Limited Liability vs Regular Partnership Firm

LLP was created in 2010 in India to provide entrepreneurs with the option of a partnership alternative Firms. The reason for the introduction of a Limited Liability Partnership (LLP) was to provide a new type of business entity that has a lower liability for owners while at the same time being simple to manage. This article examines the critical distinctions between an LLP and a Partnership Firm. Anyways, you will need to have some aid with your HR department, and that is where you can partner with a global employer of record agency like INS Global Consulting.

Difference Between LLP and Partnership Firm

Extent of Liability

In an LLP, members are responsible for the number of their contributions in the LLP. They are not accountable to creditors outside of the LLP personally. If it is an entity that is a partnership, they are individually accountable to creditors. It is why many entrepreneurs are reluctant to become partners in an LLP. Thus, when incorporating an LLP, all the Partners are entitled to some protection from liability. So, partnership firms are better for small services based businesses like car washing business, export houses, franchise businesses etc.Whereas LLP is more suitable for professional services based business. 

Number of Partners

LLPs, as well as Partnership Firms, are required to be able to count at least two partners. The number of Partners in LLP is not limited to the amount of Partners in LLP can have. 

If a partnership firm is a Firm, if the number of Partners at any point falls to less than two due to the death, incapacitation, or resignation of one of the Partners, the firm would be dissolved. 

In contrast, when it comes to an LLP, if the total number of partners decreases below two, the sole partner can locate a replacement Partner to fill the vacancy without having to dissolve the LLP. If the LLP operates with a single Partner, The sole Partner would be the sole responsible for any commitments of the LLP to pay for that time.

Central Government vs. State Government

LLP is a distinct legal entity registered under the Ministry of Corporate Affairs of India. An LLP can move its registered office to any in the States and quickly create a bank account wherever in India.

Partnership companies are registered with the Registrar of Firms under state governments’ control. It is more complicated to transfer operations across India through a Partnership firm.

Perpetual Existence

LLP is a legal entity whose survival is not dependent on partners. Therefore, the partners of an LLP may change at times; however, it will not impact the LLP’s existence, continuity, or operations. For a Partnership Firm, the resignation or death of a Partner could have severe consequences, and the partnership will need to be reconfigured.

Cost for Registration

LLP registration can be done on the internet through any reliable service like Taxtolegal for a reasonable price. Partnership registration can also be done online with any legal service or startup provider.


In the first 30 days following the inception of an LLP and an LLP, Agreement must be executed and filed with the MCA. If an LLP cannot file the LLP contract or there isn’t an LLP agreement, the requirements mentioned in the First Schedule of the LLP Act govern the relationships between partners and the LLP. 

Even if there’s an agreement written in writing, there is no specific declaration of any of the issues addressed within the initial Schedule. The first Schedule will handle these issues.

If the Partnership Firm is a registered or non-registered Partnership Firm, the Partnership Deed will define the rights and obligations of the Partners in the partnership.


Members may be added to an LLP during incorporation, or after incorporation, with the approval of an existing partner. The following individuals are eligible to be members of an LLP:

  • Individuals
  • Limited Liability Partnership
  • Companies
  • Foreign Limited Liability Partnerships
  • Foreign Companies.

A Hindu Undivided Family, represented by its Karta, could be a member of an LLP. But, there isn’t a statement in the Act regarding admitting HUF.

A minor is not allowed to be a partner in an LLP. In an entity that is a partnership, minors may be admitted to the partnership to benefit the partner.

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