The main differences between a partnership and a company lie in their definition, legal status, and the liability structure of their owners. A partnership is one form of company, while a company is a broader term that includes all types of business entities in Indonesia.
Definition of Partnership (Firma)
A firma is a form of civil partnership established by two or more individuals to run a business together under one name. According to Article 16 of the Commercial Code (KUHD), a partnership is not a legal entity. This means that all partners are personally liable for the firm’s obligations.
Key characteristics of a partnership:
- At least two partners with equal rights and obligations.
- Unlimited liability: partners’ personal assets may be used to cover the firm’s debts.
- No minimum capital requirement.
- Commonly engaged in professional services, such as law, accounting, or consulting.
Read also: Is a Partnership a Legal Entity in Indonesia?
Definition of Company
A company has a broader definition. According to Law No. 8 of 1997, a company is any business entity that operates continuously with the intention of making a profit. A company can be a legal entity or not.
Types of companies in Indonesia include:
- Limited Liability Company (PT): a legal entity with ownership based on shares.
- Limited Partnership (CV): consists of active and passive partners.
- Sole Proprietorship (UD): owned by an individual, not a legal entity.
- Cooperative: based on the principle of mutual cooperation.
- Partnership (Firma): classified as a company but not a legal entity.
Read also: 5 Differences Between Partnerships and Limited Liability Companies (PT)
Fundamental Differences Between Partnerships and Companies
- Definition: A partnership is one form of company. A company covers a wide range of business types.
- Legal status: A partnership is not a legal entity, while a company can be a legal entity (PT) or not (CV, UD, partnership).
- Liability: Partners in a partnership are personally liable for debts, while PT shareholders have limited liability according to their capital contribution.
- Ownership: A partnership is jointly owned by its partners, while other companies may be share-based or individually owned.
- Legal basis: Partnerships are regulated under the Commercial Code (KUHD), while companies are governed by different laws depending on their type.
In conclusion, a partnership is a subset of a company. All partnerships are companies, but not all companies are partnerships. Companies are broader in scope, while partnerships are more specific as a civil partnership with unlimited liability.
Read also: How to Establish a Partnership in Indonesia
The Importance of Partnership Legality
Since a partnership is not a legal entity, ensuring legality is crucial for running a safe and professional business. Partnership owners must ensure that the deed of establishment, business licenses, and registered business address are properly documented.
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FAQ
Is a partnership considered a company?
Yes. A partnership is one form of company, although it is not a legal entity.
What is the main difference between a partnership and a PT?
A partnership has unlimited liability, while a PT limits liability to the capital contributed by shareholders.
Can a partnership be established with small capital?
Yes. There is no minimum capital requirement to establish a partnership.
Who is suitable to establish a partnership?
Usually, professionals such as lawyers, consultants, or accountants who want to work together under one name.
