, QUESTION 1
A partnership and a company differ mainly in their legal status, method of formation, and liability.
A partnership is created through a contract between two or more people who agree to run a
business together for profit. It does not have a separate legal personality from its partners, which
means the rights and obligations of the partnership are essentially those of the partners
themselves. As a result, partners are jointly and severally liable for the debts of the partnership
(Delport 2014, p. 299).
A company, on the other hand, becomes a separate juristic person once it is incorporated in terms
of the Companies Act. This means it exists independently from its shareholders and directors, and it
can own property, incur debts, and sue or be sued in its own name (Delport 2014, p. 12). Because
of this separate legal personality, shareholders in most companies enjoy limited liability and are
usually only liable up to the amount they have invested, unlike partners who may be personally
liable for all partnership debts (Delport 2014, p. 14).
In addition, a partnership is formed by agreement and does not require formal registration, while a
company only comes into existence once it is registered with the Companies and Intellectual
Property Commission. This makes companies more suitable for businesses that require continuity,
limited liability, and the ability to operate on a broader or global scale (Delport 2014, pp. 12–15).
A partnership and a company differ mainly in their legal status, method of formation, and liability.
A partnership is created through a contract between two or more people who agree to run a
business together for profit. It does not have a separate legal personality from its partners, which
means the rights and obligations of the partnership are essentially those of the partners
themselves. As a result, partners are jointly and severally liable for the debts of the partnership
(Delport 2014, p. 299).
A company, on the other hand, becomes a separate juristic person once it is incorporated in terms
of the Companies Act. This means it exists independently from its shareholders and directors, and it
can own property, incur debts, and sue or be sued in its own name (Delport 2014, p. 12). Because
of this separate legal personality, shareholders in most companies enjoy limited liability and are
usually only liable up to the amount they have invested, unlike partners who may be personally
liable for all partnership debts (Delport 2014, p. 14).
In addition, a partnership is formed by agreement and does not require formal registration, while a
company only comes into existence once it is registered with the Companies and Intellectual
Property Commission. This makes companies more suitable for businesses that require continuity,
limited liability, and the ability to operate on a broader or global scale (Delport 2014, pp. 12–15).
