Difference Between LLP and Partnership with Comparison Chart
Difference Between LLP and Partnership with Comparison Chart. Know the full Difference Between Partnership and Limited Liability Partnership (LLP). There are a lot of differences between Partnership Firm and LLP, So here below we provide complete difference chart or difference table..If you are planning for new business or want to expand the existing business? You have to take an important decision here, regarding the selection of the type of business organisation like – Sole proprietorship, partnership, LLP, cooperative society, joint stock company are some common forms..so here we provide Difference Between LLP and Partnership……
Definition of LLP
Limited Liability Partnership (LLP): Limited Liability Partnership (LLP) is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008 (‘The Act’) with limited liability and perpetual succession. The Act came into force, for most part, on 31st March, 2009 followed by its Rules on 1st April, 2009 and the registration of the first LLP on 2nd April, 2009.
The LLP form would enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small and medium enterprises and for investment by venture capitalists.
Definition of Partnership
Partnership Firm: The term ‘partnership’ is defined as the abstract legal relation between the persons. It is the form of business operation; wherein the partners agree to pool their capital and resources, to run a business carried on by all the partners or any one partner on behalf of all the partners and share profits and losses in the manner prescribed in the agreement called ‘partnership deed’.
Difference Between LLP and Partnership
|Distinctive||LLP is a separate legal entity and therefore, can be sued or it can sue others||A partnership firm is not distinct from the several persons who compose it.|
|Liability||Partners have Limited Liability||Partner of a firm would have unlimited liability|
|Dissolution||The retirement or death of a partner would not dissolve the LLP||The death or retirement of a partner would dissolve the partnership firm.|
|Firm’s Property||Property belongs to the LLP and not to the individuals comprising it||The property of the firm is the property of the individuals comprising it.|
|Legality||LLP is formed by an incorporation document and an LLP agreement, thus, giving it a legality||A partnership can be formed either orally or by a deed of agreement whether registered or not.|
|Max No. of Partners||No upper limit has been laid down by the Act||A registered or unregistered partnership cannot have more than 50 partners.|
|Perpetual Succession||The death or insolvency of a shareholder or all of them does not effect the life of the LLP||The death or insolvency of a partner dissolves the firm, unless otherwise provided|
|Capacity||A partner of LLP in his separate capacity as a legal person can do business with the LLP since the LLP is a separate legal entity by itself||An individual partner would not be able to conduct business transaction with the partnership firm of which he is a partner|
|Incorporation Process||Incorporation Process is reduced into a simple procedure of filling of the prescribed information in the Incorporation document and statement in Form No. 2.||As compared to LLP, Incorporation process is complex.|
|Agreement||In case of LLP, a limited liability partnership agreement (LLPA) is prepared.||In case of a Company, articles of association of a company are prepared.|
|Memorandum||The memorandum of a LLP is not required to name the state in which it is required to be incorporated.||The memorandum of a company is required to name the state in which it is required to be incorporated.|
|Change in Registered office||The detail procedure involved in changing the registered office from the state of incorporation to another state is not required to be followed in case of a LLP.||The detail procedure is required to be followed in case of a company.|
|Meeting||There is no such stipulation for meeting of partners.||Meeting of partners either periodically or compulsory as stipulated for directors and shareholders‘ meetings in the Companies Act.|
|Management & Ownership||There is no separation between management of the company and the ownership since all the partners, unlike all the directors, can take part in the day to day affairs of the LLP.||There is a separation between management of the company and the ownership.|
|Authority||In an LLP, each partner has the authority to do so unless expressly prohibited by the partnership terms.||In case of a company no individual director can conduct the business of the company.|
|Remuneration||There are no provisions in the LLP Act for remuneration payable to designated partners.||The Companies Act contemplates regulating the remuneration payable to directors.|
|Borrowing Powers||Unlike in the case of companies, there are no restrictions on the borrowing powers.||There are restrictions on borrowing powers in case of a company.|
|Maintenance of accounts||The LLP can choose to maintain the accounts on cash basis/accrual basis.||Whereas under the Companies Act, accrual method is compulsory.|
Key Difference between LLP & Partnership
The principle points of difference between a company and a partnership are as follows:
- LLP is a separate legal entity and therefore, can be sued or it can sue others without involving the partners. A partnership firm is not distinct from the several persons who compose it.
- The partners of an LLP would have limited liability i.e., they would not be liable beyond the money contributed by them. Whereas, partners of a firm would have unlimited liability.
- The retirement or death of a partner would not dissolve the LLP. On the other hand, the death or retirement of a partner would dissolve the partnership firm.
- In a partnership, the property of the firm is the property of the individuals comprising it. In an LLP, it belongs to the LLP and not to the individuals comprising it.
- Whereas a partnership can be formed either orally or by a deed of agreement whether registered or not, LLP is formed by an incorporation document and an LLP agreement, thus, giving it a legality.
- Whereas a registered or unregistered partnership cannot have more than 20 partners, LLP can have more than that number since no upper limit has been laid down by the Act.
- An LLP has perpetual succession, i.e., the death or insolvency of a shareholder or all of them does not affect the life of the LLP, whereas the death or insolvency of a partner dissolves the firm, unless otherwise provided.
- Whereas an individual partner would not be able to conduct business transaction with the partnership firm of which he is a partner, a partner of LLP in his separate capacity as a legal person can do business with the LLP since the LLP is a separate legal entity by itself.[/box]
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