What is the Difference Between Partnership Vs Private limited
Partnership and Private Limited Company are two distinct business structures in India. While partnerships offer simplicity and shared liability among partners, private limited companies provide limited liability protection and structured governance. Understanding the differences between these two options is crucial for entrepreneurs choosing the right framework for their business ventures.
Features
Meaning
- Liability
- Formation
- Taxation
- Legal Status
- Management Structure
- Compliance
- Capital Raising
- Perpetual Existence
- Minimum Alternate Tax (MAT)
- Public Offering
- Restrictions on Transfer
Partnership
Meaning under the Partnership Act, 1932
- Partners have unlimited liability, risking personal assets.
- Requires a partnership deed; less formalities.
- Taxed at tax slab @ 30%
- Not a separate legal entity from partners.
- Typically shared equally among partners
- Fewer regulatory requirements and compliance formalities.
- Limited options for raising capital; relies on partners' contributions.
- Partnership dissolves upon death or withdrawal of a partner.
- Partnerships are not subject to MAT.
- Cannot issue shares to the public.
- No restrictions on the transfer of partnership interest, unless specified in the partnership deed.
Private limited
Regulated under the Companies Act of 2013
- Shareholders have limited liability, protecting personal assets.
- Requires registration, Memorandum of Association, Articles of Association, etc.
- Subject to corporate tax rates
- Considered a separate legal entity from shareholders.
- Managed by directors appointed by shareholders; structured governance.
- More regulatory compliance obligations; annual filings, meetings, etc.
- Can raise capital through share issuance, loans, and investments.
- Company has perpetual existence; not affected by changes in ownership.
- the Minimum Alternate Tax (MAT) rate for companies in India was 17.47% of their book profits, as per the provisions of the Income Tax Act, 1961.
- Can issue shares to the public, subject to regulatory requirements.
- Shares are subject to restrictions on transfer, as per the company's Articles of Association.
