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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 vs 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.

1. LLP is defined as a partnership in which a partner has limited liabilities. On the other hand, a partnership is defined as an agreement between two or more members who wish to work together.
2. LLP is a part of a partnership. A partnership is a big subject that includes other kinds of partnership like a general partnership, LLP, public-private partnership, etc.
3. There is a particular share of liabilities decided by the members. Profits, losses, assets, and liabilities are equally shared among the members.
4. Limited Liability Partnership Act was passed in the year 2008. Indian Partnership Act was passed in the year 1932.
5. The registration for LLP is mandatory. The registration for partnership is optional.
6. The legal document is termed as LLP Agreement. The legal document is termed as the Partnership Deed.
7. The liability in LLP is limited to capital contribution. In partnership, the liability is unlimited.
8. LLP has a separate legal status. A partnership is not a legal entity. However, the members collectively in a partnership are known as firm.
9. The name of the company has the suffix 'LLP.' The members of the company can choose any name for their company.
10. There is no limit regarding partners in LLP. Only a hundred partners can be there in a partnership.
11. The property can be held in the name of LLP. The properties cannot be held under the company's name.
12. The auditing of the accounts is essential, in case the turnover reaches to 50 lakhs. The auditing of accounts is not necessary in partnership.
13. Partners of LLP serve as the agents of the company. Members of a partnership business serve as agents as well as the partners of the firm.

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

  1. Convenient: It is easier to start LLP firms as compared to other businesses. The formalities and documentation are easier and are mutually done. Thus, LLP is more convenient than other partnership firms.
  2. Capital Contribution: No minimum capital is required to start an LLP. The minimum amount or assets can be utilized to start a firm. No big capital is required.
  3. Registration cost: The registration cost is low for LLP, unlike for public or private companies.
  4. Tax: LLP is not liable to pay taxes on the income or liability of other partner.

Benefits of Partnership

  1. Sharing: In partnership firms, the profits and losses are equally divided among the members. There is no fixed amount of sharing. Everything is equally shared.
  2. Decision-Making: Partners can take collectively mutual decisions that would help the company in yielding more profits. The opinion of each member matters in a partnership business.
  3. Capital: When there are more partners, more capital comes into the partnership business. With more capital, the company yield more profits, leading to growth in the entrepreneurial world.
  4. Privacy: Privacy is maintained in a partnership, unlike other business firms. The company's affairs are kept confidential. Therefore, one's privacy is harmed in 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.

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