Difference between a Pvt. Ltd Company and Partnership

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A company has a legal entity, separate from its shareholders or also called members. Members represent the company. Creditors and Debtors of the company are of the company alone and they can’t proceed against the members personally. A partnership firm has no legal entity separate form the members. It dies upon the death of a partner or upon separation between them. Partners are responsible for each and every debt or credit directly.

Liability

In a company, the shareholders have limited liability it is the very reason why it is called private limited or public limited company. Individually, share-holders liability is limited to the extent of their contribution to the venture or shares held by them for which they haven’t yet paid for. So once you have paid up the price for the shares to the company, your liability is over. You are not bound to pay anything towards the debts, which the company has incurred.

In a partnership form each partner has an unlimited liability and is personally liable for all the debts of the firm.

Registration and Legal Formalities

It takes one or two days to form a partnership firm. While a company registration is a 3-4 week long process. Company incorporation is much more expensive too. There are many legal formalities in case of a company which are on-going too. For example, The external auditing of the accounts of a company is a legal necessity, but in case of a firm until the annual turn-over doesn’t cross INR.40 lakhs, audit is not necessary.

Registration and Legal Formalities

All the partners of a firm are entitled to take part in the management. But in case of a company the board of directors, elected by shareholders, control and manage the business.

Every shareholder doesn’t have to worry about the management of the company. Only majority voting power (>50%) is needed to control the most operations of a company (in a few very important cases >75% is required).

While in case of a firm, consent of all partners is required to carry out any important decisions etc.

Winding up

A partnership firm can be wound up at any time by taking consent of all the partners if it is at will, without any legal formalities.

Winding up of a company is a lengthy legal process. Remember that a company is a legal entity. So when law gives birth to a company, only law can kill it.

Advantages of Incorporation

  • Separate legal entity and Limited liability, as described above
  • Ease of operations, because not every member is required to run the company
  • Adds credibility to your existence. i.e. In B2B deals most customers are worried if you are not a registered company. No Venture Capitalist or foreign investor would prefer to invest in a partnership firm as no one prefers to take unlimited liability.

Procedural aspects of incorporation of company

  • The proposed directors have to get DIN (Directors Identification Number) as the first step for which we need Passport size photos, ID proof/address proof. Full Name of Father, Grand father & Age
  • One of the directors (proposed Mg.Director) has to get digital signature as all documents have to be digitally signed
  • We have to apply for and get the name allotted. For this we can give 5 names in the order of preference. Names identical with existing companies (even phonetically identical) are not usually allotted
  • After allotment of names, we have to file the Memorandum and Articles of Association signed by the promoters and the incorporation certificate will be issued usually in a week’s time from the day of filing

Capital required for use of the following names:

Corporation Rs.5 Cr.
India, Bharat, Hindustan as first name       Rs. 50 Lakhs
India, Bharat, Hindustan within the name       Rs. 5 Lakhs
International, Globe, Asiatic, Asia, Universal Continental, Inter-Continental as first name Rs. 1 Crore
International, Globe, Asiatic, Asia, Universal Continental, Inter-Continental within the name Rs. 50 Lakhs
Industries / Udyog Rs. 1 Crore
Enterprises, Products, Business, Manufacturing Rs. 10 Lakhs

Names with numerals not allowed ( Prior approval required)

Our charges for incorporating a company includes the following:

  • Stamp duty
  • Articles of Association
  • Memorandum
  • P.O.A. in Stamp paper
  • Form in Stamp paper
  • Digital Signature- 2 nos
  • Director Identification number - 2 nos
  • Certificate of CA : 2 nos for two forms
  • Copies:
  • Internet usage
  • Name search

Stamp duty shall vary depending upon the Capital. Minimum capital requirement is Rs.1 lakh

Time required for search & approval of name : 14-16days

Total time taken for the entire procedure : 3-4 weeks

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Any Questions?

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