Sr No.

Traditional Partnership

Limited Liability Partnership

Distinctions

1.

Partnership is registered under Indian Partnership Act, 1932. Registration is not mandatory.

L.L.P is incorporated under Limited Liability Partnership Act, 2008. Incorporation is mandatory.

2.

Partnership is created by contract.

Limited Liability Partnership is created by law.

3.

Not a legal entity separate from its partners.

It is a legal entity separate from its partners, having perpetual succession.

4.

Unlimited personal liability of each partner for dues of the partnership firm. Personal property of each partner also liable.

No personal Liability of partner, except in case of fraud.

5.

The name of the entity can be as per the choice

The name should contain “Limited Liability Partnership” or “LLP” as suffix

6.

The cost of formation of partnership firm is negligible.

The cost of formation of an LLP is comparatively lesser than the formation of the Company.

7.

It does not have perpetual succession as this depends upon the will of the partner.

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

8.

Partnership deed/ agreement is executed.

‘Incorporation Document’ is required to be executed. In addition, LLP agreement is required in almost all cases, though such LLP agreement is not mandatory.

9.

Documents are required to be filed with Registrar of Firms (of respective state).

Registrar of Companies (ROC) is the administrating authority.

10.

Death of Partner dissolves a firm, in absence of agreement.

Death of Partner does not dissolve LLP.

11.

Minimum two and maximum twenty partners

Minimum two partners. No limit on maximum number of Partners.

12.

Each partner can take part in business of firm.

Each partner can take part in business of firm, but LLP Agreement can provide to the contrary.

13.

All partners are liable for statutory compliances under partnership Act

Only designated partners are liable for statutory compliances as are required under LLP act (not necessarily in respect of other Acts)

14.

Partner cannot enter into business with firm, though he can give loan to firm.

Partner of LLP can enter into business with LLP. He can also give loans to LLP.

15.

Every partner of firm is agent of firm and also of other partners. He can bind partnership firm as well as other partners by his acts.

Every partner of LLP is a agent of LLP but not of other partners. Thus, he can bind LLP by his acts but not other partners.

16.

Partnership firm can be dissolved

LLP can be wound up

17.

No specific provision to enter into compromise, arrangement, amalgamation, reconstruction etc. This can be done only under civil Laws.

LLP can enter into compromise, arrangement, amalgamation, reconstruction etc.

18.

Only registered partnership can sue the third party

A LLP is a legal entity can sue and be sued.

19.

Foreign nationals can not form Partnership firm in India

Foreign Nationals can be a Partner in a LLP.

20.

Partners have joint ownership of all the assets belonging to partnership firm.

The LLP independent of the partners has ownership of assets.

21.

The partners are not required to obtain any identification number.

The Designated Partners are required to obtain Designated Partner Identification Number (DPIN) before being appointed as Designated Partner in the LLP.

22.

There is no requirement of Digital Signature Certificate.

As forms are filed electronically, Digital Signature Certificate of at least one designated partner is required.

23.

A person can be admitted as a partner as per the Partnership Deed.

A person can be admitted as Partner as per the LLP Agreement.

24.

A person can cease to be a partner as per the agreement.

A person can cease to be a partner as per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP.

25.

The ownership of the partner is evidenced by Partnership Deed

The ownership of the partner is evidenced by LLP Agreement.

26.

Partnership firms are required to have only tax audit of their accounts as per the provisions of Income Tax Act, 1961.

All LLP except those having turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act, 2008.

Similarities

1.

Liability of a person for ‘holding out, i.e. not representing himself as partner, though he is not
Partner of firm entitled to remuneration only if partnership agreement so provides

Liability of a person for ‘holding out, i.e. not representing himself as partner, though he is not partner of the firm (clause 29 of LLP Bill, 2008)
Partner of firm entitled to remuneration only if partnership agreement so provides

2.

Rights of partnership can be assigned

Rights of partnership can be assigned

3.

In case of a death of a partner, the legal heirs have the right to get the refund of the capital contribution plus share in accumulated profits, if any. Legal heirs will not become the partners.

In case of a death of a partner, the legal heirs have the right to get the refund of the capital contribution plus share in accumulated profits, if any. Legal heirs will not become the partners.