The emergence of LLPs has offered a whole new plethora of opportunities to small scale businesses. The legalising of LLPs also affords the previously missing/ now stronger statutory protection to a small scale business man who would earlier go for a partnership with massive liabilities.
While both require a minimum of two partners to be formed, some of the broad and primary differences between Partnerships and Limited Liability Partnerships (LLPs) are listed below:
1. A partnership is based essentially on an understanding between the partners and is not a legal entity. LLPs are legal entities.
2. In a partnership, the partners are jointly liable whereas in a LLP, the partners are liable only to the extent of their contribution to the partnership.
3. A partnership cannot have more than 20 partners while a LLP can have any number of partners (more than the minimum of 2).
4. The law does not mandate the registration of an ordinary partnership whereas it is mandatory to have an LLP registered.
5. A partnership does not necessarily need to have its balance sheets filed or audits conducted. On the contrary, both of these are mandatory for LLPs. If the turnover of an LLP is INR 40 Lakhs or more or the contributions are INR 25 Lakhs or more, legally, they need to have audit conducted.
6. In a partnership, the partners may select any name they please. An LLP's name shall have to be approved by the Registrar and be suffixed with LLP.
7. While in a partnership, even a minor can be a partner, this cannot be done in the case of LLPs. 24th November 2017 From India