Business names, Companies & Partnerships
1. Business name is the name or style under which any business is carried out whether in partnership or otherwise. This is different from a company because whereas a company is a separate legal entity with its own identity in law, a business name is only a name that you are allowed to use to identify yourself or your service in trade.
Registering a business name helps the proprietor to carry on business under the registered name thereby distinguishing the owner’s business from that of others.
2. A Company is a legal person which has capacity and powers to act on its own (i.e the law sees a company in the same light as a natural person).
It is created by the Companies Act No.1 of 2012 which provides the legal framework under which companies can be formed for legal purposes.
3. A Partnership is defined under Section 2 of the Partnerships Act, 2010 as the relationship that exists among persons numbering between 2 and 20 who carry on a business together with the aim of making profits. A Partnership is different from a company because while a company is separate from its owners and can hold property and sue or be sued in its name, a partnership is not a legal entity of its own; partnership property is held by the partners exclusively for purposes of the business. Also, when a partner dies, the partnership is dissolved (unless the Partners agreed otherwise) which is not the case with a company.
There are two major types of partnership; a general partnership and a limited liability partnership. The limited liability partnership is more like a Limited Liability Company.
In the case of a Limited Liability Partnership, only one of the Partners is liable for the debts of the partnership. The rest of the partners are only liable to the extent of their capital contribution to the partnership. In General Partnership, however, all Partners are fully liable for the partnership’s debts.
To register a partnership the Business Name should be registered first.
Who can register a Partnership?
Any two or more persons carrying out business together with a view to making profits can register a partnership. To register any type of partnership, one needs to file a Deed of Partnership.
Difference between a Firm & a Company
In addition to the definitions above which differentiate the Firm/Partnership from a company, below is the comparison between the company and the Firm as the most commonly used business vehicles for carrying out the business.
Registration & Identity:
To register a company the main document is the memorandum and articles of association. The process is more costly and requires several documentation (forms) unlike a Firm where you only need to fill in the statement of particulars of the individuals responsible for the Firm.
Compliances:
There are multiple compliance requirements in the case of companies like filing of annual return & annual accounts, holding of meetings and the Annual General Meeting, resolutions for opening of bank accounts, issue of share certificates, etc. This is not so in the case of firm.
Liability:
Companies are a separate & distinct legal entity. The biggest advantage of having a company is that the liability of the shareholders is limited as against partnership firm wherein the liability of the partner is unlimited.
Dissolution /Winding up:
The partnership/firm is very easy to dissolve without much cost and efforts. Winding up of the companies is a time consuming, costly and a lengthy process because the company is a separate legal entity which can only be easily dissolved through a legally process.
Capital induction and its withdrawal:
Partners have a flexibility of introducing & withdrawing the capital into and from the firm without any hindrances. This is not so in the case of companies.
Control & Management:
In the case of a company, the board of directors appointed by the shareholders can independently run the company whereas in the case of a firm, normally consent of all partners is required to carry out any important decisions.
