Difference between Partnership firm and Private Limited Company

Both partnership firm and the company are the forms of business structures that can be formed in India to carry out a business activity.  One of the common features between the private limited company and the partnership firm is that the partnership can be formed with minimum two members and to start the private limited company also two members are required. However, there are certain significant differences between the two business structures that we will be highlighting through the course of this article.

Difference between a Partnership firm and Private Limited Company

Lawdef- Difference between a Partnership firm and Private Limited Company

  1. Governing Act – In India Partnership firms are governed by partnership act 1932 while the Companies are governed by the Companies Act 2013.
  2. Registration- It is not mandatory to register a Partnership Firm however it is recommended to do so as unregistered firms cannot avail the benefits offered to the registered firms. On the other hand it is mandatory for the companies to obtain registration under the companies Act 2013.
  3. Liability- The liability of the members of company are limited to share only and they are not responsible for the acts of other members whereas in case of partnership firm the liability  of the partners is unlimited and they are jointly liable for the acts of all the partners.
  4. Legal Status- A registered company is considered as a separate legal entity thus it can hold property, can sue and be sued whereas the partnership firm formed is not considered as an separate legal entity thus the partners of the firm are liable for the acts done in the firm.
  5. Perpetual Succession- Due to the absence of separate legal entity the life of the partnership firm comes to an end with the death of its partner whereas the company once registered continue to exists till the time it is officially wound up by the tribunal.