Differences Between a Company and a Partnership

The recent body that is in control of the operations of business in Nigeria is the Corporate Affairs Commission (CAC) . The laws with which she operates are found in a legal document called Companies and Allied Matters Act, (CAMA,1990) . We shall therefore buttress the fundamental differences between companies and partnerships as it is contained in CAMA, 1990 . These differences are as follows :
(a) A company is established by registering it under the Companies and Allied Matters Act,
1990. But a partnership is established by implied agreement of the partners . Thus whereas
a company must follow special formality, a partnership needs no such special formality
(section 18) ;
(b) A company is an artificial legal person separated and distinct from its members .
It has a unique succession and a common seal . It can sue and be sued. But a partnership is
not a legal person although it can be sue and be sued in the firms name.
The individual partners owns the firm and are personally liable on the contracts of the firm
(section 37);
(c) A minimum of two persons may form a company or a partnership. A public company does
not have a maximum limit.
A private company must not go more than 50 members . In contrast the maximum number
of a partnership on a banking business is 10 as compared to other business where the
partners must not be more than 20, although there some exceptions to the rule . Here, a
partnership of legal practitioners, accountants and some others, has no maximum limit
(section 18,19 and 22);
(d) A shareholder is not an agent of the company whereas a partner is an agent of his firm in
affiliation with partnership business . This implies that whereas, a member of a company
cannot bind the company by his acts;
(e) The liability of a partner is unlimited though it is possible to limit the liability of one or more
partners provided that at least there is one general partner unlimited liability.
In other words , the liability of a member of a company is normally limited by shares or by
guarantee (section 21);
(f) A member of a company freely transfer his share in the partnership without the knowing
of all the respective partners(section 115) ;
(g) The management of a company is under the care of the directors appointed by the
shareholders. A member of a company therefore is not involved in the management of the
company unless he is a director. Otherwise all partners are entitled to share in
management among themselves (section 63(3) ;
(h) A company is subject to strict control by the provisions of the Companies and Allied Matters
Act 1990 with regards to maintenance of capital, books of account, share register of
members and distribution of profits. There are no such statutory obligation in a partnership.
partners drawing up profits and capital are in a matter agreement (section 105 and 331);
(i) The powers of the company are defined by its memorandum of association and the company
must operate within its objects specified in the memorandum . The articles of association
contain rules and regulations for internal management . Any alteration of these powers and
regulations must adhere to the strict procedure laid down in the Act . In a nutshell, rules
regarding management of partnership, business are spotted in the partnership Deed which
the partners can alter easily by consent (section 44) ;
(J) A company has unique succession and comes to an end only when it is liquidated under the
Act;
(k) A company continues in its operation if a member lives or dies or adjudged bankrupt. In a
nutshell, a partnership may fold up when a partner dies or becomes insolvent and
(l) Creditors of a company are not creditors of the members. They can sue the company
alone for their money . But creditors of a partnership are the creditors of the individual
partners.