Department of Management Sciences, National University of Modern

Languages

Assignment
Submitted by:
Shahraz Mushadi
Roll NO: 31466
Subject: Business Law
Submitted to: Sir Bilal
Class: MBA (3.5)4th Evening
Date: 15-04-2020
Content
 Define and differentiate between Company and Partnership.
 Define contract, discuss the types of contract according to
parties.
Define and differentiate between Company and Partnership.
Company
A company is a legal entity formed by a group of individuals to engage in and
operate a business—commercial or industrial—enterprise. A company may be
organized in various ways for tax and financial liability purposes depending on the
corporate law of its jurisdiction.
The line of business the company is in will generally determine which business
structure it chooses such as a partnership, proprietorship, or corporation. These
structures also denote the ownership structure of the company.
They can also be distinguished between private and public companies. Both have
different ownership structures, regulations, and financial reporting requirements.
KEY TAKEAWAYS
 A company is a legal entity formed by a group of individuals to engage in
and operate a business enterprise in a commercial or industrial capacity.
 A company's business line depends on its structure, which can range from a
partnership to a proprietorship, or even a corporation.
 Companies may be either public or private; the former issues equity to
shareholders on an exchange, while the latter is privately-owned and not
regulated.
 A company is generally organized to earn a profit from business activities.
Types of companies
The most common types of companies are:
1. Royal Chartered Companies
2. Statutory Companies
3. Registered or Incorporated Companies
4. Companies Limited by Shares
5. Companies Limited by Guarantee
6. Unlimited Companies
7. Public Company (or Public Limited Company)
8. Private Company (or Private Limited Company)
9. One Person company
 1. Royal Chartered Companies
Royal Chartered Companies are companies created by the Royal Charter. This
means they are granted power or a right by the monarch or by special order of a
king or a queen. Examples of Royal Chartered Companies are East India Company,
BBC, Bank of England, etc.
2. Statutory Companies
Statutory Companies are companies incorporated by means of a special act
passed by the central or state legislature. They are mostly invested with
compulsory powers and are responsible to carry out some special business of
national importance. Some examples of statutory companies are The Reserve
Bank of India (formed under RBI act, 1934), Life Insurance Corporation of India
(formed under LIC Act, 1956).
3. Registered or Incorporated Companies
All the other companies which are incorporated under the company act passed by
the government comes under this head. These companies come under existence
only after they register themselves under the act and the certificate of
incorporation is passed by the Registrar of companies. Google India Pvt. Ltd is an
example of incorporated companies.
4. Public Limited Company
The legal existence of a Public Limited Company is separate from its members
(shareholders) and the liability of its members is also limited. Its existence is thus
not affected by the retirement or death of its shareholders. A minimum of 7
members is needed to form a Public Limited company but there is no maximum
limit on this. The company collects its capital by the sale of its shares to the
shareholders. The shareholders of a company do not have the right to participate
in the day-to-day management of the company, thus separating ownership from
management. All the major decisions of the company are taken by the Board of
Directors.
5. Private Limited Company
Private Limited (Pvt. Ltd) companies have more than 2 and less than 50 members
and their liability is limited or unlimited depending on the type of the company it
is. Unlike Public Limited companies, here the transfer of shares is limited to its
members and the general public cannot subscribe to its shares and debentures.
Pvt. Ltd companies are exempted from many rules and regulations which are
applicable to Public Limited companies, for example, the need to file a prospectus
with the Registrar, the need to hold the statutory general meeting or maintain
annual reports etc. Also, it can start operations after receiving just the certificate
of incorporation, whereas a Public Limited company needs a certificate of
commencement as well. It is a great option if you want the advantages of limited
liability and yet want greater control over your business and maintain its privacy.
This is the most popular type of company for start-ups to be registered as.
6. One Person Company
One Person Company (OPC) as a company type was introduced in the Companies
Act of 2013 in India. It is similar to a sole proprietorship but the owner shall have
limited liability and thus his personal assets would not be at risk if losses need to
be recovered or if the company is liquidated.
7. Companies Limited by Shares
The liability of the shareholders is limited to the extent of the face value of shares
held by them. Most Pvt. Ltd companies are of this type.
8. Companies Limited by Guarantee
In these companies, in case of liquidation, the shareholders promise to pay a
certain fixed amount to cover the liabilities of the company.
9. Unlimited Companies
There is no limit on the liability of the shareholders. In case of liquidation, they
might have to pay even from their personal assets to cover the liabilities of the
company. This type of company is quite uncommon today due to obvious reasons.

