Comparison Between Business Forms
Comparison Between Business Forms
Comparison Between Business Forms
Prevailing Law Partnership is prevailed by Companies are prevailed Limited Liability Partnership
‘The Indian Partnership Act, by ‘Companies Act, 2013’ are prevailed by ‘The
1932’ and various Rules Limited Liability Partnership
made there under Act, 2008’ and various
Rules made there under
Distinct entity Not a separate legal entity Is a separate legal entity Is a separate legal entity
under the Companies Act, under the Limited Liability
2013. Partnership Act, 2008.
Name of Entity Any name as per choice Name to contain 'Limited' in Name to contain 'Limited
case of Public Company or Liability Partnership' or
'Private Limited' in case of 'LLP' as suffix.
Private Company as suffix.
Cost of Formation The Cost of Formation is Minimum Statutory fee for Minimum cost of Formation
negligible incorporation of Private of LLP is Rs. 800 only,
Company is Rs.6,000/- and comparatively much lesser
minimum Statutory fee for than the cost of formation
incorporation of Public of Company
Company is Rs. 19,000/-
Perpetual Succession It does not have perpetual It has perpetual succession It has perpetual succession
succession as this depends and members may come and partners may come
upon the will of partners and go. and go
Charter Document Partnership Deed is a Memorandum and Article of LLP Agreement is a charter
charter of the firm which Association is the charter of of the LLP which denotes
denotes its scope of the company which defines its scope of operation and
operation and rights and its scope of operation. rights and duties of the
duties of the partners partners vis-à-vis LLP.
Common Seal There is no concept of It denotes the signature of It denotes the signature
common seal in partnership the company and every and LLP may have its own
company may have its own common seal, dependant
common seal upon the terms of the
Agreement
Formalities of In case of registration, Various eforms along the Various eForms and the
Incorporation Partnership Deed along Memorandum & Articles of LLP Agreement are filed
with form / affidavit required Association are filled with with the Registrar of LLP
to be filled with Registrar of Registrar of Companies along with the prescribed
firms along with requisite with prescribed fees Fee.
filing fee
Time line It will take 7 days (approx.) It will take 10 days It will take 10 days
to incorporate (approx.) to incorporate (approx.) to incorporate
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(inclusive of time taken to (inclusive of time taken to
obtain DIN) obtain DPN)
Legal Proceedings Only registered partnership A company is a legal entity A LLP is a legal entity can
can sue third party which can sue and be sued sue and be sued
Foreign Participation Foreign Nationals can not Foreign Nationals can be a Foreign Nationals can be a
form Partnership Firm in member in a Company. Partner in a LLP.
India
Number of Members Minimum 2 and Maximum 2 to 200 members in case Minimum 2 partners and
200 of Private Company and their is no limitation of
Minimum 7 members in maximum number of
case of Public Company. partners.
Ownership of Assets Partners have joint The company independent The LLP independent of the
ownership of all the assets of the members has partners has ownership of
belonging to partnership ownership of assets assets
firm
Rights / Duties / Rights / Duties / obligation Rights / Duties / obligation Rights / Duties / obligation
obligation of the Partners of the partners are of the directors are of the partners are
/ Managing Partners / governed by Partnership governed by AOA and governed by LLP
Directors Deed. resolution passed by Agreement.
shareholders or directors.
Liability of Unlimited. Partners are Generally limited to the Limited, to the extent their
Partners/Members severally and jointly liable amount required to be paid contribution towards LLP,
for actions of other partners up on each share. except in case of intentional
and the firm and liability fraud or wrongful act of
extend to their personal omission or commission by
assets. the partner.
Principal/Agent Partners are agents of the The directors act as agents Partners act as agents of
Relationship firm and other partners. of the company and not of LLP and not of the other
the members partners.
Director Identification The partners are not Each director is required to Each Designated Partners
Number(DIN) required to obtain any have a Director is required to have a DIN
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identification number Identification Number before being appointed as
before being appointed as Designated Partner of LLP.
Director of any company.
Digital Signature There is no requirement of As eforms are filled As eforms are filled
obtaining Digital Signature electronically, atleast one electronically, atleast one
Director should have Digital Designated Partner should
Signatures have Digital Signatures.
Transferability of Interest A partner can transfer his A member can freely A partner can transfer his
interest subject to the transfer his interest interest subject to the LLP
Partnership Agreement Agreement
Admission as partner / A person can be admitted A person can become A person can be admitted
member as a partner as per the member by buying shares as a partner as per the LLP
partnership Agreement of a company. Agreement
Cessation as partner / A person can cease to be a A member / shareholder A person can cease to be a
member partner as per the can cease to be a member partner as per the LLP
agreement by selling his shares. Agreement or in absence of
the same by giving 30 days
prior notice to the LLP.
Maintenance of Minutes There is no concept of any The proceedings of meeting A LLP by agreement may
minutes of the board of directors / decide to record the
shareholders are required proceedings of meetings of
to be recorded in minutes. the Partners/Designated
Partners
Voting Rights It depends upon the Voting rights are decided as Voting rights shall be as
partnership Agreement per the number of shares decided as per the terms of
held by the members. LLP Agreement.
Remuneration of The firm can pay Company can pay Remuneration to partner
Managerial Personnel for remuneration to its partners remuneration to its will depend upon LLP
day to day administration Directors subject to law. Agreement.
Contracts with Partners are free to enter Restrictions on Board Partners are free to enter
Partners/Director into any contract. regarding some specified into any contract.
contracts, in which directors
are interested.
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Maintenance of Statutory Required to maintain books Required to maintain books Required to maintain books
Records of accounts as Tax laws of accounts, statutory of accounts.
registers, minutes etc.
Share Certificate The ownership of the Share Certificates are proof The ownership of the
partners in the firm is of ownership of shares held partners in the firm is
evidenced by Partnership by the members in the evidenced by LLP
Deed, if any. Company Agreement.
Audit of accounts Partnership firms are only Companies are required to All LLP except for those
required to have tax audit of get their accounts audited having turnover less than
their accounts as per the annually as per the Rs.40 Lacs or Rs.25 Lacs
provisions of the Income provisions of the contribution in any financial
Tax Act Companies Act, 2013, year are required to get
their accounts audited
annually as per the
provisions of LLP Act 2008.
Compromise / Partnership cannot merge Companies can enter into LLP’s can enter into
arrangements / merger / with other firm or enter into Compromise / Compromise /
amalgamation compromise or arrangements / merger / arrangements / merger /
arrangement with creditors amalgamation amalgamation
or partners
Oppression and No remedy exist , in case of Provisions providing for No provision relating to
mismanagement oppression of any partner remedy against Oppression redressal in case of
or mismanagement of and mismanagement exists oppression and
Partnership mismanagement
Whistle Blowing No such provision is Provision has been made Provision has been made
provided under Partnership under the Companies Act, to provide protection to
Act, 1932 2013. employees & partners,
providing useful information
during an investigation or
convicting any partner or
firm.
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