In this blog, we will look at the advantages of LLP (Limited Liability Partnership), “Why it is beneficial to select LLP over Partnership Firm?”, the difference between LLP and Partnership Firm. Let’s have a look at what is LLP and Partnership Firm, before going towards the benefits of choosing LLP over Partnership Firm.
LLPs and Partnership Firms are business entities that are formed when two or more people join forces to form a single entity. In addition, the profits and losses of these firms are shared among the participants in accordance with their agreement.
A Limited Liability Partnership (LLP) is one in which some or all of the partners are limited in their liability. As a result, it can display aspects of partnerships and businesses. Each partner in an LLP is not responsible or liable for the misbehavior or carelessness of another partner.
The Partnership Act of 1932 governs partnership firms in India. A partnership is defined as an agreement between individuals who have agreed to share earnings from a business carried on by all or any one of them acting on behalf of all.
LLP (Limited Liability Partnership) |
Partnership Firm |
A Limited Liability Partnership (LLP) is a type of business entity that combines the characteristics of a body corporate and a partnership. |
A Partnership Firm is described as a group of people who have joined together to make money from a business that is run by all of the partners or by one partner on behalf of all of the partners. |
In the case of an LLP, however, the partners are the agents of the partners. |
In a partnership, the partners operate as the firm’s and the partners’ agents. |
Limited Liability Partnership (LLP) has the ability to sue and be sued in its own name. |
A Partnership Firm cannot sign a contract in its own name. |
Limited Liability Partnership Act, 2008, is the law applicable to the LLP. |
Partnership Firm needs to follow the rules and regulation set by Indian Partnership Act, 1932. |
The number of partners in an LLP must be at least 2, with no higher limit. |
A Partnership Firm can have a minimum of 2 participants and a maximum of 20. |
LLP is considered as a legal separate entity. |
A Partnership Firm is not considered as a separate legal entity. |
Each partner in the partnership owns a portion of the company. This is a less expensive and more customizable company form than a company, whereas a Limited Liability Partnership (LLP) combines the benefits of both a partnership and an LLP by limiting the partners’ liability.
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