Limited Liability Partnership and Partnership Firm are two different concepts. The former is a form of organisation; however, the latter is a relationship among people who share mutual interest.
Limited Liability Partnership
a business structure where partners have limited liability, meaning they are not personally responsible for the firm’s debts. It is a separate legal entity that can own assets and operate in its own name. In India, LLPs are governed by the Limited Liability Partnership Act, 2008 and require at least two partners, making them a flexible and low-compliance option for small businesses and professionals.
Partnership
A type of business where two or more people agree to run a business together and share its profits and losses. The partners manage the business collectively, and in a traditional partnership, they usually have unlimited liability, meaning their personal assets can be used to pay business debts. In India, partnerships are governed by the Indian Partnership Act, 1932 and are commonly used for small businesses due to their simple setup and minimal compliance requirements..
Difference Between Limited Liability Partnership and Partnership Firm
Basis | Limited Liability Partnership | Partnership Firm |
|---|---|---|
Legal Identity | Has a separate legal identity in the eyes of law. | Does not have a separate legal identity apart from its partners. |
Applicable Act | Governed under the Limited Liability Partnership Act, 2008. | Governed under the section of the Partnership Act, 1932. |
Maximum number of partners | No upper limit of partners specified. | Can have a maximum of 50 members as per the Companies Act, 2013. |
Minor partner | Cannot have a minor as a partner. | A minor can join as a partner . |
Liability | All or some of the partners shall have liability limited to their capital contribution. | Partners have unlimited liability, i.e., the personal assets of the partners can be used to pay the debts of the firm. |
Establishment | Created by the Law. | Comes into existence under a contract. |
Perpetual Succession | Continues to exist despite partners leaving or joining the firm. | Comes to end whenever a partner leaves or a new one joins a firm. |
Common Seal | Has a common seal that serves as a signature of the firm. | There is no concept of the common seal. The documents are signed by the partners jointly or by any one of the partners on the behalf of the others. |
Ownership of the assets | Can own the assets in its own name. | An asset of the firm is owned by the partners jointly. |
Right to sue | Can sue or can be sued by others in its own name. | Cannot sue nor can be sued by others in its own name. The partners are held responsible for all the acts of the firm. |
Binding Documents | A Limited Liability Partnership is bound by an agreement. | A Partnership Deed is a major binding document. |
Registration Requirement | It is mandatory to register a Limited Liability Partnership under the Limited Liability Partnership Act, 2008. | Registration of the partnership is optional. |