INTRODUCTION:

COMPANY:

A company is a business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be made to exist in law and then a company is itself considered a "legal person". The name company arose because, at least originally, it represented or was owned by more than one real or legal person. In the United States, a company may be a "corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing."¹ In the US, a company is not necessarily a corporation². In English law and in the Commonwealth realms a company is a body corporate or corporation company registered under the Companies Acts similar legislation³. It does not include a partnership or any other unincorporated group of persons, although such an entity may be loosely described as a company.

A company can be defined as an "artificial person", invisible, intangible, created by or under Law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

ORIGIN:

The English word has its origins in the Old French military term compaignie (first recorded in 1150), meaning a "body of soldiers"⁴, originally taken from the Late Latin wordcompanio "companion, one who eats bread with you", first attested in the Lex Salica as a calque of the Germanic expression *gahlaibo (literally, "with bread"), related to Old High German galeipo "companion" and Gothic gahlaiba "messmate". By 1303, the word referred to trade guilds. Usage of company to mean "business association" was first recorded in 1553 and the abbreviation "co." dates from 1769.

TYPES:

There are various types of company that can be formed in different jurisdictions, but the most common forms of company (generally formed by registration under applicable companies legislation) are:

§ A company limited by guarantee. Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company. This type of company is common in England. A company limited by guarantee may be with or without having share capital.

§ A company limited by shares. The most common form of company used for business ventures. Specifically, a limited company is a "company in which the liability of each shareholder is limited to the amount individually invested" with corporations being "the most common example of a limited company. This can be a public company or private company." This type of company is common in England.

§ A company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return. This type of company may no longer be formed in the UK, although provisions still exist in law for them to exist.^[6]

§ A limited-liability company. "A company—statutorily authorized in certain states—that is characterized by limited liability, management by members or managers, and limitations on ownership transfer", i.e., L.L.C.

§ An unlimited company with or without a share capital. A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited. In this case doctrine of veil of incorporation does not apply.

Less commonly seen types of companies are:

§ Companies formed by letters patent. Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.

§ Charter corporations. Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfil a quasi regulatory function (for example, the Bank of England is a corporation formed by a modern charter).

§ Statutory Companies. Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction.

Note that "Ltd after the company's name signifies limited company, and PLC (public limited company) indicates that its shares are widely held."

In legal parlance, the owners of a company are normally referred to as the "members". In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders. In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include "segregated portfolio companies" and restricted purpose companies.

There are however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world.

Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. Public companies are companies whose shares can be publicly traded, often (although not always) on a regulated stock exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.

PARTNERSHIP:

A partnership is an arrangement where parties agree to cooperate to advance their mutual interests⁵. Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace. In the most frequently associated instance of the term, a partnership is formed between one or more businesses in which partners (owners) co-labour to achieve and share profits and losses (see business partners). Partnerships are also common regardless of and among sectors. Non-profit, religious, and political organizations may partner together to increase the likelihood of each achieving their mission and to amplify their reach. In what is usually called an alliance, governments may partner to achieve their national interests, sometimes against allied governments who hold contrary interests, such as occurred during World War II and the Cold War. In education, accrediting agencies increasingly evaluate schools by the level and quality of their partnerships with other schools and a variety of other entities across societal sectors. Partnerships also occur at personal levels, such as when two or more individuals agree to domicile together, while other partnerships are not only personal but private, known only to the involved parties.

Partnerships present the involved parties with special challenges that must be navigated unto agreement. Overarching goals, levels of give-and-take, areas of responsibility, lines of authority and succession, how success is evaluated and distributed, and often a variety of other factors must all be negotiated. Once agreement is reached, the partnership is typically enforceable by civil law, especially if well documented. Partners who wish to make their agreement affirmatively explicit and enforceable typically draw up Articles of Partnership. It is common for information about formally partnered entities to be made public, such as through a press release, a newspaper ad, or public records laws.

While partnerships stand to amplify mutual interests and success, some are considered ethically problematic. When a politician, for example, partners with a corporation to advance the corporation's interest in exchange for some benefit, a conflict of interest results. Outcomes for the public good may suffer. While technically legal in some jurisdictions, such practice is broadly viewed negatively or as corruption. Governmentally recognized partnerships may enjoy special benefits in tax policies. Among developed countries, for example, business partnerships are often favoured over corporations in taxation policy, since dividend taxes only occur on profits before they are distributed to the partners. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation. In such countries, partnerships are often regulated via anti-trust laws, so as to inhibit monopolistic practices and foster free market competition. Enforcement of the laws, however, is often widely variable. Domestic partnerships recognized by governments typically enjoy tax benefits, as well.

Definition in civil law

A partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise; contribute to it by combining property, knowledge or activities; and share its profit. Partners may have a partnership agreement, or declaration of partnership and in some jurisdictions such agreements may be registered and available for public inspection. In many countries, a partnership is also considered to be a legality, although different legal systems reach different conclusions on this point.

Common law

Under common law legal systems, the basic form of partnership is a general partnership, in which all partners manage the business and are personally liable for its debts. Two other forms which have developed in most countries are the limited partnership (LP), in which certain limited partners relinquish their ability to manage the business in exchange for limited for the partnership's debts, and the limited liability partnership (LLP), in which all partners have some degree of limited liability. There are two types of partners. General partners have an obligation of strict liability to third parties injured by the Partnership. General partners may have joint liability or joint and several liability depending upon circumstances. The liability of limited partners is limited to their investment in the partnership. A silent partner is one who still shares in the profits and losses of the business, but who is uninvolved in its management, and/or whose association with the business is not publicly known; these partners usually provide capital.

