Partnership Vs. Private Limited Company

[Mika]

If you want to do a business legally and do not want to get caught evading taxes, your business needs to be a registered entity. When you are registering your business, you need to understand different kinds of business models. Here I am talking about a Partnership firm and a private limited company.

A partnership firm and a private limited company are similar in many ways and also have a lot of differences. These business models belong to a small and medium business enterprise having a small staff and small working capital. The major difference is a private limited company can grow very big, whereas a partnership firm does not have that capacity. A private limited company can even go public and trade in the stock market.

In a partnership business model, two or more people are the owners. However, if the owners' number exceeds, it is recommended that the business converts into a private limited company. A partnership business is a registered firm in the trade and commerce department, whereas a company is registered in the company registrar's office.

 

[Jasmine]

Well, I am not an expert in this topic, however, based on my understanding and reading, partnership business is basically a business run by friends and family. You can join with another person to create a partnership business. Sometimes there can be more than two partners. Even though there is no strict rule on how many people can participate, it is generally understood that if there are more than 4 partners, you will have to go for private limited business model. A partnership business can be converted into private limited company, by restructuring the business model. Interestingly, if a private limited company wants to grow even bigger, have more shareholders (thousands in numbers) it can go public and raise capital through IPO. However, before that can happen you need to get approval from the security and exchange board in your country. The basic difference between partnership business and private or public limited company is the size of capital.