LLP VS Partnership Firm

For all those who need to know what is the difference between an LLP and a Partnership firm, below is the detailed comparison.

LLP VS Partnership Firm

SR. NO. PARTICULAR LIMITED LIABILITY PARTNERSHIP PARTNERSHIP FIRM
1. Governing Law The Limited Liability Partnership Act, 2008 and various Rules made thereunder The Indian Partnership Act, 1932 and various Rules made thereunder
2 Registration Compulsory Optional
3 Creation Created by law Created by contract
4 Separate Legal Entity It is separate legal entity, separate from its partner’s \ designated partners. It is not separate legal entity from partners. Partners are collectively referred to as a firm.
5 Perpetual succession It has perpetual succession. It does not have perpetual succession.
6 Purchase of Property LLP can also purchase movable / immovable property in its name A partnership firm cannot purchase movable/immovable property in its name. the same must be purchased in the name of partners.
7 Common Seal It denotes the signature of the Company and LLP may have its own common seal, if it besides to have one. Not required
8 Formalities of Incorporation Various documents/declarations executed in prescribed formats pre-filled in designated e-forms are required to be filed with ROC along with filing fees. Partnership deed along with form/ affidavit required to be filed with Registrar of firms along with requisite filing fees.
9 Timeline It will take approx. 20  days to incorporate ( inclusive of time taken to obtain DPIN) It will take approx. 7 days to incorporate.
10 Expenses for formation Minimum Statutory fee for incorporation of LLP is Rs. 1500/- and Maximum fee for incorporation of LLP is Rs. 7000/- (approx.) Minimum Statutory Fee does not exceed to Rs. 500/- and Maximum Statutory Fee is Rs. 5000/-
11 Legal Proceeding LLP can also sue and be sued Only registered partnership can sue.
12 Taxation It’s status is unclear, pending changes in income tax act. It is a separate taxable entity
13 Name Suffix ‘LLP’ or Limited Liability Partnership has to be added to the name. No such requirement.
14 Change of name The name of the LLP can be changed with the prior approval of Central Government. The name of the Partnership firm can be changed
15 Ownership of Assets The LLP has ownership of assets and  Partners only have a capital contribution  in the LLP Partners have joint ownership of all the assets
16 Liability The liability of partners is limited up to their capital contribution however in case of a partner act with an intention to conduct fraud, they are personally liable. Liability of partners is unlimited
17 Agency Relationship Partners are agents of LLP Partners are agents of the firm and each other
18 Contracts / Business transaction by Member/ Directors/ Partners A partner can enter into a contract with the LLP A partner can not enter into a contract with the firm
19 Power of Member\ Partner\ Director The power of partners/ designated partners to conduct the day to day affairs is specified by the LLP agreement / LLP act. All the partners have to say in the day to day management of the firm or as specified in the partnership deed if there is any
20 Dissolution by an act of partners/members/directors Continuance of LLP is not affected by the acts of its Partners. Partnership contract can be put to an end by anyone of the members \ on the happening of event specified in partnership act, 1932
21 Transferability of interest Rights/ interest of partners are transferable as per the provisions of LLP agreement. Transferability of Interest subject to the mutual consent of all the members.
22 Share Certificate There are no provisions for issuing of Share Certificate. Rights/ Interest of the Partners in the LLP are evidenced by Partnership agreement. There are no provisions for issuing of Share Certificate. Rights/ Interest of the Partners in the firm are evidenced by Partnership deed if any.
23 Jurisdiction of Company Law Board (CLB) CLB has jurisdiction over the affairs of the LLP CLB has no jurisdiction
24 Nature An LLP is a body corporate formed and incorporated under this act and which has legal entity separate from that of its partners, having perpetual succession and liability of its partner shall be limited. The partnership is a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all with unlimited liability.
25 Compromise \ arrangements \ merger \ amalgamation Provisions exist for Compromise \ arrangements \ merger \ amalgamation for LLP in the act. There is no provision for Compromise \ arrangements \ merger \ amalgamation in the Partnership firm.
26 Minimum Capital requirement No such requirement No such requirement
27 Books of Accounts Books of accounts must be prepared as specified in the LLP Act. Not applicable