Partnership
It is legal form of business in which two or more people share ownership, as well
as the responsibility for managing the company and the income or losses the
business generates. That income is paid to partners, who then claim it on their
personal tax returns – the business is not taxed
A partnership is also an arrangement where parties, known as business partners,
agree to cooperate to advance their mutual interests. The partners in a
partnership may be individuals, businesses, interest-based organizations, schools,
governments or combinations. Organizations may partner to increase the
likelihood of each achieving their mission and to amplify their reach. A partnership
may result in issuing and holding equity or may be only governed by a contract.
KEY TAKEAWAYS
 A partnership is an arrangement between two or more people to oversee
business operations and share its profits and liabilities.
 In a general partnership company, all members share both profits and
liabilities.
 Professionals like doctors and lawyers often form a limited partnership.
 There may be tax benefits to a partnership compared to a corporation.
Separately, as corporations are, on its profits or losses.
Types of Partnership
There are three types of partnerships:
1. General partnership
2. Limited partnership

1. General Partnership
In a general partnership, each partner shares equally in the workload, liability,
and profits generated and paid out to the partners. All partners are actively
involved in the business’s operations.
General partnership profile
1. Legal form: Partnership
2. Legal basis: Uniform Partnership Act 1914 and Revised Uniform Partnership
Act
3. Shareholders: At least two persons (natural or legal)
4. Management: Freedom of individual action and obligation to be a self-
governing body; in addition, management can be freely structured, e.g.
with procuration
5. Representation: By non-partners, authorized signatories in particular are
possible
6. Articles of association: No legal structural obligations; does not require
written form (although highly recommended)
7. Company (company name): Personal names, fictional names and subject
names are all allowed. If the name is not the same as the company’s legal
name, your state may require to file the company name under “Doing
Business as” (DBA).
8. Location: USA, worldwide
9. Accounting obligations: Inventory and balance sheet
10.Share capital required: No
11.Legal entity: Yes
12.Legal capacity: Yes
13.Liability: Partners are entirely liable with both business and private assets
14.Tax liability: Flow through entity (shareholders are taxed through their
income tax rather than business as a whole)
 Advantages and Disadvantages of General Partnership

2. Limited Partnership
Limited partnerships allow outside investors to buy into a business but maintain
limited liability and involvement, based on their contributions. This is a more
complicated form of partnership, which also has more flexibility in terms of
ownership and decision-making.
Partners in a Limited Partnership
There is one general partner, who is responsible for the day-to-day management
of the partnership. The general partner may be an individual person or an entity,
like a corporation. Yes, a corporation can be an owner of a partnership.
The LP also has one or more limited partners. These individuals are sometimes
called "silent partners," because they don't have to do anything except investing
in the business to get a share of the profits.
Limited Partnerships and Liability
The general partner is also fully liable for the debts and liabilities of the
partnership because the general partner has responsibilities and control and
makes decisions that affect the partnership. This liability is for debts and also for
lawsuits.
Limited partners have invested money in the partnership, but they don't
participate in the management of the business. They are considered passive
owners. Their liability is limited to their investment in the partnership, like owners
(members) in a limited liability company (LLC).
Advantages and Disadvantages of Limited Partnership
 Differentiate Between Company and Partnership
The special features of a joint stock company can be well understood if we
compare the features of a company form of organization with that of a
partnership firm. The important points of distinction between the company and
partnership are given below:

