COMPARISON OF BUSINESS FORMS
|
CRITERIA
|
PROPRIETORSHIP
|
PARTNERSHIP
|
LIMITED COMPANY
|
|
Minimum Number of Members
|
1 Person (either natural or artificial)
|
2 Persons (either natural or artificial)
|
2 in case of Private Limited Company
and 7 in case of Public Limited Company
|
|
Maximum Number of Members
|
20 except in case of banking business.
10 in case of banking business
|
50 in case of Private Limited
and unlimited in case of Public Limited Company
|
|
|
Cost of Registration
|
As there is no registration required, No Statutory fees is payable
|
The cost of registration is
negligible
|
The cost of Registration, mainly the statutory filling fees depends on the proposed Authorised Capital
|
|
Legal Entity
|
Proprietorship does not have
legal entity as the Proprietor and the firm are same persons
|
Partnership does not have
Separate Legal Entity other than
partners of the firm
|
Company has separate Legal
entity other than its shareholders and Directors and can operate like a legal person
|
|
Ownership ofBusiness
|
Ownership lies with
Proprietor
|
Ownership lies with the
partners
|
Ownership lies with members
|
|
Management
|
Managed by the proprietor
|
Managed by the Partners
|
Managed by the Directors elected / appointed by
members of company
|
|
Ownership of Property
|
Ownership lies with
Proprietor as the Proprietor and the firm are same persons
|
Ownership lies with the
Partners
|
A Company purchases its
Property in its own name
|
|
Flexibility in Ownership
|
The entire business needs to
be sold
|
Ownership is restrictive;
any change in partnership
requires the approval of other partners.
|
Ownership is easily changeable ,
as shares of Company are freely
transferable
|
|
Liability
|
The liability of the Owner is
unlimited and extends to his
personal assets
|
The liability of the Partners are unlimited an extends to personal property
|
The liability of members are Limited to the share taken and does not extends to personal property
|
|
CRITERIA
|
PROPRIETORSHIP
|
PARTNERSHIP
|
LIMITED COMPANY
|
|
Creditworthiness
|
The creditworthiness of Proprietorship firms depends
upon the goodwill and creditworthiness of its Proprietor
|
The creditworthiness of
Partnership firms depends
upon its goodwill and
creditworthiness of its
partners
|
Due to Stringent Compliances &
disclosures under various laws,
companies enjoys high degree of
creditworthiness
|
|
Business Durability
|
Death or Insolvency of Owner dissolves the Proprietorship
|
Death, resignation or
Insolvency of Partner,
dissolves the firm
|
A Company has Perpetual
Succession, death or insolvency
of members does not effect its
existence
|
|
Chances of individual fraud
|
Very High, any act of
individual partner will
bind the firm
|
Negligible, all the decisions are
taken collectively by board of
directors
|
|
|
Dissolution/Termination
|
A Proprietorship being a creation of will, can be terminated as per will
|
A Partnership being a
creation of will, can be
terminated as per will of
partners
|
A Company being a creation of
law, can be dissolved as per
procedures laid down in Law
|
|
Contractual Capacity
|
The contracts are entered
into the name of Proprietor
|
The contracts are entered
into the name of partner
|
A Company has a capacity to
enter into any contract
|
|
Legal Governance
|
They are not governed by any
specific law
|
Management of partnership not governed by any
specific law
|
It is governed by Companies
Act, 1956
|
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