DIFFERENCE BETWEEN

MEMBERSHIP AND PARTNERSHIP

Submitted to Prof. Ramachandra Desu

As Part of CIA 1 of Business Law

Submitted by
Rhea Agnes Fernandez
Reg No:1627055
MBA-A
Second Trimester

MEMBERSHIP

A member is a person whose name appears on the Register of Members. For

all practical purposes the words shareholder and member are used
interchangeably because in the normal course a shareholder will also be a
member and a member will also be a shareholder
For example, companies who are limited by guarantee or unlimited
companies having no share capital will have only members and not
shareholders. Contrarily, a holder of a share warrant is a shareholder but not a
member as his name is removed from the register of members immediately
after the issue of such share warrant.

Methods to attain membership:

A person may become a member in a company in any of the following ways:
(1) By allotment:
Ordinarily a person becomes a member of the company by applying for the
shares in writing and securing the allotment thereof directly from the
company.
(2) By subscribing to the memorandum:
Section 41 of the Act provides that the subscribers of the memorandum of a
company shall be deemed to have agreed to become members of the
company, and on its registration shall be entered as members in its register of
members. Thus, the signatories to the memorandum become members of the
company, simply by reason of their having signed the memorandum. Neither
application form nor allotment of shares is necessary for becoming a member
in their case. Even entry in the register of members is not necessary to confer
upon them the rights and liabilities of membership.
(3) By agreeing to purchase qualification shares:
As per the provisions of Section 266(2), all such persons who have signed an
undertaking to take and pay for their qualification shares, for acting as a
director of the company and delivered it to the Registrar, are also in the same
position as subscribers to the memorandum. As such they are also deemed to
have become members automatically on the registration of the company.
(4) By transfer:

A person may also become a member of the company by purchasing shares in

the open market and then getting them registered in his name.
(5) By transmission or succession:
A person may become a shareholder by transmission of shares through death,
lunacy or insolvency of a member. Transmission is different from transfer. It
is an involuntary transfer. It takes place by operation of law, to a person who
is entitled under the law to succeed to the estate of the deceased or lunatic
automatically and does not require an instrument of transfer.
(6) By principle of estoppel:
If a persons name is improperly placed on the register of members and he
knows and assents to it, that is, agrees in writing to become member or
attends company meetings or/and accepts dividend, he shall be deemed to be
a member. Under the principle of estoppel if a person holds himself out being
in a position of membership which is not true, he will then be estopped from
denying that he is a member.

PARTNERSHIP
Partnership is a type of business organization in which two or more
individuals pool money, skills, and other resources, and share profit and loss
in accordance with terms of A the partnership agreement. In absence of such
agreement, a partnership is assumed to exit where the participants in an
enterprise agree to share the associated risks and rewards proportionately.
In a broad sense, a partnership is any cooperative endeavour undertaken by
multiple parties. These parties can be governments, non-profits, businesses,
individuals, or a combination, and the goals of the partnership can vary
widely. There may or may not be a written agreement governing the
partnership, but it is generally a good idea to lay out specific terms at the
outset, so that disagreements can be settled according to predetermined rules.
In some cases such an agreement is legally required.
Within the more narrow sense of a for-profit venture undertaken by two or
more individuals, there are three main categories of partnership. In a general
partnership (GP), all parties share the legal and financial liability of the
partnership equally. In other words, the individuals are personally responsible
for the debts the partnership takes on. Profits are also shared equally, in
principle, but the specifics of profit sharing will almost certainly be laid out
in a partnership agreement.

Types of Partners in a Partnership

Depending on the type of partnership and the levels of partnership hierarchy,
a partnership can have several different types of partners. This article
on different types of partners explains the difference between:

 General partners and limited partners. General partners participate

in managing the partnership and have liability for partnership debts.
Limited partners invest but do not participate in management.
Equity partners and salaried partners. Some partners may be paid
as employees, while others have only a share in ownership.
The different levels of partners in the partnership. For example, there
may be junior and senior partners.

Before you start a partnership, you will need to decide what type of
partnership you want. You may have heard the terms:
A general partnership is composed of partners who participate in the
day-to-day operations of the partnership are who have liability as
owners for debts and lawsuits. There may also be limited partners
A limited partnership has one general partner who manages the
business and one or more limited partners who don't participate in the
operations of the partnership and who don't have liability.
A limited liability partnership is similar to the limited partnership,
but it may have several general partners.
Forming a Partnership
Partnerships are usually registered with the state in which they do business,
but the requirement to register varies from state to state. Partnerships use a
partnership agreement to clarify the relationship between the partners, roles
and responsibilities of the partners, and their respective shares in the profits
or losses of the partnership.

It is relatively easy to form a partnership, but, as noted above, the business

must be registered with the state where the partners do business. Depending
on the state, you may have the choice of one or more of the types of
partnerships mentioned above. Once you have registered with your state, you
can then proceed to the other typical tasks in starting a business.