What is the difference between a company and a firm. I intend to establish one of them. How do I go about it.?

Question

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Answer 1

In legal parlance, and with specific reference to India, a company is an entity incorporated / registered under the Companies Act, 1956. It could be a public limited company, a private limited company, Sec. 25 company, company limited by guarantee, .....
Whereas a firm may or may not be a registered entity and could be proprietary, a partnership, an AoP etc.

Your intending to establish one depends on many significant points, namely your proposed business, its model, scale, liability conditions etc. If you yourself don't know adequately on these aspects, it would be advisable to consult a business professional for suitable guidance and compliances.

Answer 2

A Company is a Company registered under the provisions of the Companies Act 1956 by making application with Registrar of Companies together with the relevent documents. Depending upon the no of members it may be a private limited company or a public limited company. The main advantage of the company is its limited liability. i.e. the member is liable only up to the face value of the share.

Whereas the firm may be a sole proprietor or a partnership. Under sole trader proprietorship the person forming is having unlimited liability. ie. his assets are also liable for repaying liabilities of the firm. Under partnership it is a business formed by more than one person and the liability here also unlimited. The profits/losses are shared in an agreed ratio predetermined by the Partnership Deed. Sole proprietorship does not require any registration whereas the Partnership may or may not be registered.

Answer 3

I simple terms a company envisages limited liability to the extent of shareholding for the stakeholders whereas a firm encompasses individual as well as joint liability even beyond individual commitments.