Distinction between a Company and Partnership

Here are the notes on the distinction between a company and partnership, with MCQs and answers:

Partnership

• A partnership is a business association of two or more people who agree to share the profits and losses of the business.
• The partners are jointly liable for the debts of the partnership.
• The partnership does not have a separate legal entity from its partners.
• The partnership is not required to be registered with the government.
• The partnership is governed by the Indian Partnership Act, 1932.

Company

• A company is a legal entity that is separate from its owners.
• The shareholders of a company are not personally liable for the debts of the company.
• The company is required to be registered with the government.
• The company is governed by the Indian Companies Act, 2013.

Comparison

Feature	Partnership	Company
Number of members	At least 2	At least 2
Liability of members	Unlimited	Limited to the extent of their investment
Legal entity	No	Yes
Registration	Not compulsory	Compulsory
Governance	By partners	By board of directors
Taxation	Partners are taxed on their share of profits	Company is taxed on its profits

MCQs

1. Which of the following is not a characteristic of a partnership?
   • The partners are jointly liable for the debts of the partnership.
   • The partnership is a legal entity separate from its partners.
   • The partnership is not required to be registered with the government.
   • The partnership is governed by the Indian Partnership Act, 1932.
   • The answer is The partnership is a legal entity separate from its partners.
2. Which of the following is a characteristic of a company?
   • The shareholders of a company are personally liable for the debts of the company.
   • The company is not required to be registered with the government.
   • The company is governed by the Indian Partnership Act, 1932.
   • The company is a legal entity separate from its owners.
   • The answer is The company is a legal entity separate from its owners.
3. Which of the following is the most common type of company in India?
   • Private limited company
   • Public limited company
   • Limited liability partnership
   • Sole proprietorship
   • The answer is Private limited company.
4. Which of the following is not a requirement for forming a private limited company in India?
   • Minimum of 2 members
   • Minimum paid-up capital of INR 100,000
   • Memorandum of association and articles of association
   • Filing of the company registration documents with the Registrar of Companies
   • The answer is Minimum of 2 members.
5. Which of the following is the main difference between a private limited company and a public limited company?
   • The number of members
   • The liability of the members
   • The requirement to be registered with the government
   • The way the company is governed
   • The answer is The liability of the members.