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Why LLP is better than a partnership?

Updated: Dec 7, 2021



The concept of LLP was established in India vide the Limited Liability Partnership Act, 2008. This Act was introduced to recognize the flexibility of partnership and benefits of corporate bodies like company to bring together under one formation of an organization.


LLP is also a form of partnership, where the liability of partners is limited as well, as any partner will not be held responsible for the acts of other partners. In contrast, a partnership carries unlimited liabilities to the partners concerned, so they are jointly or severally liable for the debts.


We would discuss why registering your business as LLP would be more beneficial than registering your business as a partnership

Basis of Comparison

Limited Liability Partnership (LLP)

Partnership Firm

Separate Legal Entity

LLP is a separate legal entity and can hold assets in its name.

The status of a partnership firm does not have a separate identification from its partners.

Liability of Partners/Members

Minimum 2 designated partners are required from LLP. However, there is no limitation on the maximum number of partners.

The ceiling limit on the number of partners is 20; however, a minimum of 2 partners must register a partnership.

Number of Partners

Minimum 2 designated partners are required from LLP. However, there is no limitation on the maximum number of partners.

The ceiling limit on the number of partners is 20; however, a minimum of 2 partners must register a partnership.

Statutory Compliances

Annual statement of accounts and solvency & annual return must be filed with the registrar of companies every year to maintain transparency.

No return is to be filed with the registrar of Firms.

Registration

The registration of an LLP is mandatory with the registrar of companies on the online portal of the MCA.

The registration of a partnership firm is optional. The same can be registered with the local registrar; no online portal is available.

Perpetual Succession

It has perpetual succession, and the partners may come and go.

It does not have perpetual succession as it depends on the will of the partners.

Higher credibility

Due to transparency in operation, the credibility of an LLP is higher; thus, it eases fundraising from the financial institution.

A partnership firm has less credibility than other corporate firms; thus, they are preferably less.

Participation of Foreigners

Foreign nationals can be a partner in an LLP.

Foreign nationals cannot form partnership firms in India.

Taxation Aspect

An LLP is considered as a partnership firm for the taxation aspect. The Income Tax Act, 1961 govern these aspects.

An LLP is considered as a partnership firm for the taxation aspect. The Income Tax Act, 1961 govern these aspects.

It is clear from the above facts and differences why one should choose an LLP over Partnership as it avails the benefits of partnership with higher preference.


LLP is in a far more beneficial position than a partnership. Therefore, one should opt for LLP when looking for long-term goals and objectives and are willing to jump into the corporate world without facing any entry barriers caused by companies.


At Itseki Mercurius India, we assist our clients in the registration / incorporation of an LLP, annual compliances of LLPs, setting up their business in India, and dealing with various corporate matters (Company incorporation, ROC Compliance, Company Winding up), bookkeeping, tax filings & assessments, payroll, auditing, trademark registration, business structuring etc. If you have any questions or wish to know more about Why LLP is better than a partnership, kindly contact us.



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