Define LLP and Partnership difference
Difference between LLP and Partnership Company
Under the Partnership Firm, each of the partners brings in his own capital and carries an unlimited liability, jointly or solely.
While LLP as the name itself suggests Limited Liability Partnership has the limited liability of the Partners.
The below table illustrates more differences between an LLP and a Partnership
Particulars | Partnership Firm | Limited Liability Partnership |
Meaning | A Partnership Firm is an association of two or more persons who have agreed to share the profits of the business, carried on by all or any one of them acting for all. | A Limited Liability Partnership is a partnership in which some or all partners have limited Liabilities |
Applicable Law | Indian Partnership Act, 1932 | The Limited Liability Partnership Act, 2008 |
Creation | Created by a contract | Created by law |
Registration | Optional | Compulsory |
Registered to | Partnership registration is done with the Registrar of firms. | LLP registration is done with the Ministry of Corporate Affairs. |
Perpetual Succession | It has no perpetual succession as this depends upon the will of its partners | It has perpetual succession the partners can come and go as per their will. |
Entity | Not a separate legal entity | Separate legal entity |
Liability | Personally liable for an unlimited amount of liabilities of the partnership. | The liability of the partners is limited to the liability of the amount invested or capital bought. |
Numbers of partners | Minimum of 2 and maximum of 50. | Minimum of 2 and maximum unlimited. |
Minority | A minor can be the partner | A minor cannot be a partner |
Charter Document | Partnership Deed | LLP Agreement |
Contractual Agreement | It cannot enter into a contract in its name. | It can sue and be sued in its name. |
Name of the firm | Any name | The name must include LLP as the suffix |
Agreement between the partners | A partnership Deed denotes the operational rights and duties of the partners. | LLP Agreement is a charter of the LLP that denotes its scope of operation and the rights and duties of the partners under the LLP |
Common Seal | There is no common seal in the Partnership Firm | It has its own common seal, and signature that depends on the terms and conditions in the LLP Agreement |
Legal Proceedings | Only the partners of the firm can sue | It is a legal entity that can sue and be sued |
Audit of accounts | Not mandatory | Mandatory, when the turnover and the paid-up capital exceed 40 lakhs and 25 lakhs. |
Compliance | It is not compulsory to file the annual return | Compulsory to file the annual returns of the Ministry of Corporate Affairs. |
Relationship | Partners are the agents of the firm and other partners | Partners are the agents of LLP only and not for other partners. |
Ownership of Assets | Partners have joint ownership, of all the assets belonging to the partnership firm. | The LLP is independent of the partners of the ownership of assets. |
Tax liability | The income of the partnership is taxed at 30% + education cess. | The income of the LLP is taxed at 30% + education cess. |
Director Identification Number | The partners need not obtain any DIN (Director Identification Number) | Each partner has to get DPIN before being a registered partner. |
Transferability Shares
Inheritance of Rights
In the death of a partner | Shares of the Partnership firm can easily be transferred to another person by obtaining consent from all the partners. Not transferable. The legal heirs receive the Transfer of shares and accumulated profit if the legal heirs do not become a partner | Shares of the LLP can easily be transferred to another person after obtaining consent from all other partners of the LLP. Regulations are governed by the terms of the LLP Agreement The legal heirs cannot become a partner but can receive transfers of shares and profits. |
Admission of a partner | A partner can be admitted with the consent of all partners as per the partnership agreement | A partner can be admitted with the consent of other partners as per the LLP agreement. |
Dissolution | By agreement, mutual consent, insolvency, or fraudulent acts, or by court order | Voluntary or by order of the National company law tribunal |
Voting Rights | It depends upon the number of partners and the norms and conditions of the deed | Shall be decided as per the needs of the terms of the agreement |
Body corporate | Body corporate cannot become a partner | The body corporate can become its partner. |
