top of page
Difference between LLP & PartnershipCost: The cost for registration of LLP is normally higher than the cost for registration of a partnership firm. Authority: LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective State Government in which the firm is registered. Limited Liability Protection: The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in an LLP, one partner is not responsible or liable for another partner's misconduct or negligence. An LLP also provides limited liability protection for the owners from the debts of the LLP. However, unlike private limited company shareholder, the partners of an LLP have the right to manage the business directly. Number of Partners: LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP
Registration of Partnership FirmA partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even subsequent to the formation. The registration of a partnership firm is done through the Registrar of Firm in which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is made in the Register of Firms and Certificate of Registration is issued.
Documents Required for Registration of Partnership FirmThe application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business. As identity and address proof of the Partners, any of the following two documents can be submitted: 1. PAN Card 2. Passport 3. Drivers License 4. Aadhar Card 5. Voters ID Proof of the principal place of business can be established by submitting the following documents: 1. Sale deed in case one of the Partner owns the place of business 2. Rental agreement copy if the premises are rented Copy of latest electricity bill or water bill or property tax receipt.
Benefits and Downside of PartnershipBenefits One of the main advantages of a Partnership Firm is that there are very minimal requirements in terms of compliance. For instance, a Company or LLP requires the annual filing of its financial statements with the Registrar of Companies. Such documents filed with the MCA are also made public documents. On the other hand, registered/unregistered Partnership Firms are not required to file any annual returns, and the financial statements of a partnership firm would NOT be made publicly available. Also, the accounts of a registered / unregistered partnership firm are not required to be audited. Whereas, the accounts of a Limited Liability Partnership (LLP) are required to be audited by a practising Chartered Accountant when the turnover exceeds Rs.40 lakhs per annum or when capital contribution exceeds Rs. 25 lakhs. Downside Partnership firm does not provide its Partners with limited liability protection and does not have perpetual existence. Also, the interest of a Partner in a Partnership firm is not easily transferrable, and the ownership structure does not allow for investment from Angel Investors, Venture Capitalists or Private Equity Firms. Banks / Financial Institutions also prefer to lend to Companies than Partnership Firms as Companies are separate entities and the regulatory requirement for financial reporting of Companies - makes a company more transparent and structured.
bottom of page