1. Definition
Any voluntary association of persons registered as a company and formed for the
purpose of any common object is called a company.
A partnership is the relation between two or more individuals who have agreed to
share the profits of a business carried on by all or any of them acting for all. The
partners are collectively called as a firm.
2. Law
A company is regulated and controlled by the Companies Act.
A partnership firm is regulated by the Partnership Act, 1932.
3. Registration
A company should be compulsorily registered under the Companies Act. Its
formation is very difficult.
Registration of a partnership firm is not compulsory under the Partnership Act.
The firm is based on the partnership deed. Its formation is very easy.
4. Legal Position
A company is a body corporate and a legal person having a corporate personality
distinct from its members. The members are not liable for the acts of the
company.
A partnership has no legal existence distinct from its members. Partners are liable
for the acts of the firm.
5. Life Time
A company is a mere abstraction of law. So its existence is not affected by the
change of membership or death or insolvency of its members.
A partnership is a mere aggregation of individuals. So the life of a partnership
ends on the death or insolvency or insanity of any one partner.
6. Liability
The maximum liability of the shareholders, in case of a limited company, is limited
to the face value of the shares purchased by them. In case of companies limited by
guarantee, the liability of the shareholders will be up to the amount guaranteed
by them.
In case of a partnership, the liability of the partners is unlimited. The partners are
jointly and severally liable for all the debts of the partnership firm.
7. Transferability of Shares
Shares of a company are freely transferable unless restricted by the Articles.
In partnership a partner cannot transfer his share without the consent of all other
partners.
8. Contract
A member of a company can enter into a contract with the same company.
In partnership a partner of a firm cannot enter into contract with the same
partnership firm.
9. Number of Members
A private company should have a minimum of 2 members and can have a
maximum of 50 members. A public company should have a minimum of 7
members and there is no maximum limit.
A partnership should have a minimum of 2 and can have a maximum of 20
persons [10 in the case of banking business].
10. Audit
The accounts of a company should be audited by a qualified auditor. But in the
case of a partnership, the accounts need not be audited. Even though the partners
decide to arrange for the audit of their firm, the auditor need not be a qualified
person. The powers, duties and liabilities of an auditor of a company are regulated
by the Companies Act.
But in the case of a partnership audit, the duties are governed by the provisions of
the contract entered into by the partners with the auditor.
11. Implied Agency
In case of a company, a shareholder is not regarded as its agent in dealing with
third parties.
In case of a partnership, a partner is an agent of the firm and of all other partners
in dealing with third parties.
12. Good Faith
Since they are more in number, most of the shareholders of the company may not
know each other. We cannot expect that all the shareholders are just and honest
to one another.
But in the case of a partnership, the partners know each other thoroughly. The
partnership agreement is based on utmost good faith. So the partners are to be
just and honest to one another.
13. Management
The management of a company is in the hands of a group of elected
representatives of the shareholders. Even this group finds it difficult to administer
the day-to-day affairs of the company. It is carried on mostly by salaried people.
Such people cannot be expected to take active part in the management as the
owners.
But in the case of a partnership, the management is in the hands of the partners
themselves. They work in absolute sincerity. They can give personal attention to
the customers and thus strengthen the customer-firm relationship.
14. Decision-Making
In case of companies, taking decisions on important issues requires a fairly long
time.
But in case of a partnership firm, quick decisions are possible.
15. Issue of Debentures
Joint stock company is the only business organization which is authorized to
borrow money through the issue of debentures.
A partnership firm cannot issue debentures.
16. Restrictions
The outsiders who deal with a company should be aware of the provisions of its
Articles of Association. This is because, the restriction on directors affect the
outsiders.
But in case of a partnership, restriction on any partner does not affect the
