Difference Between Company vs Firm
Registration your business as a company or a firm is as important than developing the right product which can cater to the needs of the business and deliver growth in years to come. In the word of business, the two terms company and firm are often used interchangeably but they have different meanings and nature and characteristics. In this Company vs Firm article, we will try and understand the key differences between the company and a firm and will try to understand their nature and working.
Head To Head Comparison Between Company vs Firm (Infographics)
Below is the top 5 difference between Company vs Firm
Key Differences Between Company vs Firm
Both Company vs Firm are popular choices in the market; let us discuss some of the major Difference Between Company vs Firm
- The key difference between a company and a partnership firm is that in the firm a minimum of 2 persons and a maximum of 20 persons are required in order to get a partnership firm registered. On the other hand, a company can have a maximum number of any persons or employees once it gets itself registered
- A partnership firm in India is governed by the Indian Partnership Act 1932 whereas on the contrary companies are governed by the Indian Companies Act 2013. Both the acts have different policies and have their own nature and understanding of different policies
- One major difference between company vs firm is that under a company the founders or the partners of the company have limited liability only which means that they are only limited to their share of stake in the firm and are not personally obligated for any debtor in the case of bankruptcy of the company they cannot be held liable. On the other hand, a firm who have partners have unlimited liability and can be personally responsible to the extent of their personal belongings in case the firm fails to pay any debt. This is one of the major drawbacks of the nature of the firm or when partners decide to register the business as a partnership firm
- Companies that are registered have shareholders in their company who can be or cannot be employees of the company whereas, on the other hand, firms can be of nature of a sole proprietorship or a partnership which can be slightly different than companies who are stakeholders and shareholders
- Under partnership firms who have a comparatively smaller number of the person that a company the partners are more power to influence decision making in the firm when compared with operations of a company
- Business registered as public limited companies needs to adhere to the policies of public listed companies and are bound to disclose results and publish annual reports for their investors and public shareholders. On the other hand, businesses which are registered as firms need not disclose their financial information to any outside party or third party and they are at discretion to publish any reports or standing of their business
Company vs Firm Comparison Table
Below is the 5 topmost comparison between Company vs Firm
|
Company |
Firm |
| It is mandatory registration of a business who are going to register they’re established as a company | For firms, it is not mandatory to get your business registered with the Partnership Act of India |
| A company once registered becomes a separate legal entity and can sue and can be sued under its own name | A firm is not a separate legal entity and it cannot enter into contracts with third parties under its name |
| For a company registered minimum capital requirement is 1 lakh in case of private company and 5 lakh in case of public limited | There is no such requirement of capital which business is going to be registered as a firm |
| There are a lot of legal formalities when a company is decided to be dissolved and popular winding up needs to be done | There are no such legal formalities in case of a firm |
| The Directors are the management of concern in case of a company | The partners itself are the management of concern in case of a firm |
Conclusion – Company vs Firm
Both Company vs Firm operate under similar lines it is just that there is a difference between the act of governing. A firm can be altered into a company but a company cannot be registered back as a firm once registered as a company. Although the operations and the objectives of both the business concern are similar in line and nature.
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