LLP Vs Partnership Firm
Most of the people who look to incorporate an LLP are always confused between registering an LLP or registering a Partnership Firm. Though both these business structures have many similarities, there are some striking distinct features of each of them.
- Registration: LLP is registered under the “Limited Liability Partnership Act, 2008”. It is created by law. It has to be registered under the Registrar Of Companies. Whereas a partnership is registered under “ The Partnership Act, 1932” and is created by contract. A partnership may be registered or unregistered. It has to be registered under the ROF- Registrar of Firms.
- Time is taken to incorporate: The registration process of an LLP takes about 7-10 days whereas a Partnership Firm is easier to form and can be formed within 5-7 days.
- Name of the Enterprise: It is mandatory for an LLP to have “LLP” as a suffix but this is not the case with a partnership firm. A partnership firm can have any name.
- Partners: There is no upper limit of the number of partners an LLP can have. Whereas a Partnership can have a maximum of 20 partners only including minors. An LLP cannot have minor partners.
- Foreign Direct Investment: FDI is possible only in the case of an LLP. A partnership cannot have FDI.
- Compliance and Taxation: LLP has to file annual returns with the ROC along with the Income Tax returns. A partnership firm does not have any annual filing except income tax returns.
- Perpetual succession: LLP has perpetual succession but a partnership firm does not have perpetual succession.
- Purchase of property: LLP can purchase a property in its name. But a partnership firm cannot do so. It can buy property in the name of its partners.
- Limited Liability: The liability of members of LLP is limited to the capital contribution made by each. But the liability of partners in the Partnership Firm is unlimited.
- Dissolution: An LLP cannot be dissolved by the act of its members. A partnership can be dissolved by one or more of its partners.
LLP form of Business Structure has gained popularity these days for structured form working with a group of professionals. It has the benefits of the flexibility of a partnership firm as well as the corporate structure of a Private Limited Company.
But still, Partnership firms rule the core unorganized sector of business in India. It is the most popular form of business structure when working in a closed known group of people.
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