, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
QUESTION 1
1.1 THE DIFFERENCE BETWEEN A PARTNERSHIP AND A COMPANY
Ben must understand that although both a partnership and a company are business vehicles, they differ
fundamentally in legal status, liability, formation, regulation, and continuity.
LEGAL PERSONALITY
The most significant difference between a partnership and a company is legal personality. A partnership
does not have a separate legal personality from its partners (except in limited statutory contexts). It is merely
a contractual relationship between two or more persons who agree to carry on business for profit.1 The assets
of the partnership are jointly owned by the partners.
By contrast, a company is a separate juristic person distinct from its shareholders.2 This principle was firmly
established in Salomon v A Salomon & Co Ltd,3 where the court confirmed that once incorporated, a
company has its own legal identity. This means the company can own property, sue, and be sued in its own
name.
LIABILITY
In a partnership, partners are jointly and severally liable for the debts of the partnership.4 This means
creditors may sue one partner for the full amount of the debt.
In contrast, shareholders in a company enjoy limited liability.5 Their liability is limited to the amount unpaid
on their shares. The company itself bears responsibility for its debts.
1
Pezzutto v Dreyer 1992 (3) SA 379 (A).
2
Companies Act 71 of 2008 s 19(1).
3
Salomon v A Salomon & Co Ltd [1897] AC 22 (HL).
4
Bester v Van Niekerk 1960 (2) SA 779 (A).
5
Companies Act 71 of 2008 s 19(2)(b).
QUESTION 1
1.1 THE DIFFERENCE BETWEEN A PARTNERSHIP AND A COMPANY
Ben must understand that although both a partnership and a company are business vehicles, they differ
fundamentally in legal status, liability, formation, regulation, and continuity.
LEGAL PERSONALITY
The most significant difference between a partnership and a company is legal personality. A partnership
does not have a separate legal personality from its partners (except in limited statutory contexts). It is merely
a contractual relationship between two or more persons who agree to carry on business for profit.1 The assets
of the partnership are jointly owned by the partners.
By contrast, a company is a separate juristic person distinct from its shareholders.2 This principle was firmly
established in Salomon v A Salomon & Co Ltd,3 where the court confirmed that once incorporated, a
company has its own legal identity. This means the company can own property, sue, and be sued in its own
name.
LIABILITY
In a partnership, partners are jointly and severally liable for the debts of the partnership.4 This means
creditors may sue one partner for the full amount of the debt.
In contrast, shareholders in a company enjoy limited liability.5 Their liability is limited to the amount unpaid
on their shares. The company itself bears responsibility for its debts.
1
Pezzutto v Dreyer 1992 (3) SA 379 (A).
2
Companies Act 71 of 2008 s 19(1).
3
Salomon v A Salomon & Co Ltd [1897] AC 22 (HL).
4
Bester v Van Niekerk 1960 (2) SA 779 (A).
5
Companies Act 71 of 2008 s 19(2)(b).
