Are you thinking of starting a business or want to expand the existing one? You have to make an important decision here, regarding the selection of the form of business organization. The most suitable form of business organization can be chosen by weighting the merits and demerits of each module according to your needs. Individual company, partnership, LLP, cooperative company, joint stock company are some common forms.
So, take a look at this article to know the difference between partnership and limited liability company (LLP).
|Sense||The partnership refers to an agreement in which two or more people agree to carry out an activity and share profits and losses mutually.||The Limited Liability Partnership is a form of business operation that combines the characteristics of a partnership and a corporate one.|
|Ruled by||Indian Partnership Act, 1932||Limited Partnership Act of 2008|
|Rental document||Partnership act||LLP agreement|
|responsibility||Unlimited||Limited to capital injection, except in case of fraud.|
|Contractual capacity||He cannot enter into a contract in his name.||He can sue and be sued in his name.|
|Legal status||Partners are collectively known as corporations, so there is no separate legal entity.||It has a separate legal status.|
|Company name||A few names||Name containing LLP as a suffix|
|Maximum partner||100 partners||Without limits|
|properties||It cannot be kept in the name of the company.||It can be kept in the name of the LLP.|
|Audit of accounts||Not required||Mandatory, only if turnover and capital contribution exceed 40 lakh and 25 lakh respectively.|
|Report||Partners are also corporate agents and other partners.||Partners are only LLP agents.|
Definition of partnership
The term "partnership" defined as the abstract legal relationship between people. the form of commercial operation; in which the partners agree to pool their capital and resources, to manage an activity carried out by all partners or any partner on behalf of all partners and to share profits and losses according to the methods provided for in the agreement called "deed partnership. "
In this agreement, the persons who entered into the agreement are called individual "partners". The material thing that symbolizes the joint entity for all partners called "company" and the name under which the activity called "company name" is conducted. Hence, partnership is the invisible link between partners while the firm is the concrete form of partner.
Definition of Limited Liability Partnership (LLP)
Limited Liability Partnership, briefly known as LLP described as a corporation created and registered under the Limited Liability Partnership Act, 2008. LLP is a commercial vehicle that integrates the benefits of a company's limited liability and the flexibility of the partnership. say for the organization their internal composition and functioning as a partnership.
LLP has a separate legal existence, distinct from its partners and has a perpetual succession. In the event of changes, it will not affect the entity's rights, existence or liabilities in the partners. Any natural or legal person can become a partner in LLP, as long as he is able to become a partner.
Key differences between partnerships and limited liability partnerships (LLP)
The following points are fundamental regarding the difference between partnerships and limited liability companies (LLP):
- The partnership defined as an association of people who have come together to earn profits from businesses, undertaken by all partners or by any partner on behalf of all partners. The Limited Liability Partnership is a form of business operation that combines the characteristics of a partnership and a corporate one.
- The partnership governed by the Indian Partnership Act of 1932. In contrast, the Limited Liability Partnership Act, 2008 governs the LLP in India.
- The incorporation of the voluntary partnership, while the registration of the mandatory LLP.
- The document that guides the partnership called Partnership Deed. Contrary to the limited liability partnership, the LLP agreement is the rental document.
- A partnership company cannot enter into a contract in its name. On the other hand, the LLP can sue and be sued in its name.
- A partnership does not have a separate legal status apart from its partners, as the partners are known individually as partners and collectively known as companies. Unlike LLP, which is a separate legal entity.
- The partner's liability limited to the amount of capital contributed by them. On the contrary, the members of a company have unlimited liability.
- The partnership can be started with any name of choice. On the contrary, the limited liability company must use the word "LLP" at the end of its name.
- Any two people can start a partnership or LLP, but the maximum number of partners in a partnership company is limited to 100 partners. In contrast, there is no maximum partner limit in LLP.
- A limited liability company has a perpetual succession while a partnership can be dissolved at any time.
- The maintenance and verification of accounting books is not mandatory for a partnership. In return, the LLP is required to keep and check the books if the turnover and capital contribution exceed 40 lakh and 25 lakh respectively.
- The partnership company cannot hold ownership in its name. In contrast, the LLP is authorized to retain ownership in its name.
- In a partnership, the partners act as agents of the partners and the firm. On the other hand, the partners are partner agents in the case of LLP.
- In both forms of business organization, the partners are not employees; rather they are agents.
- Partners are entitled to remuneration, only if provided for in the contract.
- No partner authorized to continue competing for work without the prior consent of other partners.
- The introduction of a new partner for the partnership can be done, only with the consent of the existing partners.
- In the event of the insolvency of a partner, who is not authorized to continue as a partner.
So with the discussion above, it is quite clear that both the general partnership and the limited liability partnership are the two varieties of partnership. In addition, an LLP other than a partnership, in the way the partners are jointly or separately responsible for the acts of the partners and the company, in a partnership. On the other hand, in the case of a limited liability company, the partners are not held responsible for the actions of other partners.