outsiders. So they need not be aware of the provisions of the partnership deed.
17. Secrecy
The companies have to file their documents, returns, reports, balance sheet, profit
and loss account etc. with the Registrar. Some of them are open to public. So,
there is no secrecy at all in case of companies.
But in case of a partnership, the firm need not prepare and file such documents.
So its secrets are not leaked out. Outsiders cannot know the ins and outs of the
firm.
18. Capital Formation
Even people with limited resources can become the shareholders of a big
company. This tempts them to save something out of their income for future. This
is a green signal for capital formation in the country. Such a capital formation is
not possible in the case of a partnership.
19. Dissolution
A company, being a creature of law, can only be dissolved as laid down by law.
A partnership firm, on the other hand, is the result of an agreement and can be
dissolved at any time by agreement.
Define Contract, discuss the types of contract according to parties.
Law of Contract
The law relating to contracts in Pakistan is contained Act, 1872. It extends
to the whole of Pakistan and came into force on the 1st day of September, 1872. It
deals with:
1. General Principles governing all types of contracts (Sec. 1-75).
2. Contracts of indemnity, Guarantee, Bailment, Pledge and Agency (Sec. 124-
238).
Initially sections 76-123 and sections 239-266 relating to sale of goods and
partnership were contained in the Contract Act but were subsequently repeated
and a separate Sale of Goods Act, 1930 and a Partnership Act, 1932 came into
force.
Contract
Pollack: “Every agreement and promise enforceable at law is a contract.”
Salmond: “A contract is an agreement creating and defining obligations between
the parties.”
Sir William Anson: “An agreement enforceable by law made between two or more
persons, by which rights are acquired by one or more to acts or forbearance on
the part of other or others.”
Sec. 2(h) of Contract Act provides “An agreement enforceable by law is a
contract.”
Thus a contract consists two elements:
a) Agreement
b) Enforceability by law
 a) Agreement
Section 2(e) defines agreement as, “Every promise and every set of promises,
forming the consideration for each other, is an agreement.”
Section 2(b) defines promise as, “When the person to whom proposal is made
signifies his assent thereto, the proposal is said to be accepted. A proposal, when
accepted, becomes a promise.”
A promise comes into existence when one party makes a proposal to the other
party and that other party gives consent. Therefore, a contract is an agreement,
an agreement is a promise and a promise is an accepted proposal.
Example:
An offers to sell his car to B for Rs.800000. B gives acceptance. It is an agreement.
b) Enforceability
An agreement is enforceable by law if it is recognized by the court. In order to be
enforceable by law, the agreement must create legal obligations between the
parties. Thus, the term agreement is wider than a contract. All contracts are
agreements but all agreements are not contracts.
Agreements are of two types:
i. Social Agreements
Social agreements are not enforceable by law because they do not create legal
obligations between the parties. In social agreements, the parties do not intend to
create legal relations.
ii. Legal Agreements
Legal agreements are enforceable by law because they create legal obligations
between the parties. In legal agreements, the parties intend to create legal
relations. All business agreements are contracts as there is an intention to create
legal obligations.
Examples
a. An invites B to a dinner. B accepts the invitation but does not attend. A cannot
sue B for damages. It is a social agreement.
b. A promise to sell his car to B for Rs.200000. It is a legal agreement because it
creates legal obligations. This agreement is a contract.
Types of contracts according to parties
According to parties a contract may be of the following two kinds:
a. Unilateral contract
b. Bilateral contract

a. Unilateral contract
In a unilateral contract only one party makes a commitment. In other words, it is a
contract where only one party is bound but the other party chooses to be bound
by it.
Example
A promise to pay Rs.1000 to anyone who finds his lost bag. B finds the bag and
returns it to A. It is a unilateral contract which comes into existence when the bag
is found.

b. Bilateral contract
It is a contract where both parties are bound by it, as soon as the contract is
made. In other words, it is a contract in which both the parties have yet to
perform their obligations.
Example
A promises to paint a picture for B and B promises to pay Rs.5000 to A.
Difference Between Unilateral and bilateral contract