Partnership Firm Vs Private Limited Company

Partnership Firm Vs Private Limited Company

In this article, let you know about difference between Partnership Firm Vs Private Limited Company so below are the details know about the partnership firm and private limited company.

What Is A Partnership Firm

It Is a  kind of business entity in which, two or more persons have agreed to conduct any business activity on behalf of the firm or partners and have assent with partners to share profits & losses mutually.

Major Feature of Partnership Firms are :

  • In The Partnership Firm, There must be an agreement between partners which can be oral or written.
  • In The Partnership Firm, The profit & loss of the business must be distributed among the partners, in the specified ratio.
  • In The Partnership Firm, Each partner is an agent of the firm as well as of the other partners who carry on the business.
  • In The Partnership Firm, The persons are known as partners in their individual capacity, while they are jointly referred to as the firm.
  • In The Partnership Firm, The agreement in which the terms and conditions of the partnership are written is known as Partnership Deed.
  • In The Partnership Firm, The primary objective of the creation of the partnership is to carry on business.
  • In The Partnership Firm As there is no separate identity of the firm itself and therefore the partners are held liable for the same.
  • In The Partnership Firm, The partners cannot transfer their shares without the consent of the other partners.

What Is a Private Limited Company :

A company is an association of persons, formed and registered under the Indian Companies Act, 1956 or any other previous act.

The following are the major features of a company :

  • Private Limited Company is an artificial person formed by the law.
  • Private Limited Company has a separate legal entity.
  • Private Limited Company has limited liability.
  • Private Limited Company has perpetual succession.
  • Private Limited Company has a common seal.
  • Private Limited Company can possess property in its own name.
  • Private Limited Company can file a suit in its own name and vice versa.
  • Private Limited Company is run by its representatives known as directors, which are appointed by the members of the company at the Annual General Meeting.

Key Differences Between Partnership Firm and Private Limited Company

  • A partnership is an agreement between two or more persons who come together to carry out a business activity and share the outcome of this activity among themselves. A company is an artificial person having the separate identity, common seal and perpetual succession which is formed and governed by a law.
  • The registration of the partnership firm is not compulsory whereas a Private Limited Company needs to get Compulsory Registration.
  • For the Formation of a partnership, There must be at least two partners. For the Formation of a Private Limited Company, there must be at least 2 members and maximum of 50 in case of private companies.
  • The Major difference between the Private Limited Company and Partnership there is no minimum capital requirement for starting a partnership firm and the minimum capital requirement for a private company it is 1 lakh.
  • The Partnership Firm is regulated by the Registrar of Firms of the State Government and Private Limited Company is regulated by the Registrar of Companies of the Central Government.  
  • If a  Dissolution of the partnership firm Takes place Then there are no legal formalities that need to be taken care. A Private Limited Company has many legal formalities for winding up that needs to be taken care of.
  • A partnership firm can be dissolved by any one or all of the partners and The company cannot be wound up by any one or all of the members of the company.
  • A Partnership Firm is not bound to use the word Limited or Pvt Ltd at the end of its name while  A Private Limited Company has to add the word  Pvt Ltd at the end of its name.
  • In the Partnership Firm, a liability of the partners is unlimited whereas In case of Private Limited Company Liability is limited to the extent of shares held by every member.


In this article, we have outlined major Differences between Private Limited Company and Partnership, so that you can make a right choice of business entity that you will choose as a business model to take advantages of benefits that are offered by Partnership and Private Limited Company.