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. |