Comparison between PARTNERSHIP and LLP

Category

Partnership

LLP

Prevailing Law

Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under

Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under

Registration

Registration is optional

Registration with Registrar of LLP required.

Creation

Created by Contract

Created by Law

Distinct entity

Not a separate legal entity

Is a separate legal entity under the Limited Liability Partnership Act, 2008.

Name of Entity

Any name as per choice

Name to contain 'Limited Liability Partnership' or 'LLP' as suffix.

Cost of Formation

The Cost of Formation is negligible

The cost of Formation is statutory filling fees, comparatively lesser than the cost of formation of Company.

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

Charter Document

Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners

LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP.

Common Seal

There is no concept of common seal in partnership

It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement

Formalities of Incorporation

In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee

Various eforms are filled with Registrar of LLP with prescribed fees

Time line

It will take 7 days (approx.) to incorporate

It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN)

Legal Proceedings

Only registered partnership can sue third party

A LLP is a legal entity can sue and be sued

Foreign Participation

Foreign Nationals can not form Partnership Firm in India

Foreign Nationals can be a Partner in a LLP.

Number of Members

. Minimum 2 and Maximum 20

Minimum 2 partners and their is no limitation of maximum number of partners.

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

Rights / Duties / obligation of the Partners / Managing Partners / Directors

Rights / Duties / obligation of the partners are governed by Partnership Deed.

Rights / Duties / obligation of the partners are governed by LLP Agreement.

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.

Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.

Tax Liability

Income of Partnership is taxed at a Flat rate of 30% plus education cess as applicable.

Income of LLP is taxed at a Flat rate of 30% plus education cess as applicable.

Principal/Agent Relationship

Partners are agents of the firm and other partners.

Partners act as agents of LLP and not of the other partners.

Transfer / Inheritance of Rights

Not transferable. In case of death the legal heir receives the financial value of share.

Regulations relating to transfer are governed by the LLP Agreement .

Transfer of Share / Partnership rights in case of death

In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners

In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners

Director Identification Number / Designated Partner Identification Number (DIN / DPIN)

The partners are not required to obtain any identification number

Each Designated Partners is required to have a DPIN before being appointed as Designated Partner of LLP.

Digital Signature

There is no requirement of obtaining Digital Signature

As eforms are filled electronically, atleast one Designated Partner should have Digital Signatures.

Dissolution

By agreement, mutual consent, insolvency, certain contingencies, and by court order.

Voluntary or by order of National Company Law Tribunal.

Transferability of Interest

A partner can transfer his interest subject to the Partnership Agreement

A partner can transfer his interest subject to the LLP Agreement

Admission as partner / member

A person can be admitted as a partner as per the partnership Agreement

A person can be admitted as a partner as per the LLP Agreement

Cessation as partner / member

A person can cease to be a partner as per the agreement

A person can cease to be a partner as per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP.

Requirement of Managerial Personnel for day to day administration

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.

Statutory Meetings

There is no provision in regard to holding of any meeting

There is no provision in regard to holding of any meeting.

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

Voting Rights

It depends upon the partnership Agreement

Voting rights shall be as decided as per the terms of LLP Agreement.

Remuneration of Managerial Personnel for day to day administration

The firm can pay remuneration to its partners

Remuneration to partner will depend upon LLP Agreement.

Contracts with Partners/Director

Partners are free to enter into any contract.

Partners are free to enter into any contract.

Maintenance of Statutory Records

Required to maintain books of accounts as Tax laws

Required to maintain books of accounts.

Annual Filing

No return is required to be filed with Registrar of Firms

Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of Companies every year.

Share Certificate

The ownership of the partners in the firm is evidenced by Partnership Deed, if any.

The ownership of the partners in the firm is evidenced by LLP Agreement.

Audit of accounts

Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act

All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008.

Applicability of Accounting Standards.

No Accounting Standards are applicable

The necessary rules in regard to the application of accounting standards are not yet issued.