{"id":50792,"date":"2022-11-16T18:07:06","date_gmt":"2022-11-16T12:37:06","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=50792"},"modified":"2026-06-04T19:03:52","modified_gmt":"2026-06-04T13:33:52","slug":"difference-between-partnership-firm-and-private-limited-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/difference-between-partnership-firm-and-private-limited-company\/","title":{"rendered":"Difference Between Partnership firm and Private Limited Company"},"content":{"rendered":"\n<p>A partnership is a relationship between two\/more\nindividuals who have mutually agreed to conduct business run by all or any one\nof them and share the profits and loss arising therefrom. The individuals who\nenter into a partnership are called partners individually and collectively,\nknown as the Partnership Firm. The Indian Partnership Act, 1932 lays down the regulations\nof the rights and duties of partners amongst themselves and with respect to the\npartners and third parties pertaining to legal and contractual relations\narising in the course of the business of the partnership. A Private Limited\nCompany is an entity owned by a group of members called shareholders and ownership\nand liability in a Company is defined by the no. of shares held by the\nshareholders. An entity is recognized as a Company once it gets registered according\nto the Companies Act 2013 and is governed by the Ministry of Corporate Affairs\n(MCA). In this write-up, we will discuss the difference between Partnership\nFirm and Private Limited Company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-partnership-firm-and-private-limited-company\/#Partnership_Firm_and_Private_Limited_Company_%E2%80%93_Differences\" >Partnership Firm and Private Limited Company &#8211;\nDifferences<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-partnership-firm-and-private-limited-company\/#Talk_To_Expert\" >Talk To Expert<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-partnership-firm-and-private-limited-company\/#Confused_between_a_Partnership_Firm_and_a_Private_Limited_Company\" >Confused between a Partnership Firm and a Private Limited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-partnership-firm-and-private-limited-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Partnership_Firm_and_Private_Limited_Company_%E2%80%93_Differences\"><\/span>Partnership Firm and Private Limited Company &#8211;\nDifferences<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/partnership-firm-registration\" title=\"Partnership Firm Registration\">Partnerships firms<\/a><\/strong> are different from\nprivate limited companies in many ways. The only similarity between the two is\nthat both are owned by a group of legal persons rather than an individual. Some\nof the major differences between the Partnership\nFirm and Private Limited Company are laid down below.<\/p>\n\n\n\n<ul>\n<li><strong>Creation<\/strong><\/li>\n<\/ul>\n\n\n\n<p>A partnership firm can be created by executing a\npartnership deed which delineates, inter alia, the underlying objects, terms,\nconditions, capital, profit and loss sharing arrangement. Once the deed is\nsigned by the partners, a partnership deed comes into existence. There ought to\nbe at least two partners.<\/p>\n\n\n\n<p><strong><em>The formation of a private limited company is a more\nelaborate process. The major steps involved are:<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li><strong>Promotion of a company<\/strong>: Promotion is the process where the company comes\ninto existence. Documents like Memorandum of Association (contains, inter alia,\nthe objects behind the formation of company, Name Clause, Registered Office\nClause), Articles of Association (contains rules &amp; regulations for the\ninternal management of the company). Consent of the Directors with respect to\nthe buying or paying of shares. An agreement is entered between the company and\nany individual to be appointed as director. A minimum of two directors are\nrequired to form a company.<\/li>\n\n\n\n<li><strong>Incorporation of company<\/strong>: After paying the requisite fee, the promoters are\nrequired to apply to the Registrar of Companies of the requisite state for the\nCertificate of Incorporation.<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Registration<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Partnership firm Registration is not compulsory unless it is a <strong><a href=\"https:\/\/corpbiz.io\/llp-registration\" title=\"LLP registration in India\">Limited Liability Partnership<\/a><\/strong> (LLP), although registration of a partnership is advised. The registration of partnership firms is regulated by the Registrar of Firms (RoFs)of the State Government.<\/p>\n\n\n\n<p>However, a private limited company is required to\nregistered as per the Companies Act,2013. The registration of companies is\nregulated by the Registrar of Companies (RoCs) of the Central Government. <\/p>\n\n\n\n<ul>\n<li><strong>Distribution\nof Profits<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The profits of the firm are distributed between the\npartners as per the terms stated in this partnership deed.<\/p>\n\n\n\n<p>With respect to a private limited company, there is no\ncompulsion to distribute profits among its members. Profits are shared among\nthe shareholders when dividends are declared.<\/p>\n\n\n\n<ul>\n<li><strong>Liability<\/strong><\/li>\n<\/ul>\n\n\n\n<p>This is one of the foremost differences between Partnership Firm and Private Limited Company.