A & B were friends. Now they have plans of setting up a supermarket in their locality. They are confused as to whether to register as a traditional partnership or as a Limited Liability Partnership. As an advisor, enumerate the differences between the two forms of business highlighting the compliances & other legal formalities.
Regulating Act | The Limited Liability Partnership Act 2008. | The Indian Partnership Act, 1932.
Separate legal entity | It is a legal entity separate from its members. | It is a group of persons with no separate legal entity.
Creation | It is created by a legal process called registration under the LLP Act, 2008. | It is created by an agreement between the partners.
Designated partners | At least two designated partners and atleast one of them shall be resident in India. | There is no provision for such partners under the Partnership Act, 1932.
Comparison between a Limited Liability Partnership (LLP) and partnership can be analysed on the below tabulated parameters.
Basis | LLP | Partnership firm
Body corporate | It is a body corporate. | It is not a body corporate.
Registration | Registration is mandatory. LLP can sue and be sued in its own name. | Registration is voluntary. Only the registered partnership firm can sue the third parties.
Perpetual succession | The death, insanity, retirement or insolvency of the partner(s) does not affect its existence of LLP. Members may join or leave but its existence continues forever. | The death, insanity, retirement or insolvency of the partner(s) may affect its existence. It has no perpetual succession.
Name | Name of the LLP to contain the word limited liability partners (LLP) as suffix. | No guidelines. The partners can have any name as per their choice.
Liability | Liability of each partner limited to the extent to agreed contribution except in case of willful fraud. | Liability of each partner is unlimited. It can be extended upto the personal assets of the partners.
Mutual agency | Each partner can bind the LLP by his own acts but not the other partners. | Each partner can bind the firm as well as other partners by his own acts.
Common seal | It may have its common seal as its official signatures. | There is no such concept in partnership
Legal compliances | Only designated partners are responsible for all the compliances and penalties under this Act. | All partners are responsible for all the compliances and penalties under the Act.
Annual filing of documents | LLP is required to file: (i) Annual statement of accounts (ii) Statement of solvency (iii) Annual return with the registration of LLP every year. | Partnership firm is not required to file any annual document with the registrar of firms.
Foreign partnership | Foreign nationals can become a partner in a LLP | Foreign nationals cannot become a partner in partnership firm.
Minor as partner | Minor cannot be admitted to the benefits of LLP. | Minor can admitted to benefits of the partnership with the prior consent of the existing partners.
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