Difference between LLP and Partnership.
Meaning of LLP (Limited Liability Partnership)
A Limited Liability Partnership (LLP) is such a business structure that combines the flexibility of a partnership with the limited liability like a special feature of a company. It is a separate legal entity business from its partners, meaning the partners are not personally liable for the debts or obligations of the LLP like the business of the company. Difference between LLP and partnership
Key Features of LLP:
- Limited Liability – All Partners have personal assets are protected in this business; they are only liable for their capital contribution for LLP Business.
- Separate Legal Entity – LLP can own assets, enter contracts, and sue or be sued in its name.
- Perpetual Succession – LLP continues to exist even if partners leave or change in such business.
- Flexibility in Management – Governed by an LLP agreement, giving partners operational freedom.
- Mandatory Registration –LLP Must be registered as per the LLP Act, 2008 in India.
Suitability of LLP:
- Ideal for small and medium-sized businesses, professional firms (lawyers, accountants, consultants), and startups that want a structured, low-risk business model.
Meaning of Partnership
A Partnership is a type of business organization where two or more individuals come together to run a business and share its profits and losses. It is governed and created by the Indian Partnership Act, 1932. Difference between LLP and partnership
Suitability of Partnership:
- Best for small businesses, family-run businesses, and professional firms where trust and personal involvement are key.
A Limited Liability Partnership (LLP) and a Partnership are both business structures involving two or more individuals, but they differ in key aspects:
1. Liability:
- LLP: Partners have limited liability, meaning their personal assets are protected, and they are not responsible for other partners’ actions or debts beyond their capital contribution.
- Partnership: Partners have unlimited liability, meaning they are personally liable for business debts and obligations, including those caused by other partners.
2. Legal Status:
- LLP: A separate legal entity from its partners, meaning it can own assets and enter into contracts in its own name.
- Partnership: Not a separate legal entity; partners are collectively responsible for business decisions.
3. Registration & Compliance:
- LLP: Requires registration with the appropriate government authority and must follow regulatory compliance, such as filing annual returns.
- Partnership: Registration is optional in many cases, and compliance requirements are minimal.
4. Continuity & Transferability:
- LLP: Has perpetual succession, meaning it continues even if partners leave or change.
- Partnership: Dissolves upon the death or withdrawal of a partner unless otherwise stated in the partnership agreement. Difference between LLP and partnership
5. Taxation:
- LLP: Taxed as a partnership, but in some cases, it may be subject to corporate taxation depending on jurisdiction.
- Partnership: Profits are taxed as personal income of partners.
6. Management & Decision-Making:
- LLP: Managed as per the LLP agreement, and partners are not personally liable for each other’s mistakes.
- Partnership: Every partner is liable for the acts of other partners in the business.
7. Suitability:
- LLP: Preferred by professional services firms (law firms, accounting firms, consultants) and small businesses looking for liability protection.
- Partnership: Suitable for small businesses where partners trust each other and want fewer legal formalities. Difference between LLP and partnership
In short, an LLP provides limited liability and a separate legal identity, while a traditional partnership involves shared responsibility and unlimited liability. Difference between LLP and partnership. You can check the syllabus of commercial law on the official website of Gndu.
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