Difference Between LLP and Partnership

Q: 1. What is the difference between a Limited Partnership and a Limited Liability Partnership?

Ans: A limited partnership is a type of partnership that will consist of at least one general partner including at least one limited partner. While a limited liability partnership does not have a general partner of its own.In an LP the general partners have personal liability. However, these limited partners are not liable for any business debts. The limited partners only risk the part they invested in the business. While an LLP in contrast offers the limited liability of its partners.

Q: 2. What is the Use of the Companies Act 2013?

Ans: The Companies Act 2013 is an Act of the Parliament of India which is applicable to the Indian company law that regulates the procedure of incorporating the company, responsibilities of a company, directors, till the dissolution of a company.

Q: 3. What are the Documents Required before Starting a LOP?

Ans: The documents required are:PAN Card of all the Partners.Address Proof of all the Partners.Utility Bill of the proposed Registered Office, where the LLP is located.No-Objection Certificate (NOC) from the Landlord.The Rental Agreement Copy between the LLP and the Landlord.

Commerce

Difference Between LLP and Partnership

Reviewed by:

Dimple Tiwari

Differences Between the Two Forms of Business

There are so many types of businesses type – Sole Proprietorship, Partnership, Limited Liability Partnership, Company form, Cooperative Society, and lots more. It is often confusing what is the requirement of one, or how is it different from the other form, which will be more advantageous than the other. To clear all these queries, we have come up with the differences between different company forms. We will concentrate our discussion on differences mainly between these forms – LLP, Partnership, LLC, Company, and Pvt. Ltd. Company.

LLP and Partnership

While you want to start a business, the common question which will strike your mind is – ‘What type of business do I want?’ This question arises out of the fact that there are a variety of businesses to choose from. If you are updated enough about the types of business, requirements of the same you will result in choosing the best suitable business for you.

In this section, we will focus our discussion on – the difference between LLP and Partnership Firm. Students are required to follows and precisely learn the differences between these two. LLP originated with the concept of Partnership, hence there are some minute details that are suggested to be paid attention to.

Following is the difference chart which depicts -

Difference Between Partnership and Limited Liability Partnership

Point of Difference	LLP	Partnership
Definition	LLP evolved as a business entity that has the combined benefit of company and partnership.	A partnership is a formal arrangement between two or more partners which manage and operate the business and share the profit.
Applicable Act	Limited Liability Partnership Act, 2008	Indian Partnership Act, 1932.
Individual Partner’s Liability	The LLP partners will have limited liability.	The partner’s liability is unlimited in this case.
Registration	Mandatory to be registered.	Registration is optional.
Legal Status	LLP has a legal status of its own apart from its members.	No separate legal status for the partnership firm.
The naming of the Firm	Suffixed with the acronym ‘LLP’	Anything decided by the partners.
Agreement Name	LLP Agreement	Partnership Deed.
How many members are allowed?	No limit	Maximum 100 members
Existence	LLP continues to exist irrespective of the entry and exit of the members.	Partnership gets dissolved if a member leaves or dies.

Difference Between LLC and LLP

Here we will learn about – difference between LLC and LLP, the difference chart is as follows:

Limited Liability Company	Limited Liability Partnership
LLC is a privately -owned company that combines the characteristics of a company and a partnership.	LLP is the type of partnership where the partner’s liability remains fixed till the amount contributed by them.
Owners are known as ‘Members’.	Owners are known as partners.
The individuals are protected from personal liability.	Partners are liable, only for their negligence.
MOA and AOA are the two documents consisting of the details of an LLC.	The limited liability partnership agreement is the document of LLP.
Must add LLC at the end of their name.	Must add LLP at the end of their name.
A single person can form an LLC.	Licensed professionals in distinctive fields can form LLP.
LLP is liable to pay various types of taxes – Income tax, Dividend distribution tax, etc.	LLP is subjected to pay only income tax and alternate minimum tax.

Difference Between LLP and Company

The difference between LLP and Company are as follows:

Point of Difference	Company	Limited Liability Partnership
Supporting Law	The companies are leaded by the ‘Companies Act 2013’.	This is guided by the ‘Limited Liability Partnership Acy 2008’.
Capital Requirement	Generally, 1 lakh	No such minimum amount is applicable.
Name of the entity	Private Ltd. as a suffix	‘Limited Liability Partnership’ as the suffix.
Registration Process	Registration of ROC is required.	Registration with the Registrar of LLP is required.
Formation Cost	The minimum Statutory fee is quite high.	Comparatively less is the statutory filing.
Charter Document	The MOA and AOA is the charter of the company which described its scope and operations.	LLP agreement is the charter of LLP
Formalities of Incorporation	Many e-forms along with MOA and AOA are filed with ROC with mentioned fees.	E-forms filled with the registrar of LLP.
Number of members	Two to two hundred in the case of a Private Company.	Minimum 2 partners while there is no limitation of the maximum number of partners.
Liability of the Partners	Limited to the amount payable on each share by the members.	Limited to the extent of their contribution, except in case of fraud or wrongful act.

Difference Between Pvt. Ltd. and LLP

The difference between a Limited Liability Partnership and a Private Limited Company are as follows-

Point of Difference	LLP	Private Ltd. Company
Incorporation or Registration	Incorporated under the provision of LLP Act, 2008.	Incorporated under the Companies Act, 2013.
What will be the minimum number of owners?	2 partners	2 shareholders
Maximum number of owners	No limit	200 will be the maximum number of shareholders.
Capital Requirements	No minimum capital is required.	No requirement of minimum authorized and the paid-up capital.
Liability of owners	Limited to the agreed or destined amount.	Limited to the unpaid amount of the shares which are taken in the company.
What will be the duration of the business	This will continue until the procedure of winding up under the LLP Act.	Continue the winding up under the Companies Act.
Audit Requirements	Accounts to be audited by a CA if the turnover exceeds Rs. 40 lakhs or the contribution exceeds Rs. 25 lakhs.	Accounts are audited by a CA whether or not a business is operated.
Tax rate	Taxable at ‘Firm’ tax rate which is 34.80% on the net profit amount.	Taxable at 22% on the net profit amount
Employee Stoch Options Plans	Not applicable	Can issue Employee Stock Options Plans.

FAQs on Difference Between LLP and Partnership

1. What is the difference between a Limited Partnership and a Limited Liability Partnership?

Ans: A limited partnership is a type of partnership that will consist of at least one general partner including at least one limited partner. While a limited liability partnership does not have a general partner of its own.

In an LP the general partners have personal liability. However, these limited partners are not liable for any business debts. The limited partners only risk the part they invested in the business. While an LLP in contrast offers the limited liability of its partners.

2. What is the Use of the Companies Act 2013?

Ans: The Companies Act 2013 is an Act of the Parliament of India which is applicable to the Indian company law that regulates the procedure of incorporating the company, responsibilities of a company, directors, till the dissolution of a company.

3. What are the Documents Required before Starting a LOP?

Ans: The documents required are:

PAN Card of all the Partners.
Address Proof of all the Partners.
Utility Bill of the proposed Registered Office, where the LLP is located.
No-Objection Certificate (NOC) from the Landlord.
The Rental Agreement Copy between the LLP and the Landlord.