The difference between partnership and company can be explained by looking at the ownership, liability, management, taxation, and legal requirements of these business structures.
In this article, we will take a look at these key factors and explain how they differ between the two structuring options.
This article is part of our free series on businesses and business banking, including how to find the best business bank accounts to open remotely around the world.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Difference Between Partnership and Company
- Registration for Partnership vs Company
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Difference Between Partnership and Company
The main difference between a partnership and a company is that a partnership is owned by two or more partners who have unlimited liability for debts and obligations while a company is owned by shareholders who have limited liability only up to the value of their shares in the company.
Additionally, partnerships are generally passthrough entities, where any income generated by the partnership is attributed to each partner, based on their share in the venture. On the other hand, a company is usually treated as a separate entity and income is taxed at the corporate level before being distributed to shareholders as dividends.
To make this distinction more clear, here is a closer look at what is a partnership and what is a company.
What Is a Partnership?
A partnership is a type of business structure where the business is owned by two or more people, who are the partners. Additionally, the profits, losses, and liabilities of the business are shared directly by the partners. And, unless specific levels of partnership are established, all partners have direct influence over the management of the business.
What Is a Company?
A company is a type of business structure where the business is owned by one or many shareholders. Shareholders can be natural persons (people) or other legal entities. Additionally, companies can be both privately held or publicly listed on exchanges. Likewise, companies can take on a number of different forms, ranging from Corporations to Limited Liability Companies (LLCs).
In the following section, we will discuss the differences in registration for both partnerships and companies. This will then be followed by answers to many of the questions we receive on the topic.
Registration for Partnership vs Company
The main difference between registration for a partnership and a company is that registration of a partnership requires the filing of a partnership agreement while registration of a company requires filing articles of incorporation with relevant authorities.
That said, there are other differences between registering a partnership and a company as well. These differences include the complexities of registration, ongoing reporting requirements from registrars, and more.
Of course, the specific jurisdiction you choose will also introduce differences in how these structures are registered and the requirements. So, before deciding which structure is best for you, you should consider all of the requirements in your chosen jurisdiction.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into this topic. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Are the Legal Requirements for Setting up a Company Versus a Partnership Firm?
The legal requirements for setting up a company versus a partnership include that companies are required to file articles of association, while partnerships file a partnership agreement. Additionally, companies typically have specific ongoing reporting requirements, while partnerships have fewer ongoing requirements. And, depending on the jurisdiction there are also differences in the information available to the public.
What Is the Main Difference Between a Partnership and a Limited Company?
The main difference between a partnership and a limited company is the level of liability that the partners assume over the debts and obligations of the partnership. On the other hand, the shareholders in a company are only liable up to the value of their shares.
Which Is Better Partnership or Company?
Whether a partnership or company is better will ultimately depend on the specific situation. For example, this may include the objectives of the individual or individuals choosing between these business structures. Additionally, given the differences between a partnership and company in terms of ownership, liability, management, taxation, and more, it’s important for the parties involved to closely consider all of these variables before making a choice between them.
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