COMPARISON OF BUSINESS FORMS

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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 of  Business
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
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

A Company has a capacity to
enter into any contract
Legal Governance
They are not governed by any
specific law

It is governed by Companies
Act, 1956

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