ACCA F4 - Corp and Business Law (ENG)

Part D The formation and constitution of business organisations  12: Corporations and legal personality 191

7 Comparison of companies and partnerships

Because it is a separate legal entity, a company has a number of features which are different from a

partnership. The most important difference between a company and a traditional partnership is that a

company has a separate legal personality from its members, while a traditional partnership does not.

7.1 The differences

The separate legal personality of a company gives rise to a number of characteristics which mark it out

from a traditional partnership. Revise this table when you have studied the rest of the book and know

more of the details concerning the distinctive factors of companies.

Factor Company Traditional partnership

Entity Is a legal entity separate from its

members

Has no existence outside of its members

Liability Members' liability can be limited Partners' liability is usually unlimited

Size May have any number of members (at

least one)

Some partnerships are limited to 20

members (professional partnerships

excluded)

Succession Perpetual succession – change in

ownership does not affect existence

Partnerships are dissolved when any of the

partners leaves it

Owners'

interests

Members own transferable shares Partners cannot assign their interests in a

partnership

Assets Company owns the assets Partners own assets jointly

Management Company must have at least one

director (two for a public company)

All partners can participate in management

Constitution Company must have a written

constitution

A partnership may have a written partnership

agreement, but also may not

Accounts A company must usually deliver

accounts to the Registrar

Partners do not have to send their accounts

to the Registrar

Security A company may offer a floating charge

over its assets

A partnership may not usually give a floating

charge on assets

Withdrawal of

capital

Strict rules concerning repayment of

subscribed capital

More straightforward for a partner to

withdraw capital

Taxation Company pays tax on its profit

Directors are taxed through PAYE

system

Shareholders receive dividends which

are taxed ten months after the tax year

Partners extract 'drawings' weekly or

monthly.

No tax is deducted as income tax is payable

on final profit for the year.

Management Members elect directors to manage the

company

All partners have a right to be involved in

management

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