The partnership firm was a very popular form of business entity owing to the simplicity of formation and ease of management and termination. But now LLP over Partnership is preferred as a business entity. LLP Registration is optional and the cost of formation is almost nil. It is registered under the Indian Partnership Act,1932 by filing a partnership deed with a form/affidavit along with compiled fees to the registrar of firms.

Advantages of LLP over Partnership

The hybrid structure of the company and partnership form has promoted LLP over partnership due to the flexibility of running a business without being bound by legal norms. Start-ups made it the most desirable form of organization for small to medium-scale businesses. LLPs are free to make their own rules of management, unlike companies.

1. Body Corporate: LLP, over a partnership that has no legal status, has a character of being a separate legal entity and can sue and be sued. It bears a seal on its name and the members are considered distinct from the organization. It can also dispose of and hold property in its own name.

2.Liability: The unlimited liability of a partner has been a noticeable predicament that has been overcome by LLP over a partnership. LLP is a distinct identity from its members thus liability lies on the firm and not on its owners. No partner shall be asked to pay from his personal assets after he has paid an amount to the extent of his share in the capital.

3.Freedom of management: The LLP agreement is not largely influenced by the Limited Liability Partnership Act,2008. The act gives the partners the flexibility to choose the way to manage their affairs and regulate their functions.

4.No Audit requirements: LLPs have to comply with audit requirements only when the capital contribution exceeds Rs.25 lakhs and the annual turnover exceeds Rs.40 lakhs. This is a factor of relief for small businessmen.

The difference between LLP over Partnership

Basis Partnership Limited Liability Partnership
Liability Unlimited Personal Liability No personal liability except in the case of fraud
Written Agreement Not Required Incorporation document is essential
Registration Registration under Partnership Act is not mandatory Incorporation under LLP Act is mandatory.
Legal entity No separate legal entity. The separate legal entity from its partners.
Property Property cannot be held in name of Partnership. Property can be held in the name of Partnership.
Verbal agreement A verbal agreement is valid for execution. Incorporation Document is required for execution.
Administrating Authority Registrar of Firms (of respective State) >Registrar of Companies (ROC)
Death of Partner The death of a partner dissolves the firm. The death of a partner does not dissolve the firm
Partners Required Minimum: 2

Maximum: 20

Minimum: 2

Maximum: no limit

Admission of minor Can be done with the permission of other partners No specific provision


There are many advantages of LLP over Partnership. One has to select an appropriate business configuration according to one’s needs.

Also, read the related post: The closing of an LLP

For more info, visit company registration online.