LLP vs Partnership Firm

LLP vs Partnership

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LLP vs Partnership Firm in India

Partnerships registered under the Partnership Act, 1932 used to be a very popular form of Business Entity in India due to the simplicity of registration and ease of maintenance. With the introduction of the Limited Liability Partnership (LLP) in India through the Limited Liability Partnership Act, 2008, the prominence of Partnership’s has been replaced by the LLPs. LLPs are easy to register, offer a range of benefits to the promoters and is easy to maintain, making it ideal for many small and medium sized business that would other wise opt to start as a Proprietorship or a Private Limited Company. In this article, we mainly cover the various aspects of LLP vs Partnership in India:

LLP vs Partnership: The Entity

Partnership

Partnership’s are registered under the Partnership Act, 1932. The partners of a Partnership registered under the Partnership Act, 1932 are personally liable for an unlimited amount of Partnership liabilities. Hence, the partnership firm and the Partners are not considered separate legal entities, neither does the Partnership have perpetual existence.

Limited Liability Partnership

LLPs are registered under the Limited Liability Partnership Act, 2008. The Partners of a LLP are not personally liable for the liabilities of the Partnership and the liability of a Partner is limited to the amount of his/her capital contribution to the LLP. Therefore, the LLP and the Partners of a LLP are considered to be separate legal entities and the LLP has a perpetual existence, until dissolved by the Promoters.

Number of Partners & Requirement

Partnership

Any Indian Citizen residing in India can be a Partner in a Partnership Firm including minors. A Partnership Firm must have a minimum of 2 Partners and can only have a maximum of 20 Partners. The Partnership Deed defines aspects such as Management of the Firm and one or more Partners can be designated to manage the Partnership Firm.

Limited Liability Partnership

Any Indian Citizen residing in India can be a Partner in a LLP. Foreign Direct Investment is allowed in a LLP with prior RBI approval. Minors are however not allowed to be part of a LLP. A LLP must have a minimum of 2 Partners and is allowed to have unlimited Partners. The LLP Agreement governs aspects of management of a LLP and one or more Partners can be designated to manage the activities of the LLP.

Transferability or Conversion

Partnership

The share in a Partnership can be transferred to another person after obtaining the permission of all the Partners in a Partnership. The transferability of a Partnership is cumbersome. Partnership can be converted into a LLP or a Private Limited Company, through a lengthy process.

Limited Liability Partnership

The share of a LLP can be transferred. However, the Transferee is not allowed to become a Partner automatically. The share of a LLP can be transferred to another person more easily. A LLP can be converted into a Private Limited Company or a Limited Company easily.

Compliance & Taxation

Partnership

The Profits of a Partnership firm are taxed at 30% + educational cess. There are no annual return filing requirement for a Partnership firm.

Limited Liability Partnership

The Profits of a LLP are taxed at 30% + educational cess. LLP must file annual return with the Ministry of Corporate Affairs(MCA).

Registration

Partnership

Partnership firms are registered with the Registrar of Firms. A Partnership Deed must be drafted for registering the Partnership firm with the Registrar of Firms. IndiaFilings can register your Partnership Firm for Rs.6,000/-

Limited Liability Partnership

LLPs are registered with the Ministry of Corporate Affairs. LLP registration process is similar to that of a Private Limited Company Incorporation process, viz. obtaining Digital Signature Certificate for the Partners, obtaining Designated Partner Identification Number (DPIN) for the Partners, obtaining name approval from MCA, obtaining Incorporation Certificate and filing LLP Agreement. IndiaFilings can register your LLP for Rs.8000/-

 

Comments (3)

Fayas

Oct 10, 2015 at 2:47 PM

We, 3 persons are planning for an export/import start up comprising of food products incl Cereals, Spices, Pulses for GCC country. We need a complete consultant for the entire process. After some mere market study, we could process 15 lakhs transaction per month in the starting. Pls suggest the reqd steps for the start up

Business Advisor

Oct 29, 2015 at 10:05 AM

Dear Sir,

Greetings from Indiafilings.com, India’s premier online consulting company !!!

We acknowledged the receipt of your mail. It’s our pleasure to assist you with your requirement, We think it is better to have a telephonic conversation with our business adviser for a detailed business commentary, so please let us know your contact number by mail to [email protected] to guide you better.

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Indiafilings Team.
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Manish basedia

Nov 09, 2015 at 5:31 PM

I want to register my company as LLP

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