What is CO-Ownership? Generally, the liability of the firm is unlimited but it is clearly stated whether there is any partner whose liability will be limited up to a certain amount. When two or more persons own the same property then they are known as Co-owners and such relationship is said to be a co-ownership. This co-ownership may exist through an agreement or by status. When two or more persons agree to contribute money to have a property with their joint names then it will be a creation of co-ownership by agreement. But when the property is acquired by two or more persons, by the operation of law then it will be the creation of co-ownership status.
When after the death of a father, the sons own the property (Land) of his late father then it will be a creation of co-ownership and sons will be individually known as Co-owners.
DIFFERENCE BETWEEN CO-OWNERSHIP & PARTNERSHIP
The following are the main points of difference between co-ownership and partnership.
- BY MEANING
when two or more persons own the same property then it is known as Co-ownership. But the partnership is the relationship between persons who have agreed to share the profit of a business carried by all at any of them acting for all.
An agreement is not necessary for the creation of coownership, but a partnership cannot be created without an agreement between the partners either it is expressed or implied.
- MAIN PURPOSE
The main purpose of Coownership ‘is not necessary to run the business. But the partnership is always created to carry on a business.
- MUTUAL AGENCY
A co-owner is not an agent of the co-ownership, so coownership is not liable for the acts of its Co-owners. But in case of a partnership, each partner is an agent of the partnership and partnership is liable for the acts of its partners.
- TRANSFER OF RIGHT
A Co-owner can transfer his rights at any time to the third party without the consent of other co-owner but a partner cannot transfer his share to the third party without the permission of all the other partners.
- PROFIT MOTIVE
As the main objective of the partnership is to earn a profit, so profit sharing ratio is determined in a partnership agreement. But in case of Co-ownership, there is no need of profit sharing ratio as its sole motive is not to earn a profit.
- LIEN ON PROPERTY
A Co-owner has no lien on the property of the Coownership, as he is not the agent of the Coownership. But partners have right of lien on the property of the partnership as he is the agent of the partnership.
- PARTITION OF SHARE
A Co-owner can demand his share at any time from the Co-owned property. But in case of a partnership, a partner can get his share only after the dissolution of the partnership firm.
- NUMBER OF MEMBERS
In case of Co-ownership, there is no limit on a number of Co-owners. In case of a partnership, the maximum limit of partners is twenty and it cannot exceed from two in case the of banking business.
- POSITION OF MINOR
Co-ownership, a minor can be a regular Co-owner. But in case a partnership, a minor cannot be a regular partner. He can only be admitted into the benefits with the mutual consent of all the other partners.
- LIFE OF CONCERN
Co-ownership may have a longer life than a partnership. For example a common house of two brothers.
- NATURE OF RELATIONSHIP
Partnership creates legal relationship among the partners as there is an agreement among the partners. But Co-ownership creates no legal relationship as there is no agreement among the Co-owners.