Definition of Partnership

 

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’.

In this arrangement, the individuals who have entered into the agreement with each other are called as individual ‘partners’. The material thing symbolising the joint entity for all partners is called ‘firm’ and the name under which business is conducted is called the ‘firm name’. Hence, partnership is the invisible bond among partners while the firm is the concrete form of partners.

Definition of Limited Liability Partnership (LLP)

Limited Liability Partnership, shortly known as LLP is described as a body corporate created and registered under Limited Liability Partnership Act, 2008. LLP is a business vehicle that integrates the advantages of limited liability of a company and the flexibility of the partnership, i.e. for organising their internal composition and operation as a partnership.

LLP has a separate legal existence, distinct from its partners and has a perpetual succession. If there is any change, in the partners, then it will not influence the rights, existence or liabilities of the entity. Any individual or body corporate can become a partner in LLP, provided they are capable of becoming a partner.

Key Differences Between Partnership and Limited Liability Partnership (LLP)

 

The following points are vital so far as the difference between partnership and limited liability partnership (LLP) is concerned:

1. The partnership is defined as an association of persons joined for earning profits from business, undertaken by all the partners or any one partner on behalf of all the partners. Limited Liability Partnership is a form of business operation which combines the features of a partnership and a body corporate.
2. The partnership is governed by the Indian Partnership Act, 1932. On the contrary, Limited Liability Partnership Act, 2008 governs LLP in India.
3. The incorporation of the partnership is voluntary, whereas the registration of the LLP is obligatory.
4. The document that guides the partnership is called Partnership Deed. As opposed to limited liability partnership, the LLP agreement is the charter document.
5. A partnership firm cannot enter into a contract in its name. On the other hand, the LLP can sue and be sued in its name.
6. A partnership has no separate legal status apart from its partners, as the partners are individually known as a partner and collectively known as firm. Unlike, LLP which is a separate legal entity.
7. The partner’s liability is limited to the extent of the capital contributed by them. As against this, the partners of a partnership have unlimited liability.
8. Partnership can be started with any name of choice Conversely, the limited liability partnership must use the word “LLP” by the end of its name.
9. Any two persons can start a partnership or LLP, but the maximum number of partners in a partnership firm are limited to 100 partners. In contrast, there is no limit of maximum partners in LLP.
10. A limited liability partnership have perpetual succession whereas a partnership may dissolve any time.
11. The maintenance and audit of books of accounts is not mandatory for a partnership, As against this, the LLP is required to maintain and audit books of accounts if turnover and capital contribution overreaches 40 lakhs and 25 lakhs respectively.
12. The partnership firm cannot hold property in its name. Conversely, the LLP is allowed to held property in its name.
13. In a partnership, the partners act an agent of the partners and the firm. On the other hand, the partners are agents of partners in case of LLP.