial sources.
14. Life
Pubic Limited Company
It has continued existence. The life of the directors and shareholders is not connected with the running business life of the company. so its activities are not affected by the retirement or death of any shareholders.
Partnership
It does not possess long life. Its business may be affected by the death insolvency or retirement of any partner.
15. Submission of Reports
Pubic Limited Company
Certain documents, statements, and reports must be submitted to the government authority.
Partnership
There is no restriction to submitting the various reports and documents to any authority.
16. Business
Pubic Limited Company
The promoters are restricted to carry on a business that is mentioned in the object clause of the memorandum of association.
Partnership
Partners may carry on any type of business and it may easily be changed by mutual consultation.
17. Meeting
Pubic Limited Company
It has to call necessary meetings of shareholders in which problems are disposed of by various resolutions.
Partnership
No compulsion to call any type of meeting and submission reports to the registrar.
Difference Between Partnership & Public Limited Company
| Partnership | Public Limited company |
|---|---|
| It is controlled under the limited partnership act, of 1907 | Its activities are controlled by the Company ordinance, 1984. |
| There are at least two members and a maximum of 20 members in the case of ordinary business and 10 in the banking partnership | The minimum number of members is two but not more than fifty |
| It has no legal entity. It is not independent of the partners. | It enjoys a separate entity and a common seal. Its existence is independent of the members. |
| There are two classes of partners in limited partnerships i.e. ordinary partners (Unlimited liability partners) and limited liability partnerships. | There is only one class of members i.e. shareholders with limited liability. |
| A certificate of incorporation is not needed by the limited partnership. & Business can be commenced immediately after the agreement | It can commence business only after obtaining the certificates of incorporation from the register’s office. |
| Its management is conducted according to the provision of the partnership agreement. But generally, business is carried on by one or two partners Limited partner is not allowed to participate in the business | It procedure of management is laid down in the Articles of Association Each member has the right to conduct their business personally. |
| There is no retraction to audit the accounts from the chartered accountant by lass but it depends upon the partnership agreement | It has to keep the accounts books and statutory books. An annual audit is compulsory by Company Ordinance. |
| There must be a limited partner and one unlimited liability partner for the formation of this type of organization. | It can commence its business with at least two members with limited liabilities |
| Partners may conduct any type of business or change it by mutual consent. | The nature of the business is mentioned in the object clause of the Memorandum of Association. It cannot be changed except by the sanction of the court. |
| No legal documents are required to be submitted to the registrar’s office before its formation. | Some legal documents i.e. Articles of Association are necessary to be submitted to the registrar’s office along with other documents before its incorporation |
| There is no compulsion to hold any meeting under the Partnership Act, of 1932. No reports are required to be filled with any office. | Some specific meetings must be held within the prescribed time under the provision of the Company ordinance. Specific reports are to be submitted to the concerned office |
| Its capital is laid down in the Articles of Partnership (Partnership deed). It may be changed easily to mutual consent. | Its capital is mentioned in the Memorandum of Association. It cannot be changed without the sanction of the court. |
| Business profit is distributed among the partners according to the partnership agreement. | The Policy of the distribution of profit is decided at the Board of Directors Meeting according to the provisions Articles of Association. |
| Tax is imposed on the individual profit of the partners. | Tax is paid by the company on the whole of its profit. |
| Its internal management is conducted by a partnership deed. | Its internal activities are controlled by the Articles of Association. |
| The partnership may be dissolved on the retirement or death of any partner. In the case of an insolvent, the Insolvency Act applies | It enjoys continued existence. Its running business life is not dissolved on the death or retirement of any member. |
Difference Between Partnership and Private Limited Company
| Limited Partnership | Private Limited Company |
|---|---|
| It is controlled under the partnership Act 1932. | Its activities are controlled by the companies’ ordinance 1984. |
| There are at least two members and a maximum of 20 members in the case of ordinary business and 10 in the banking partnership. | The minimum number of members is two but not more than fifty. |
| It is no legal entity. It is not independent of the partners. | It enjoys a separate entity and a common seal. Its existence is independent of the members. |
| There are two classes of partners in limited partnership i.e. ordinary partners (unlimited liability partners) and limited liability partners. | There is only one class of members i.e. shareholders with limited liability. |
| A certificate of incorporation is not needed by a limited partnership. Business can be commenced immediately after the agreement. | It can commence business only after obtaining the certificate of incorporation from the registrar’s office. |
| Its management is conducted according to the provision of the partnership agreement | Its procedure of management is laid down in the Articles of Association. Each member has the right to conduct their business personally. |
| But generally, business is carried on by one or two partners. Limited partners are not allowed to participate in the business. | It has to keep the accounts books and statutory books. An annual audit from any person is compulsory. |
| There is no restriction to audit the accounts from the chartered accountant by law, but it depends upon the partnership agreement. | It can commence its business with at least two members with limited liabilities. |
| There must be one limited partner and one unlimited liability partner for the formation of this type of organization. | The nature of business is mentioned in the object clause of the Memorandum of Association, it cannot be changed except by the sanction of the court. |
| Partners may conduct any type of business or change it by mutual consent. | Some legal documents i.e. Articles of Association and Memorandum of Association are necessary to be submitted to the registrar’s office along with other documents before its incorporation. |
| No legal documents are required to be submitted to the registrar’s office before its formation. | Some specific meetings must be held within the prescribed time under the provision of the Company ordinance. Specific reports are to be submitted to the concerned office. |
| There is no compulsion to hold any kind of meeting under the partnership act 1932. No reports are required to be filed with any office. | Its capital is mentioned in the memorandum of Association it cannot be changed without the sanction of the court. |
| Its capital is laid down in the Articles of partnership (partnership deed) it may be changed easily by mutual consent. | The policy of the distribution of profit is decided at the Board of directors Meeting according to the provision of the Articles of Association. |
| Business profit is distributed among the partners according to the partnership agreement. | Tax is paid by the company on the whole of its profit. |
| Tax is imposed on the individual profits of the partners. | Its internal activities are controlled by the Articles of Association. |
| Its internal management is conducted by the partnership deed. | It enjoys continued existence. Its running business life is not dissolved on the death or retirement of any member. |
| A partnership may be dissolved on the retirement or death of any partner. In case of insolvency, the insolvency act applies. | There is a separate legal procedure for the winding up of the company. insolvency act may not apply. |
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.
Leave a Reply