\nThe partners&#8217;s liability&nbsp; in a\npartnership firm is unlimited and they are jointly and severally liable for\nindividual actions and also for actions of all the partners done in pursuance\nof the business of the partnership firm. The private estate of the partners can\nincur liability if the partnership property is found insufficient for the same.<\/p>\n\n\n\n<p>In contrast, in a private limited company, the shareholders are only liable to the extent of the unpaid value of shares subscribed in the company<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Talk_To_Expert\"><\/span>Talk To Expert<span class=\"ez-toc-section-end\"><\/span><\/h2><div class=\"calling-person blog_cta my-4\"> \n    <div class=\"row\"> \n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-12\"> \n            <div class=\"d-flex flex-nowrap\"> \n                <div class=\"user-online\"> <img decoding=\"async\" src=\"https:\/\/corpbiz.io\/img\/user.jpg\" alt=\"corpbiz\"> <\/div> \n                <div class=\"user-online-details ms-3 align-self-center\"> \n                    <h2 class=\"text-white mt-0\"><span class=\"ez-toc-section\" id=\"Confused_between_a_Partnership_Firm_and_a_Private_Limited_Company\"><\/span>Confused between a Partnership Firm and a Private Limited Company? <span class=\"ez-toc-section-end\"><\/span><\/h2> \n                    <p class=\"mt-3\"><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i \n\n                            class=\"fa fa-star\"><\/i><i class=\"fa fa-star-half-full\"><\/i><span \n\n                            class=\"ms-2 text-white\">(4.8)<\/span><\/p> \n                <\/div> \n            <\/div> \n        <\/div> \n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-8 mx-auto\"> \n            <div class=\"d-flex justify-content-between call-chat\"> <a href=\"tel:919121230280\"> <span>Call Now \n\n            <\/span><img decoding=\"async\" class=\"ms-2\" src=\"https:\/\/corpbiz.io\/admin\/style\/images\/userfiles\/image\/new_call_icon.png\" \n\n                alt=\"Call With \" width=\"32px\"> \n        <\/a> <a href=\"https:\/\/api.whatsapp.com\/send?phone=919121230280&#038;text=Hello%20Corpbiz%2C%20I%20need%20guidance%20on%20choosing%20between%20a%20Partnership%20Firm%20and%20a%20Private%20Limited%20Company.\" target=\"_blank\" rel=\"noopener\"> <span>Schedule Meeting<\/span><img decoding=\"async\" class=\"ms-2\" \n\n                src=\"https:\/\/corpbiz.io\/img\/chat-with-expert.png\" alt=\"Schedule Meeting \" width=\"32px\"> <\/a> <\/div> \n        <\/div> \n    <\/div> \n<\/div>\n\n\n\n\n<ul>\n<li><strong>Capital\nrequirement<\/strong><\/li>\n<\/ul>\n\n\n\n<p>There is no minimum capital requirement for commencing\na partnership firm.<\/p>\n\n\n\n<p>However, the Companies Act. 2013 lays down that the\nauthorized capital of a Pvt. Limited Company should be at least Rs. 100000\/-\n(Rupees One Lakh only)<\/p>\n\n\n\n<ul>\n<li><strong>Dissolution\/Winding\nUp<\/strong><\/li>\n<\/ul>\n\n\n\n<p>A partnership firm can be dissolved in many different\nways, namely, by mutual consent of partners or by entering into an agreement to\nthat effect. A firm may be compulsorily dissolved if all or all but one partner are declared insolvent or the firm is\ncarrying out unlawful activities. It may also be dissolved on the happening of\ncertain contingent events like expiry of a fixed term or task for which the\npartnership was formed, death of partner when there are only two partners or\nwhen there were more than two partners, the partnership would dissolve and\nother remaining partners will enter into a new agreement.<\/p>\n\n\n\n<p>The winding-up of a company can be done voluntarily by\nselling its majority shareholding of the company. Here the stakes are\ntransferred to another person or entity and the majority shareholders are\ndischarged of their responsibilities. A Compulsory Winding-Up of a company is\nconducted by a Tribunal when such company is found to have indulged in an\nunlawful or fraudulent act. A petition is in this regard is filed to the\ntribunal to commence the winding-up process.<\/p>\n\n\n\n<ul>\n<li><strong>Legal\nStatus&nbsp; <\/strong><\/li>\n<\/ul>\n\n\n\n<p>A Partnership Firm in India has no separate legal\nstatus separate from its partners. <\/p>\n\n\n\n<p>However, a private limited company is an artificial separate\nlegal entity and can hold assets and incur liability in its names.<\/p>\n\n\n\n<ul>\n<li><strong>Succession<\/strong><\/li>\n<\/ul>\n\n\n\n<p>As a partnership firm is not a separate legal entity,\nthere is no perpetual succession of a partnership firm. On the demise of its\npartners, the firm also ceases to exist. Change in partners leads to\ndissolution or formation of another partnership firm.<\/p>\n\n\n\n<p>On the other side, a Private Limited Company, is a\nseparate legal entity separate from its members and a company, once registered,\ncontinues to exist regardless of the death of its members. Change of member or\ndirectors does not affect the existence of a company.<\/p>\n\n\n\n<ul>\n<li><strong>Agency<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In a partnership firm, all partners are agents of one\nanother and the firm and can bind the firm and its partners with respect to\nactions conducted in pursuance in business of the firm.