Difference Between Partnership Firm Vs. Limited Liability Partnership

What is Limited Liability Partnership?

Limited Liability Partnership is a type of partnership agreement only having more advantages than the traditional partnership model. Limited liability partnership is an agreement between 2 or more persons to carry out a business or profession. LLP agreement is executed for the same between them containing right and duties of the partners.

As the name suggests, Partners in LLP will have limited liability and will not be responsible for misconduct and wrong doings of other partners. The LLP is a separate legal entity, the partners and LLP are distinct from each other. LLP can be registered by filing forms with registrar of companies just like we incorporate the companies. Need any assistance in Limited Liability Partnership registration, then ExpertBells team will be happy to help you.

Features of an LLP(Limited Liability Partnership)

• Limited Liability

Partners in LLP will have a limited liability and is not liable on account of illegal and unauthorised actions of other partners. Thus, LLP provides a shield to its partner.

• No Personal Liability

Partners will not be personally liable for any due against the LLP and cannot be sued for the same.

• Number of Partners

There is no maximum limit on number of partners for a LLP, however minimum 2 partners will be required.

• Low-Cost Formation

LLP can be formed with a very low cost, and it is easy to form as compared to a company.

• Low Compliance Cost

It is easy and economical to fulfil statutory compliance of LLP as compared to a company.

• Less Compliance

LLP enjoys less compliance and restrictions as compared to a company.

• LLP Suffix

Name of LLP contains the word LLP as suffix.

What is Partnership firm?

Partnership firm is basically a name given to a group of individuals operating under a partnership agreement. It is not a separate legal entity distinct from its members. It can be defined as an association of 2 or more people come together to run a business or profession and agreed to share the profit or loss of the same.

All the partners in the partnership firm act as an agent for each other and the firm and will be liable jointly for misconduct or illegal act done in the name of partnership firm or by partners.

In this partnership model, every partner is liable for the dues of the partnership firm and the same can be recovered from the individual properties of the partner too if the assets of the firm are not sufficient.

The maximum number of the partners a partnership firm can have is 20. It can start with a minimum of 2 partners. It is governed by ‘Indian Partnership Act, 1932’.

Features of a Partnership firm

• No Limited Liability

Partners in partnership firm will have unlimited liability. As they act as an agent for each other and firm, they will be liable for all the unauthorised act in the name of firm by any partner.

• Personal liability

Partners will be personally liable for any due against the firm. If the assets of the firm are not sufficient, their personal property may be used to recover the dues.

• Number of partners

There is a maximum limit on number of partners for a Partnership firm which is 20.

• Low-cost formation

Partnership firm also can be formed with a very low cost, and it is even easy to form as compared to an LLP.

• Low compliance cost

There is almost negligence compliance cost in case of a partnership firm.

• Less Compliance

As partnership firm is not a separate legal entity, compliance and restrictions are even less as compared to a LLP.

• No Suffix

No suffix or prefix needs to be added in the name, any name can be decided as per the choice of the partners.

• Runs on faith

A partnership firm is runs solely on the trust and faith amongst the partners.

Key Difference Between Partnership Firm Vs. Limited Liability Partnership

Check out the key difference between partnership firm and lilited liability partnership.