Distinction between company and partnership

(1)Registration:
A company comes into existence only after its registration under the Companies Act, 1956. In case of partnership the registration is not necessary.

(2) Legal Status:

A company is a legal person and regarded by law as a single person. A partnership is a collection of individuals.

(3) Minimum number of persons:

The minimum number of persons required to form a company is two in case of private companies and seven in the case of public companies. The minimum number of persons required to form a partnership is two.

(4) Maximum number of persons:

A public company may have any number of members. In case of a private company the maximum number cannot be more than fifty. In trading partnership the maximum number of partners is twenty, in a banking business, the maximum number if ten.

(5) Transferability:

A shareholder can transfer his share without the consent of other shareholders. In case of partnership, a partner cannot transfer his share without the consent of other partners.

(6) Liability of members:

The liability of the members of a company is limited whereas liability of partners for debts of a firm is unlimited.

(7) Contractual capacity:

The shareholders of a company can enter into contract with the company and can be employees of the company. Partners can contract with other partners but not with firm as a whole.

(8) Length of existence:

The death or retirement of a partner dissolves the partnership. But company having legal existence can continue in spite of death and insolvency of the members. It has a perpetual existence.

(9) Powers:

The affairs of accompany are closely controlled by the Companies Act, 1956 and the company can only operate within the objects laid down in the memorandum of association, though these can be altered to some extent by special resolution. Partners may carry on any business as they please so long as it is not illegal and make whatever arrangements they wish with regard to the running of the firm from time to time.

(10) Statutory obligations

A company is required to comply with various statutory obligations regarding management e.g.; filing balance sheet, maintaining prescribed registers. In case of partnership, there are no statutory obligations.

(11) Authority of members:

Management of a company vests in the hands of a few directors elected from amongst and by the shareholders. A shareholder has no say in the management. Whereas in the case of partnership, all partners are entitled to share in the management of a firm. A partner is an agent of the firm and can bind it by his acts.

(12) Distribution of profit:

Profits of a firm are distributed in agreed proportion or equally in absence of agreement among the partners but profits in case of a company can be distributed according to the provision of the articles by the directors.

(13)Audit:

Audit in case of company is compulsory but in case of partnership firm it is not compulsory. The difference is probably going to depend on corporation and partnership laws in the state where they are located.

(14) Agency:

A member of a company is not an agent of the company or that of other members, and he cannot bind a company by his acts. Each partner is an agent of the firm and his partners, and nay bind the firm by his acts.

(15) Powers:

CONCLUSION:

First time entrepreneurs who are entering into the corporate world are confused about how to go into the business whether as a company or as partnership. Understanding the differences between the company and partnership can be helpful to them in making the right decision –

1. A company is considered to be an artificial legal person, hence a company may make contracts and take legal action against others and others also can take legal action against the company. It is an entity which is distinct from its members, while partnership is not a legal person and in partnership it is the partners who own the property of the firm and are liable for the contracts of the partnership firm jointly as well as severally.

2. In a company liability of the members of the company is limited to the extent of shares held by him and hence insolvency of a company does not mean insolvency of the members of the company while in case of partnership liability of the partners is unlimited and hence their personal wealth can also be taken for paying the debts of the partnership firm and hence insolvency of partnership firm means insolvency of partners as well.

3. While dissolving a company strict rules and regulation are needed to be adhered to while in case of partnership it can be dissolved by partners at any time with mutual consent. In other words it is easier to close a partnership firm then a company.

4. A company is managed by board of directors which are elected by the members of the company while a partnership firm is managed by all partners or any one of them on behalf of all of them.

5. A company has perpetual succession implying that death or insolvency of member does not have any bearing on the existence of the company and it keeps functioning while a partnership firm does not have perpetual succession and is dissolved on death or insolvency of any partner subject to the contract to the contrary.

Hence from the above it can be seen that there are vast differences between the two and hence any one should study in detail the pros and cons of both company as well as partnership before taking any decision on whether to enter into partnership or incorporate a company.

REFERENCES:

1. Black's Law and lee Dictionary. Second Pocket Edition. Bryan A. Garner, editor. West. 2001.

2. http://legal-dictionary.thefreedictionary.com/company

3. Companies Act 2006, Section 1

4. Harper, Douglas. "company". Online Etymology Dictionary.

5. "Become a Partner or Sponsor". UberStudent. 2011-04-30. Retrieved 2012-03-31.

Webliography:

· http://www.cseindia.org/node/2900

· http://earth911.com/news/2010/10/21/india-sets-up-green- tribunal-to-try-environmental-crimes/

· http://www.downtoearth.org.in/content/national-green-tribunal- stays-thermal-power-plant-gujarat

· http://www.downtoearth.org.in/content/green-tribunal-suspends- environment-clearance-scania-sponge-iron-plant-raigarh

· http://inece.org/conference/9/papers/Bakshi_India_Final.pdf

Bibliography:

· Awtar Singh, Company Law, 15^th Edition, 2008

· C R Datta on Company Law, 6^th Edition, 2009

· Taxmann’s Company Law, 14^th Edition , 2011

· Guide to Companies Act, 17^th edition,2008

Received on 11.03.2013 Modified on 01.04.2013

Int. J. Rev. & Res. Social Sci. 1(1): July –Sept. 2013; Page 05-08