, QUESTION 1
Difference Between a Partnership and a Company
A partnership and a company are both legally recognised forms of business
organisation; however, they differ fundamentally in their legal nature, liability,
continuity, and regulatory requirements. A partnership is defined as a voluntary
association of two or more persons who agree to carry on a business with the
intention of making a profit and sharing such profit between them. Partnerships are
governed primarily by common law and do not possess a legal personality separate
from the partners themselves1. In contrast, a company is a juristic person that comes
into existence upon registration in terms of the Companies Act 71 of 2008 and exists
independently from its shareholders and directors2.
A critical distinction between these two business forms lies in the issue of legal
personality and liability. In a partnership, partners are jointly and severally liable
for the debts and obligations of the partnership, meaning that creditors may claim
directly against the personal assets of any partner. This poses a significant financial
risk, particularly in specialised and high-risk fields such as aviation and corporate
law3. Conversely, a company enjoys limited liability, whereby shareholders are
generally only liable to the extent of their shareholding, thus offering greater
protection to personal assets.
Another important difference relates to continuity and existence. A partnership
does not enjoy perpetual succession and may be dissolved upon the death,
insolvency, or withdrawal of a partner, unless the partnership agreement provides
otherwise. This lack of continuity can hinder long-term planning and international
expansion. A company, however, enjoys perpetual succession, meaning it continues
to exist regardless of changes in ownership or management, making it more suitable
for long-term and global business operations4.
1
R Cassim et al Contemporary Company Law 2 ed (2012) 3–4.
2
Companies Act 71 of 2008 s 19(1).
3
J Gibson South African Mercantile and Company Law 8 ed (2015) 41.
4
L Havenga et al General Principles of Commercial Law 10 ed (2019) 296.
Difference Between a Partnership and a Company
A partnership and a company are both legally recognised forms of business
organisation; however, they differ fundamentally in their legal nature, liability,
continuity, and regulatory requirements. A partnership is defined as a voluntary
association of two or more persons who agree to carry on a business with the
intention of making a profit and sharing such profit between them. Partnerships are
governed primarily by common law and do not possess a legal personality separate
from the partners themselves1. In contrast, a company is a juristic person that comes
into existence upon registration in terms of the Companies Act 71 of 2008 and exists
independently from its shareholders and directors2.
A critical distinction between these two business forms lies in the issue of legal
personality and liability. In a partnership, partners are jointly and severally liable
for the debts and obligations of the partnership, meaning that creditors may claim
directly against the personal assets of any partner. This poses a significant financial
risk, particularly in specialised and high-risk fields such as aviation and corporate
law3. Conversely, a company enjoys limited liability, whereby shareholders are
generally only liable to the extent of their shareholding, thus offering greater
protection to personal assets.
Another important difference relates to continuity and existence. A partnership
does not enjoy perpetual succession and may be dissolved upon the death,
insolvency, or withdrawal of a partner, unless the partnership agreement provides
otherwise. This lack of continuity can hinder long-term planning and international
expansion. A company, however, enjoys perpetual succession, meaning it continues
to exist regardless of changes in ownership or management, making it more suitable
for long-term and global business operations4.
1
R Cassim et al Contemporary Company Law 2 ed (2012) 3–4.
2
Companies Act 71 of 2008 s 19(1).
3
J Gibson South African Mercantile and Company Law 8 ed (2015) 41.
4
L Havenga et al General Principles of Commercial Law 10 ed (2019) 296.
