COMPANY V/S OTHER FORMS OF BUSINESS
A limited company and other forms of associations have large number of similarities and dissimilarities. Both individuals are subjects and trading is the object. Here we share the differences between company Law Notes and other forms of business.
Distinguish Between a Company and a Partnership firm.
- A company is a separate legal person. A partnership firm is not seperate from the several persons who form the partnership.
- In a company, property of the belongs to the company and not to the individuals who are its members. In a partnership, the property of the firm is the property of the individuals comprising it.
- The creditors of a company can proceed only against the company and not against its members. Creditors of a partnership firm are creditors of individual partners and an act against the firm can be executed against the partners jointly and severally.
- Members of a company are not its agents, but partners are the agents. A partner can get rid of the property and incur liabilities as long as he acts in the course of the firm’s business. A member of a company has no such power.
- A member of a company can contract with his company whereas a partner cannot with his firm.
- A partner cannot transfer his share and make the transferee a member of the firm without the consent of the other partners, whereas a member of the company can transfer his company’s share ordinarily .
- Restrictions on a partner’s authority contained in the partnership contract do not bind outsiders whereas such restrictions incorporated in the Articles are effective, because the public are bound to acquaint themselves with them.
- A shareholder of the company may be limited either by shares or a guarantee whereas apartner’s liability is always unlimited.
- In company, the death or insolvency of a shareholder or all of them does not affect the life of the company, i.e. perpetual succession, whereas the death or insolvency of a partner dissolves the firm, unless otherwise provided.
- A company may have any number of members except in the case of a private company which cannot have more than 200 members (excluding past and present employee members). In a public company there must not be less than seven persons in a private company not less than two. Further, a new concept of one person company has been introduced which may be incorporated with only one person.
- A company is required to have its accounts audited annually by a chartered accountant, whereas the accounts of a firm are audited at the free will of the partners.
- A company, being a creation of law, can only be dissolved as laid down by law. A partnership firm, on the other hand, is the result of an agreement and can be dissolved at any time by agreement among the partners.
Difference between Hindu Undivided Family Business and Company
- a Hindu Undivided Family Business consists of homogenous (unvarying) members since it consists of members of the joint family itself whereas . A company consists of heterogeneous (varied or diverse) members.
- In a Hindu Undivided Family business the Karta (manager) has the sole authority to contract debts for the purpose of the business, other coparceners cannot do so. There is no such system in a company.
- A person becomes a member of a Hindu Undivided Family business by virtue of birth. There is no provision to that effect in the company.
- No registration is compulsory for carrying on business for gain by a Hindu Undivided Family even if the number of members exceeds twenty. Registration of a company is compulsory.
Distinction between Limited Liability Partnership (LLP) and Company
Limited liabilities partnership is called a hybrid between a partnership and company. LLP comprises with the features of both a partnership structure as well as corporate structure. Limited liabilities Partnership is an alternative corporate business form that gives the benefits of limited liability of a company along with the flexibility of a partnership. LLP has no effect on its existance irrespective of changes in partners. LLP is capable of entering into contracts and holding property in its own name. LLP is a distinct legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution. Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct. Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
A basic difference between an Limited Liability Partnership and a company
- The internal governance structure of a company is regulated by Companies Act whereas for a Limited liability Partnership it would be by a contractual agreement between partners.
- The management-ownership divide inherent in a company is not there in a limited liability partnership.
- LLP have more flexibility as compared to a company.
- LLP have lesser compliance requirements as compared to a company.