LLP or Partnership – A comparison


Introduction of LLP in India:

The concept of Limited Liability Partnership has been brought into by way of enforcing Limited Liability Act, 2008. LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership under the one structure of organization. Slowly the trend in shifting from orthodox partnerships to LLP’s.

In this Post, we will discuss why doing business as LLP is advantageous over Partnership Firm.

The Comparison:

  Limited Liability Partnership Partnership Firm
Separate legal entity LLP is a separate legal entity and can hold assets in its name. The status of Partnership Firm does not have separate identity from its Partners.
Liability of Partners The liability of Partners is limited to the extent of their contribution in LLP. Further, one Partner is not affected or not held liable for the actions of another Partner. The liability of Partners is not limited and can extend to personal assets of Partners. The action of active Partner can hold another liable.
Number of Partners Minimum 2 Designated Partners (Holding DPIN) are required to from LLP. However, there is no ceiling limit on number of Partners. The ceiling limit on number of Partners is 50. Partnership Firm having more than 50 Partners are declared as illegal association.
Uninterrupted Existence The existence of LLP is not affected by change in the Partners of LLP. The Partnership Firm dissolves due to removal or death of Partner subject to clauses of Partnership Deed.
Registration Registration of LLP is mandatory and it is registered with Registrar of Companies on online portal of MCA. Hence, it gets benefit of Centralized Registration. Partnership Firm can be registered as well as unregistered. The registration, if required shall be done with local Registrar of Firm.
Statutory Compliances Statutory Compliances in case of LLP are in addition to compliance under Income Tax Act, as the LLP Act mandates the same. These compliances ensure transparency of operations and financials of the entity. There are no additional compliances prescribed except laid down under Income Tax Act.


Data availability

The central Registration with MCA allows availability of Documents to Public except the Agreement between Partners. Also, one can see the last Balance sheet filed with MCA in the Master data of the entity which creates high creditability and reliability among the other parties to the LLP  


Any of the information or the data of the Partnership are not disclosed on public platform.

Higher Creditability Due to higher compliances and transparency in operation, the credibility of LLP is higher and thus it eases the fund raising from financial institutions. Compared to partnership firms, other body corporates are having higher credibility and hence are less preferable.
Uniqueness of Name The name of the LLP is unique and not identical or similar to any other company or LLP, which helps to establish distinctive image. There is no restriction for using the name in case of Partnership, furthermore it does not necessarily help to establish distinct image of Partnership.
Taxation Aspect: LLP is considered as Partnership Firm for the purpose of Taxation Aspects. The taxation aspects are governed by Income Tax Act, 1961.
Agreement Signed: Operations of both the LLP and Partnership firm are administered by Agreement signed between the Partners of the entity.

Every Designated Partner would be required to obtain a “Designated Partner’s Identification Number” (DPIN) issued by the MCA Portal

On the basis of above comparison above it is clear why LLP should be elected over the Partnership Firm as it avails the benefits of the Partnerships with higher preference.

Nature of Simplicity of transaction is intact in the LLP and its distinguished position in Corporate World places an LLP in far more advantageous position than a Partnership. Not necessarily everyone should opt for an LLP but the one who are looking for long term growth and are willing to jump into corporate world without facing the high restriction caused in case of Companies, the person may prefer LLP considering its advantages over its disadvantages.

As the year draws to a close, everyone is asking the same question – Should I form a Partnership or a Limited Liability Partnership? Which option will suit me better?

Technically, a Limited Liability Partnership has many advantages. In fact, it would not be wrong to say that an LLP combines some of the advantages of a Private Limited Company with some of the advantages of a simple Partnership.

On the flip side, a simple Partnership is much cheaper to form, unless you decide to register it. On the special request of a client, when we decided to register a Partnership deed we found that touts and agents were charging them between Rs. 7000-15,000 just to register the simple Partnership. It would actually have been much cheaper to form a LLP, where the registration is completely online & Fee depends on the Contribution which is more or less similar to the cost charged by these agents.

So coming back to the main question we need to answer here, let us compare some of the features of a Partnership vis-à-vis an LLP.

Partnership Limited Liability Partnership
Quicker to form, unless you need to get it registered Takes slightly longer, because of all the formalities and processes involved
Can be terminated quickly Much more stable and not easy to terminate
Registration is not mandatory Registration is mandatory but possible online
Liability of Partners is unlimited. Even the personal assets of the partners can be annexed to pay of the debts of the Partnership firm Liability of the Partners is limited. Only the amount contributed by the Partners to the firm can be used to pay off the debts of the Partnership firm
Ideal for hobbies, very small enterprises or people looking to test the waters


For people more serious and convinced about the business opportunity, this is the safer option

From the comparison above, it seems very clear that a Partnership has certain limitations. We also recommend that in most cases, if you want to choose between the two, it makes a lot of sense to choose the limited liability partnership route even though the registration process seems to be little lengthy. Not necessarily everyone should opt for a LLP but the one who are looking for long term growth & are willing to jump into corporate world without facing the high restriction caused in case of companies, then the person may prefer LLP considering its advantages over few of its critics.


-Vishal Gurnani (CA Final)