Sr. No. | Basis of difference | Partnership | LLP |
1. | Prevailing Law | Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under. It is created by contract. | Limited Liability Partnership is prevailed by The Limited Liability Partnership Act, 2009′ and various Rules made there under. LLP is created by law. |
2. | Distinct Entity | Not a separate legal entity. When one talks of the firm’s property or firm’s assets all that is meant is property in which all partners have a joint or common interest. Even registration of a partnership firm does not mean that it becomes a distinct legal entity. Only registered partnership can sue third party. | Is a separate legal entity under the Limited Liability Partnership Act, 2009. Thus, it can sue and be sued. |
3. | Registration | Registration is optional. | Registration with Registrar of LLP required. |
4. | Name of Entity | Any name as per choice. | Name to contain Limited Liability Partnership’ or ‘LLP’ as suffix. |
5. | Perpetual Succession | It does not have perpetual succession as this depends upon the will of partners. | It has perpetual succession and partners may come and go |
6. | Common Seal | There is no concept of common seal in partnership. | It denotes the signature and LLP may have its own common seal, dependent upon the terms of the Agreement. |
7. | Number of Members | Minimum 2 and Maximum 20. | Minimum 2 partners and there is no limitation of maximum number of partners. |
8. | Ownership of Assets | Partners have joint ownership of all the assets belonging to partnership firm. | The LLP, independent of the partners, has ownership of assets. |
9. | Rights / Duties / obligation
| Rights / Duties / obligation of the partners are governed by Partnership Deed. | Rights / Duties / obligation of the partners are governed by LLP Agreement. |
10. | Liability of Partners/Members | Unlimited. Partners are severally and jointly liable for actions of other partners and the firm and liability extend to their personal assets. The firm is also liable for the wrongful acts or omissions of any partner. | Limited, to the extent their contribution towards LLP. The LLP is not liable for the acts done by the partners outside the scope of their authority and the partners are also not responsible for the wrongful acts of any other partner. Similarly any obligation of the LLP is the sole obligation of it and not of its partners personally. However, there is unlimited liability of partners and LLP in case of intentional fraud. |
11. | Principal/Agent Relationship | Partners are agents of the firm and other partners. | Partners act as agents of LLP and not of the other partners. |
12. | Requirement of Managerial Personnel | No requirement of any managerial personnel; partners themselves administer the business. | ‘Designated Partners’ are responsible for managing the day-to-day business and other statutory compliances. |
13. | Maintenance of Minutes | There is no concept of any minutes. | A LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners. |
14. | Financial Disclosures | The law being silent on partnership firms, it is not mandatory to file disclosures. | Mandatory to file disclosures by Limited Liability Partnership as per the LLP Act itself. |
15. | Compromise / arrangements / merger / amalgamation | Partnership cannot merge with other firm or enter into compromise or arrangement with creditors or partners. | LLPs can enter into compromise / arrangements / merger / amalgamation. |
16. | Taxation | For the purposes of taxation, a partnership firm shall be treated as a separate legal entity. | For the purposes of taxation, the LLPs will be treated as a “firm” as defined in the Partnership Act, 1932. |
17. | Credit Worthiness of Organization | Creditworthiness of firm depends upon goodwill and creditworthiness of its partners. | Will enjoy comparatively higher creditworthiness from Partnership due to stringent regulatory framework but lesser than a Company. |
18. | Whistle Blowing | No such provision is provided under Partnership Act, 1932. | Provision has been made to provide protection to employees and partners, providing useful information during an investigation or convicting any partner or LLP. |
19. | Foreign Participation | Foreign nationals cannot form Partnership Firm in India | Foreign Nationals can be a Partner in a LLP. |
