The Partnerships that are registered under the Partnership Act, 1932 used to be a very popular form of Business Entity in India due to the simplicity of registration and the ease of maintenance. But With the introduction of the Limited Liability Partnership (LLP) in India through the Limited Liability Partnership Act, 2008, the prominence of such kinds of Partnership’s has been replaced by the LLPs. The LLPs are easy to register, they offer a range of benefits to the promoters and it is easy to maintain, making it ideal for many small and the medium sized business that would otherwise opt to start as a Proprietorship or a Private Limited Company. This article will tell us about the difference between partnership and LLP.
First, in the case of a partnership, there is the Unlimited personal liability of each partner for the dues of the partnership firm. Whereas in the case of LLP, the personal property of each of the partners will also be considered. There is no such liability of the partner except in the case of fraud.
Second, written agreement is not essential in traditional partnership but in LLP the Incorporation document essential.
Third, Partnership can be registered under Partnership Act but the Registration is not mandatory. Whereas LLP is incorporated under the LLP Act and under this, Incorporation is mandatory.
Fourth, the partnership is not a legal entity that is separate from its partners whereas an LLP is a legal entity that is separate from its partners, having perpetual succession.
Fifthly, in the case of a partnership, the Property cannot be held in name of partnership firm but Property can be held in the name of LLP.
Sixth, Partnership deed/agreement is executed, Even if the verbal agreement is valid. But, in the case of LLP, ‘Incorporation Document’ is required to be executed. In addition, LLP Agreement is required in almost all cases, though such LLP agreement is not mandatory.
Seventh, the Documents are required to be filed with Registrar of Firms (of respective State) in the case of a partnership . But under LLP, the Registrar of Companies (ROC) is the administrating authority.
Eighth, the Death of the partner dissolves a firm, but under LLP in absence of agreement Death of partner does not dissolve LLP.
Ninth, in a partnership firm Minimum two and maximum twenty partners are required but in case of LLP, there must be Minimum two partners and there is No limit on the maximum number of partners
Last, the Minor can be admitted to benefit of partnership. But in the case of LLP, There is no specific provision to admit the minor to the benefit of the partnership. It is doubtful if this can be done.