Difference Between Partnership and LLP

difference-between-partnership-and-llp

PARTNERSHIP

  1. Partnership Firm

A Partnership is an association of two or more people to achieve certain common goals, pool money, skills, and other resources, and to share profit and loss in accordance with terms of the partnership agreement.

  1. Regulated Body

The Indian Partnership Act, 1932 is an act to regulate partnership firms in India. The act is administered through the Ministry of Corporate Affairs. The act is not applicable to Limited Liability Partnerships, since they are governed by the Limited liability Partnership Act, 2008.

  1. Documents Required
  • Two color photographs of all partners.
  • Id proof of all partners like Pan card, Aadhar card etc.
  • Current office address proof like valid rent agreement, property document, noc from the landlord (if rented).
  • Proposed name of Partnership and nature of business.
  • Partnership draft deed.
  1. Annual/Periodical Compliances
  • Preparation of financial statement.
  • Filling of Income Tax return
  • Availing Tax Audit report (If applicable)
  • Filling of Tax deduction or collection at source return (If applicable)
  • Filling Monthly or Quaterly GST return (If applicable)
  • Other Compliances as applicable

LIMITED LIABILITY PARTNERSHIP

  1. What is LLP

A limited liability partnership is a new form of legal business entity governed by Limited Liability Partnership Act 2008. This is the business form that would combine the flexibility of a partnership firm and the advantages of a company having limited liability.

LLP allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement. It is useful for small and medium enterprises as it has less compliance requirement as compare to company.

  1. Features of LLP
  • It is a corporate body as well as legal entity separate from its partners. It has perpetual succession.
  • It gives the benefits of limited liability of partners that would limit up to their share only.
  • LLP would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.
  • No partner would be liable on account of the independent actions of other partners.
  • LLP shall maintain annual accounts. However, audit of the accounts is required only if the contribution exceeds Rs. 25 lakhs or annual turnover exceeds Rs.40 lakhs.
  1. How it is different from Partnership

An LLP is to some extent similar to a partnership business, apart from the fact that individual members have limited liabilities to any debts involved, compared to the usual partnership business.

Apart from this, LLP is more regulated form of business and has more compliances as compared to partnership as it is regulated by Ministry of corporate affairs.

  1. Procedure

The Registrar of Companies (ROC) is the authority having jurisdiction over the incorporation. The steps are as follow-

  • Decide on the Partners and the Designated Partners.
  • Obtain a digital signature certificate of all Partners.
  • Obtain Designated Partner Identification Number (DPIN) of all partners.
  • Decide on the name of the LLP and check whether it is available.
  • Draft the LLP agreement
  • File the LLP Agreement, incorporation documents and obtain the Certificate of Incorporation.
  1. Documents/Info Required
  • Passport Size photo of all partners.
  • ID and Address proof like PAN and Aadhar of all Partners.
  • Name of the proposed Partnership and nature of business.
  • Address proof of office of LLP.
  • Other information like capital requirement, Profit sharing etc.
  1. Annual/Periodical Compliances
  • Preparation of financial statement.
  • Filling of Income Tax return
  • Availing Tax Audit report (If applicable)
  • Filling of Tax deduction or collection at source return (If applicable)
  • Filling Monthly or Quaterly GST return (If applicable)
  • Filling of Annual compliances with Registrar of Company.
  • Other Compliances as applicable

Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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