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Preface: This post was originally published in 2022 and has been updated on July 09, 2025, to provide you with the most current and accurate information.
A Company and a Partnership are regarded as two popular business structures in India. On one hand, a company is a business entity registered under the Companies Act 2013. On the other hand, a partnership is a business entity registered under the Indian Partnership Act 1932.
If you are planning to establish a business, but are confused between company and partnership, going through this article will be helpful. Here, we shall discuss the key differences between company and partnership in the context of India.
A company is a business entity registered under the Companies Act 2013. It is regarded as a separate legal entity from its owners. This means the company can enter into contracts, own property and sue/be sued in its own name.
A company is an umbrella term that can be used to refer to any kind of company registered under the Act, such as one person company, private limited company or public limited company.
Registering a company is a legal requirement. The Registrar of Companies (ROC) is responsible for registering all the companies in India. Every company requires at least one director.
A partnership, officially known as a partnership firm, is a legal arrangement where two or more persons agree to combine their resources, efforts and expertise to operate a business and share in the profits and losses.
A partnership is not a separate legal entity from its owners. This means it cannot own properties, sue or enter into agreements in its own name. In India, partnership firms are registered under the Indian Partnership Act 1932.
The Registrar of Firms (ROF) is responsible for registering partnership firms in India. However, it is important to know that partnership firm registration isn’t a mandatory requirement by law. Unlike companies, partnerships do not require appointment of any director.
Going through the table below will help you understand the difference between a company and a partnership easily:
|
S. No. |
Parameters |
Company |
Partnership |
|
1. |
Governing Law |
A company is governed by the Companies Act 2013. |
A partnership is governed by the Indian Partnership Act 1932. |
|
2. |
Liability |
Companies like One Person Company, Public Limited Company and Private Limited Company offer limited liability protection. This means the owners are not personally liable for debts and losses incurred by the company. |
A partnership does not offer limited liability protection. It comes with unlimited liability, meaning the partners of the business are personally liable for the losses and debts incurred by the company. |
|
3. |
Minimum Number of Members |
A minimum of 7 members is required for a public limited company. In the case of a one person company, only one member is required. |
A minimum of 2 members is required to form a partnership. |
|
4. |
Maximum Number of Members |
A private limited company can have a maximum of 200 members.
|
A maximum of 100 members can be part of a partnership. |
|
5. |
Essential Documents |
Memorandum of Association and Articles of Association are mandatory documents for every company in India. |
A partnership deed is not a mandatory requirement in India. However, it is essential to avoid potential legal disputes and offer clarity. |
|
6. |
Audit |
Companies in India need to conduct audits. It is a mandatory requirement. |
It is not mandatory for partnerships in India to conduct audits. |
|
7. |
Legal Status |
A company is considered to be a separate legal entity from its owners. |
A partnership is not regarded as legally separate from its partners. |
|
8. |
Conversion |
Can be converted into another company/business type. |
A partnership firm can be converted to a limited liability partnership. |
|
9. |
Decision-making Authority |
The Board of Directors are majorly responsible for decision-making. |
The partners of the firm are responsible for decision-making. |
|
10. |
Taxation |
A company is taxed as a separate entity. |
A partnership isn’t taxed separately. Instead, its partners are taxed individually as per applicable tax slabs. |
|
11. |
Profit Sharing |
The profit is shared between members as per the articles of association, which is considered to be the company’s internal rulebook. |
The profit is shared between partners as per the partnership agreement. In absence of such an agreement, the profit is distributed equally. |
A company is a business governed by the Companies Act 2013. A partnership, however, is governed by the Indian Partnership Act 1932. While a company is regarded as a legal entity separate from its owners, a partnership firm is not a separate legal entity from its partners. This means that a company can purchase property, sue or be sued, or enter into agreements in its own name, whereas a partnership cannot.
A company, specifically an OPC, can be opened with just one member. However, a partnership firm requires a minimum of two members. Need help in deciding which one is better for your business? Connect with our business registration consultants at Registrationwala.
Q1. Which authority registers companies in India?
A. The Registrar of Companies (ROC) registers companies in India, in accordance with the Companies Act.
Q2. Which authority registers partnership firms in India?
A. The Registrar of Firms (ROF) registers partnership firms in India, in accordance with the Indian Partnership Act.
Q3. Is a partnership deed required for a partnership?
A. No. Although a partnership deed is an essential document, it isn’t legally mandatory for a partnership to have one.
Q4. Is the memorandum of association required for incorporating a company?
A. Yes, the memorandum of association is a mandatory document for incorporating a company in India.
Q5. How many partners are required to form a partnership?
A. A minimum of two partners is required to form a partnership.
Q6. Is it legally mandatory to register a partnership with the Registrar of Firms?
A. No, it is not legally mandatory to register a partnership with the Registrar of Firms.
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