28 Manner of Keeping Books of Accounts Cash basis or accrual basis Cash or accrual basis
29 Filing of Annual Accounts Statement of accounts and solvency are required to be filed with ROC annually in the prescribed format. Not applicable
30 Audit of Accounts As per the provisions of the LLP Act, accounts to be audited annually except for LLP’s having a turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year. The Audit of accounts is as per the provisions of the income tax act.
31 Applicability of Accounting standards It’s status is unclear, pending changes in the income tax act. An accounting standard is not applicable.
32 Mode of Service documents Documents to be served on LLP / designated partners may be served through electronic means Service of documents can not be served through electronic means
33 Annual Return Annual Return is required to be filed with the ROC annually in the prescribed format Not applicable
34 Director Identification Number / Designated Partner Identification Number Each Designated partner required to have a DPIN before being appointed as a Designated Partner of LLP. No such requirement
35 Digital Signature At least one designated partner of the LLP should have their Digital signature. A digital signature is a pre-requisite for e-filing. Not Applicable. Documents are filed manually.
36 Minimum Number of Member Minimum two partners Minimum two partner
37 Maximum number of Member  No cap of a maximum number of its partners Maximum 10 for banking business and 20 for other businesses.
38 Designated partner/ Director/ Managing Partner Minimum two designated partner No cap on the minimum number of Managing partner
39 Need for Designated Partner/ Director/ Managing Partner to be partner/ member The designated partner need not be a partner of the company Managing partner shall be a partner of the firm
40 Vacancy In case the LLP has an only minimum number of a designated partner then casual vacancy in the office of the designated partner must be filled in 30 days Not applicable
41 Remuneration / Salary Remuneration will be provided
only if provided in the LLP agreement.		 A partner is not entitled to receive any remuneration for taking part in the conduct of business
42 Memorandum and Articles of Association \ Partnership deed/ Partnership Agreement LLP Agreement is a charter of the LLP which denotes its scope of operation. Partnership Deed is a charter of the firm which denotes its scope of operation.
43 Meetings Meeting of the Designated Partners has to be held at a specific time period as per the Provisions of LLP Act. No such requirement
44 Compounding of offenses Offenses punishable with fine are compoundable Not Applicable
45 Change in directors / designated partners/ Partners Notice of change of director is to be given to the ROC. Notice of change of partners should be given to Registrar of Firms
46 Publication of name Official correspondence/publication/ letterhead/ invoices must mention the full name of the company and address of the registered office and a statement that it is registered with limited liability. Not applicable
47 Rights / Duties / obligation of Partners / Managing Partners / Directors Rights / Duties/obligation of directors are governed by the Partnership Agreement Rights / Duties/obligation of directors are governed by a partnership deed.
48 Minutes Decisions taken in meetings must be recorded as minutes within 30 days Not applicable
49 Oppression and Mismanagement by majority shareholders No provision relating to redressal in case of oppression and mismanagement No such provisions
50 Voting Rights Each partner has only one vote Not applicable
51 Transfer of Share / Partnership rights in case of death In case of the death of a partner, the legal heir has the right to refund capital contribution + share in accumulated profits, if any.  Legal Heirs will not become partners In case of the death of a partner, the legal heir has the right to refund of capital contribution + share in accumulated profits, if any.  Legal Heirs will not become partners
52 Cessation as partners/member A partner can cease to be a member by transferring his share but the transfer of right or cessation of partner does not by itself cause the disassociation of the partner notwithstanding his retirement, and he like the other continuing partners of the firm remain liable as partner to third parties for any act done by any of them which would have been an act of the firm if done before retirement until public notice is given of the retirement either by the retired partner or any other partners of the reconstituted firm. A person can cease to be a member and will be entitled to his share of profit and capital at the time of retirement.
53 Drawing Drawings are permitted as per the LLP agreement Drawings are permitted