Define a Company. How does a company differ from a partnership?
Find the question and answer of Company Law only on Legal Bites.
Question: Define a Company. How does a company differ from a partnership? [BJS 2000]Find the question and answer of Company Law only on Legal Bites. [Define a Company. How does a company differ from a partnership?]AnswerAccording to Black's Law Dictionary, a company is "an association of persons formed for the purpose of carrying on some business or enterprise." Economist Joseph Schumpeter defined a company as "an institution that carries on business activities characterized by innovation...
Question: Define a Company. How does a company differ from a partnership? [BJS 2000]
Find the question and answer of Company Law only on Legal Bites. [Define a Company. How does a company differ from a partnership?]
Answer
According to Black's Law Dictionary, a company is "an association of persons formed for the purpose of carrying on some business or enterprise." Economist Joseph Schumpeter defined a company as "an institution that carries on business activities characterized by innovation and risk-taking."
In corporate law, a company is defined as a legal entity separate from its shareholders or owners. This means that a company can enter into contracts, sue and be sued, and own assets in its own name.
Section 2(20) of the Companies Act, 2013, defines the term 'Company' as follows:
“Company means a company incorporated under this Act or under any previous company law."
This definition includes both incorporated and unincorporated companies and applies to both for-profit and non-profit organizations. The Companies Act 2013 also specifies that a company must have at least two members (shareholders) to be formed and registered under the Act and that it must have a registered office and a common seal. Additionally, the Act lays out requirements for the management and governance of companies, including the appointment of directors and the holding of shareholder meetings.
The Companies Act 2013 recognizes several types of companies, including:
Private Limited Company: A company in which the minimum number of members is two and the maximum is 200 and the liability of members is limited to their shares.
Public Limited Company: A company in which the minimum number of members is seven and there is no maximum limit, and the liability of members is limited to their shares.
One Person Company (OPC): A company with only one person as its member.
Small Company: A company which fulfills the criteria laid down in the act in respect of paid-up capital and turnover.
Producer Company: A company which is formed by the primary producers to carry out their activities collectively.
Nidhi Company: A company which is formed for the cultivation of thrift and savings among its members.
Section 8 company: A company which is formed for the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
Unlimited Company: A company in which the liability of members is not limited to their shares.
Foreign Company: A company which is incorporated outside India but has established a place of business in India.
These are some of the types of companies that are recognized under the Companies Act 2013, and each type has specific compliance requirements, restrictions, and privileges.
Difference between a Company and a Partnership
A company and a partnership are two different types of business structures, and they have some key differences:
Legal Status: A company is a separate legal entity from its shareholders or owners, while a partnership is not. This means that a company can enter into contracts, sue and be sued, and own assets in its own name, while a partnership cannot.
Ownership: In a company, ownership is represented by shares of stock, while in a partnership, ownership is represented by the partnership agreement. In a partnership, the partners have direct control and share in the profits and losses of the business, whereas in a company, shareholders do not have direct control, but they are entitled to dividends if any, and share in the capital appreciation of the company.
Liability: In a company, shareholders are generally only liable for the company's debts to the extent of their capital contributions, while in a partnership, partners are jointly and severally liable for the partnership's debts.
Management: A company is managed by a board of directors and officers, while a partnership is managed by the partners themselves.
Raising Capital: A company can raise capital by issuing shares of stock, while a partnership can raise capital by admitting new partners or by borrowing money.
Continuity: A company has perpetual succession, meaning it continues to exist even if shareholders or directors change, while a partnership is dissolved upon the death, retirement, or withdrawal of a partner.
Taxation: Companies are taxed separately from their shareholders, while the income of a partnership is passed through to the partners and taxed on their individual tax returns.
Reporting & Compliance: Companies are subject to more stringent reporting and compliance requirements, including the annual filing of financial statements and the holding of annual general meetings, whereas, in a partnership, there are fewer compliance requirements.
These are some of the key differences between a company and a partnership. It's important to consider these factors when deciding which type of business structure is best for your organization.