Partnership and Limited Liability Partnership are two different types of business structure with similar properties. Understanding the difference and beneficial points to structure your business is important to start a new business or change the form of an existing business. Understand the key difference between a Partnership firm and Limited Liability of Partnership firm from the below table.
|
Comparision |
Partnership Firm |
Limited Liability Partnership |
|---|---|---|
|
Meaning |
One or more person entered into agreement to carry on a business is collectively known as Partnership firm. |
LLP is a corporate business form that gives flexibility of partnership and limited liability benefits of a company. |
|
Governed by |
Indian Partnership Act, 1932 |
Limited Liability Partnership Act, 2008 |
|
Registration |
Optional. |
Mandatory. |
|
Registration Authority |
The firm must submit the partnership firm registration form and other subsequent forms with the Registrar of Firms. |
An LLP should submit the registration form and all the subsequent e-forms with the Registrar of Companies. |
|
Legal Status |
No separate legal entity. |
It has a separate legal status. |
|
Document |
Partnership deed created by contract. |
LLP Agreement created by law and ROC registration certificate. |
|
Number of Partners |
Min- 2 Max- 20 |
Min- 2 Max- No limit |
|
Designated Partner |
Not required. |
Minimum 2. |
|
In case of death/resignation of Partner |
End of Partnership firm. |
Since it is has a separate legal status, does not affect continuation of organization. |
|
Partners Liability |
Unlimited |
Limited |
|
Audit applicability |
As per Income tax Act (Turnover Exceeds Rs.10 crores). |
If turnover exceeds Rs.40 lakhs or contribution exceeds Rs.25 lakhs. |
|
Legal Proceeding |
Only registered partnership firm can sue any partner or 3rd party. |
Can sue or be sued as it is a legal entity. |
|
Name |
Use any name. |
Name will be registered with ROC and use ‘LLP’ as suffix. |
|
Power to own Property |
Property should be in name of all partners or authorised partner as per agreement. |
LLP can hold property in its name. |
|
Common Seal |
There is no concept of a common seal, only authorised partner must sign the documents. |
Common seal denotes the signature of an LLP, it is used to sign documents. |
|
Annual filing with ROC |
Not applicable. |
To be filed every year with Registrar. |
An LLP and a partnership firm are similar forms of entities but differ in their functioning, administration, legal status etc., They are governed by different Acts and Rules. Knowing their differences will help an entrepreneur select the right form of partnership structure as per specific needs and circumstances for his/her business.