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What are the differences between a Limited Liability Partnership and a Partnership Firm

 What are the differences between a Limited Liability Partnership and a Partnership Firm?

DifferenceLLPPARTNERSHIPANDPARTNERSHIP

Law

Limited Liability Partnership is prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made thereunder

The partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made thereunder

Registration

LLP

 Registered under the LLP Act, 2008. The registration is done under the Ministry of Corporate Affairs.

Partnership

Registered under the Partnership Act, 1932. The registration is done with the Registrar of Firms.

Liability

LLP

The liability of partners is limited in an LLP mainly because it’s a separate legal entity. The liability of the partners is limited to the amount invested by them in the company.

Partnership

Partners are personally liable for the unlimited amount of liabilities of the company in a partnership firm.

Number of partners

LLP

A minimum of two partners is required. However, a minor cannot be a partner in an LLP

Partnership

A minimum of two and a maximum of twenty partners are required for a partnership firm. A partnership firm can have a minor as its partner.

SPIN

LLP

Each partner is required to obtain a DPIN (Designated Partner Identification Number) before being assigned as a designated partner in an LLP

Partnership

DPIN is not required for a partnership firm

Transferability

LLP

Shares can be easily transferred to another person after obtaining the consent of all the partners. However, a transferee cannot become a member automatically.

Partnership

Shares can be easily transferred to another person after the consent of all the partners of the partnership firm. Transferability of partnership is a long process.

Conversion

LLP

An LLP can be converted to a Private Limited Company. But, it cannot be converted back into a partnership firm.

Partnership

Conversion of a partnership firm to an LLP or a private limited company is a cumbersome process.

Compliance

LLP

Filing of annual returns to the Ministry of Corporate Affairs is mandatory.

Partnership

Annual return filing is not required.

Dissolution

LLP

Voluntary or by order of National Company Law Tribunal.

Partnership

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

Conclusion

Under the partnership firm, every partner owns a share of the business. This type of structure is less expensive and customizable too. On the other hand, an LLP has the advantages of an LLP and a partnership. The partners in an LLP enjoy limited liability.

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