Definition of LLP
Limited Liability Partnership (LLP): Limited Liability Partnership (LLP) is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008 (‘The Act’) with limited liability and perpetual succession. The Act came into force, for most part, on 31st March, 2009 followed by its Rules on 1st April, 2009 and the registration of the first LLP on 2nd April, 2009. The LLP form would enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small and medium enterprises and for investment by venture capitalists.
Definition of Partnership
Partnership Firm: The term ‘partnership’ is defined as the abstract legal relation between the persons. It is the form of business operation; wherein the partners agree to pool their capital and resources, to run a business carried on by all the partners or any one partner on behalf of all the partners and share profits and losses in the manner prescribed in the agreement called ‘partnership deed’.
Difference Between LLP and Partnership
Key Difference between LLP & Partnership
The principle points of difference between a company and a partnership are as follows:
LLP is a separate legal entity and therefore, can be sued or it can sue others without involving the partners. A partnership firm is not distinct from the several persons who compose it.The partners of an LLP would have limited liability i.e., they would not be liable beyond the money contributed by them. Whereas, partners of a firm would have unlimited liability.The retirement or death of a partner would not dissolve the LLP. On the other hand, the death or retirement of a partner would dissolve the partnership firm.In a partnership, the property of the firm is the property of the individuals comprising it. In an LLP, it belongs to the LLP and not to the individuals comprising it.Whereas a partnership can be formed either orally or by a deed of agreement whether registered or not, LLP is formed by an incorporation document and an LLP agreement, thus, giving it a legality.Whereas a registered or unregistered partnership cannot have more than 20 partners, LLP can have more than that number since no upper limit has been laid down by the Act.An LLP has perpetual succession, i.e., the death or insolvency of a shareholder or all of them does not affect the life of the LLP, whereas the death or insolvency of a partner dissolves the firm, unless otherwise provided.Whereas an individual partner would not be able to conduct business transaction with the partnership firm of which he is a partner, a partner of LLP in his separate capacity as a legal person can do business with the LLP since the LLP is a separate legal entity by itself.
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