- 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
- 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.