<\/p>\n\n\n\n<p>In a company, a member is not an agent of other\nmembers of the company or the company itself. They are liable for their actions\npersonally and do not bind the other members and company.<\/p>\n\n\n\n<ul>\n<li><strong>Transfer of Shares<\/strong><\/li>\n<\/ul>\n\n\n\n<p>This is also one of the main differences between Partnership Firm and Private Limited Company.\nIn a partnership firm, shares cannot be transferred to another partner or any\ntheir party without the consent of all the partners.<\/p>\n\n\n\n<p>In a private company, a shareholder can be transferred\naccording to the provisions of <\/p>\n\n\n\n<ul>\n<li><strong>Management<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If there is no express agreement to the contrary, all\npartners are entitled to the management and control of the running of the firm.<\/p>\n\n\n\n<p>However, in a company, members are not entitled to\nparticipate unless they are appointed as directors. Although they do have the\nright to sit in on general meetings, voting rights for, inter alia, the election\nof auditors, appointment of directors.<\/p>\n\n\n\n<ul>\n<li><strong>Property<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The firm\u2019s property, which is referred to as \u201cJoint Estate\u201d belongs to all the partners involved. It does not belong to anyone individually distinct from its partners. The property of a company is separated from that of its shareholders who can get it back only in the form of dividend or return of capital.<\/p>\n\n\n\n<div style=\"text-align:center; margin: 30px 0;\">\n  <a href=\"https:\/\/api.whatsapp.com\/send?phone=919121230280&#038;text=Hello%20Corpbiz%2C%20I%20need%20guidance%20on%20choosing%20between%20a%20Partnership%20Firm%20and%20a%20Private%20Limited%20Company.\"\n     style=\"\n       display: inline-block;\n       padding: 16px 36px;\n       background: linear-gradient(135deg, #1A73E8, #1558D6);\n       color: #ffffff;\n       text-decoration: none;\n       font-size: 18px;\n       font-weight: 600;\n       border-radius: 50px;\n       box-shadow: 0 6px 18px rgba(26, 115, 232, 0.35);\n       transition: all 0.3s ease;\n       letter-spacing: 0.5px;\n     \"\n     onmouseover=\"this.style.transform='translateY(-3px)'; this.style.boxShadow='0 10px 24px rgba(26,115,232,0.45)'\"\n     onmouseout=\"this.style.transform='translateY(0)'; this.style.boxShadow='0 6px 18px rgba(26,115,232,0.35)'\"\n  >\nGet professional support from Corpbiz today. <\/a>\n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>After discussing the differences between Partnership Firm and <strong><a href=\"https:\/\/corpbiz.io\/company-registration\" title=\"Private Limited Company Registration in India\">Private Limited Company<\/a><\/strong>, it concluded that, the Partnership firms provide more autonomy to its partners with the management and control of the firm as compared to shareholders of the company although the risk to the partners involved is graver as their personal assets can incur liability. Whereas in a private limited company, although the shareholders have limited rights, their liability only extends to the extent of the unpaid shares held by them in the company. However, private limited companies require adhering to many compliances to function smoothly as compared to a partnership firm. Partnership firms and private limited companies have their own set of advantages and disadvantages and choosing either of the two largely depends on the object of the business and stakeholders involved.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/annual-compliance-checklist-for-private-limited-company\/\">Annual Compliance Checklist for Private Limited Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A partnership is a relationship between two\/more individuals who have mutually agreed to conduct business run by all or any one of them and share the profits and loss arising therefrom. The individuals who enter into a partnership are called partners individually and collectively, known as the Partnership Firm. The Indian Partnership Act, 1932 lays [&hellip;]<\/p>\n","protected":false},"author":47,"featured_media":50796,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[158],"tags":[2868],"acf":{"service_id":"5"},"authorName":"Sherin Jose","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/11\/MicrosoftTeams-image-4-e1668575330329.jpg","authorDescription":"Sherin has degrees in Law and English Literature from the University of Delhi. She is adept at legal research and writing and enjoys discussing and analysing important legal developments. Her primary interests lie in Corporate, FinTech and IPR Law and she is always on the lookout for exploring new developments in the area. She is an avid reader who loves classics and contemporary fiction. She likes to travel, bake and obsess over cat videos in her free time.","postViews":50818,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50792"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=50792"}],"version-history":[{"count":4,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50792\/revisions"}],"predecessor-version":[{"id":71852,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50792\/revisions\/71852"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/50796"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=50792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=50792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=50792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}