Difference between LLP and Partnership
Businesses are never easy to run, whether it is a family business, sole proprietorship, or partnership. All businesses involve one common factor, i.e., risk. Risk is inevitable in business. There are times when the company yields more and more profits, and there are times too when the company suffers losses and has many liabilities. Well, business is done by these profits and liabilities. Therefore, it is challenging to run a business and keep it in a stable position. Apart from the risks, several other factors affect business, like demographic factors, economic factors, social & cultural factors, political factors, etc. So today, we will be discussing about the two kinds of business, i.e., LLP (Limited Liability Partnership) and Partnership. Well, you must be wondering that both are significant kinds of partnership, so they must be the same. But it is not so. There are several contrasting points between them. So, let us begin by the definitions of LLP and Partnership.
LLP stands for Limited Liability Partnership. It is a kind of partnership in which the partner has limited liabilities. This partnership might include two or more members in the company. In LLP, the partners cannot be considered liable for each other code of conduct or behavior. One of the common features and pros about this partnership is that it is very flexible. Partners decide their share of liabilities while becoming a part of the firm. LLP is a legal company and the share of assets, and liabilities are decided by the partners. Now, how does an LLP firm works? Well, LLP can be set up as an incorporated partnership. Every member of the company has to pay taxes based on the profit earned. LLP is different from other business partnerships because in ordinary businesses/ partnerships, people are not forced or liable to pay the debts if he/ she can't. There are many benefits associated with LLP, like it is flexible, members enjoy corporate ownership, limited liability, etc. Well, LLP is quite different as there is no managing director or CEO of the company. The members of the company are in an equal position and serve as the Board of Directors.
A partnership is defined as an arrangement among two or more members of the organization to look after the business operations and share the assets, liabilities, profits, and losses of the business. In a partnership, all the members of the firm have equal shares of profits and losses. Now, how does a partnership business work? Well, a partnership is a kind of an agreement between two or more members who want to work together in order to yield profits. Along with the profits, the members also share equal losses and liabilities. One feature is common in LLP and Partnership, i.e., the members of the firm have to pay taxes based on their profits earned. A partnership is a broad concept, and LLP is a part of a Partnership. There are other significant kinds of partnerships like a general partnership, limited partnership, public-private partnership, LLP, etc. Some of the positive points about a partnership are that there is sharing of profit, mutual agency, there are cost savings, moral support, etc. Now, let us look at some of the contrasting points between LLP and a partnership.
So, these are some of the contrasting points between LLP and Partnership. The main objective of LLP and Partnership is that they are made for profit earning. Now, both these firms have several benefits associated with it. So, let us have a look at them.
Benefits of LLP
Benefits of Partnership
So, these are some of the benefits of LLP and partnership. It is important to note that both are profit-yielding firms. Both LLP and partnership have several differences that are listed above. Thus, both LLP and partnership are the firms in which the partners may have an equal share of assets, liabilities, profits, and losses.