Before introduction of Limited Liability Partnership Act, 2008, Partnership Firm was one of the most popular types of business in India. Partnership Firms are governed by Partnership Act, 1932. With introduction of Limited Liability Partnership Act, 2008, LLPs have started taking place of Partnership Firms. As LLPs are easy to incorporate and having range of benefits over Partnership Firm, the small and medium businesses are preferring LLP registration over Partnership Firm. Limited Liability, easy transferability, perpetual succession are some of the benefits of Limited Liability Partnership over a Partnership Firm.
In this article we will compare Partnership Firm with Limited Liability Partnership and discuss benefits and/or drawbacks of both types of businesses.
Partnership Firms are governed by Partnership Act, 1932. A Partnership Firm can be registered under Partnership Act, 1932
Limited Liability Partnership is by Limited Liability Partnership Act, 2008. A Limited Liability Partnership is registered with the Ministry of Corporate Affairs.
Partners’ Liability in LLP
Partnership Firm is not a separate legal entity and therefore the Partners of a Partnership Firm are jointly and severally liable for the acts of a Partnership Firm. This makes the partners’ liability unlimited.
Limited Liability Partnership is a separate legal entity and has perpetual succession. The liability of the partners of Limited Liability Partnership is limited to the extent of their share in LLP.
Who can be Partners and number of partners
Any Indian citizen, including a minor, can become partner in Partnership Firm. There can be minimum two and maximum twenty partners in a Partnership Firm. Any one or more or all partners can be designated management of Partnership Firm as per the Deed of Partnership.
Any Indian citizen can become partner in a Limited Liability Partnership Firm. However a minor cannot become partner in a Limited Liability Partnership. Even the foreign citizens can become partners of LLP with approval from related authorities. Minimum one Indian partner is mandatory for LLP registration . The management of partners can be designated to few partners by appointing designated partners.
Transferability of Share
Share of Partner in Partnership Firm can be transferred to a third person after taking consent from all other partners.
Share of Partner in LLP can be transferred to third person. However the transferee does not become partner automatically on transfer of share. The procedure to transfer share of LLP is easier.
There are no annual compliances to be followed by Partnership Firm with respect to Partnership Act, 1932.
Every LLP in India has to file an Annual Return with the Ministry of Corporate Affairs as per the Limited Liability Partnership Act, 2008.
LLP Registration in India
Registration of Partnership Firm is done under Partnership Act, 1932. Procedure of registration of Partnership Firm is comparatively easy. A Partnership Firm can be registered through MYeFILINGS.com for Rs. 5999/-
LLP registration in India is done under Limited Liability Partnership Act, 2008. Procedure for registration of Limited Liability Partnership is similar to that of a Private Limited Company. A Limited Liability Partnership can be registered by obtaining Digital Signature Certificate, DIN, Name Approval and filing of all required forms with the ROC. A Limited Liability Partnership can be registered through MyEfilings.com for Rs. 15999/-
For more information on Limited Liability Partnership or conversion of Partnership Firm to Limited Liability Partnership, visit the related articles as given below
- Conversion of Partnership to LLP
- Reasons to convert Partnership Firm into LLP
- Conversion Partnership Firm to LLP – Overview, Procedure and Facts