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Nandhakumar & Sundaran, Chartered


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Comparison between Partnership Firm,
Services
Audit & Assurance
Company and LLP
Due Diligence
Accounting Service
Advisory Services Category Partnership Company LLP
Indirect Tax
Services
Management Prevailing Law Partnership is Companies are Limited Liability
Consulting prevailed by The prevailed by Partnership are
Resources Indian Partnership Companies Act, prevailed by The
Compliance Act, 1932 and 1956 Limited Liability
Calendar various Rules Partnership Act,
Company & LLP made there under 2008 and various
Formation
Rules made there
Comparison
under
between
Partnership Firm,
Company and LLP Registration Registration is Registration with Registration with
Contact Us optional Registrar of ROC Registrar of LLP
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Creation Created by Created by Law Created by Law
Contract

Distinct entity Not a separate Is a separate legal Is a separate legal


legal entity entity under the entity under the
Companies Act, Limited Liability
1956. Partnership Act,
2008.

Name of Entity Any name as per Name to contain Name to contain


choice 'Limited' in case of 'Limited Liability
Public Company Partnership' or 'LLP'
or 'Private Limited' as suffix.
in case of Private
Company as suffix.

Cost of Formation The Cost of Minimum Statutory The cost of


Formation is fee for Formation is statutory
negligible incorporation of filling fees,
Private Company comparatively lesser
is Rs.6,000/- and than the cost of
minimum Statutory formation of
fee for Company.
incorporation of
Public Company is
Rs. 19,000/-

Perpetual It does not have It has perpetual It has perpetual

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Succession perpetual succession and succession and
succession as this members may partners may come
depends upon the come and go. and go
will of partners

Charter Document Partnership Deed Memorandum and LLP Agreement is a


is a charter of the Article of charter of the LLP
firm which denotes Association is the which denotes its
its scope of charter of the scope of operation
operation and company that and rights and duties
rights and duties of defines its scope of of the partners vis--
the partners operation. vis LLP.

Common Seal There is no It denotes the It denotes the


concept of signature of the signature and LLP
common seal in company and may have its own
partnership every company common seal,
shall have its own dependant upon the
common seal terms of the
Agreement

Formalities of In case of Various eforms Various eforms are


Incorporation registration, along the filled with Registrar of
Partnership Deed Memorandum & LLP with prescribed
along with form / Articles of fees
affidavit required Association are
to be filled with filled with Registrar
Registrar of firms of Companies with
along with requisite prescribed fees
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filing fee

Legal Proceedings Only registered A company is a A LLP is a legal entity


partnership can legal entity which can sue and be sued
sue third party can sue and be
sued

Foreign Foreign Nationals Foreign Nationals Foreign Nationals can


Participation can not form can be a member be a Partner in a
Partnership Firm in in a Company. LLP.
India

Number of Minimum 2 and 2 to 50 members Minimum 2 partners


Members Maximum 20 in case of Private and there is no
Company and limitation of maximum
Minimum 7 number of partners.
members in case of
Public Company.

Ownership of Partners have joint The company The LLP independent


Assets ownership of all independent of the of the partners has
the assets members has ownership of assets
belonging to ownership of
partnership firm assets

Rights / Duties / Rights / Duties / Rights / Duties / Rights / Duties /


obligation of the obligation of the obligation of the obligation of the
Partners / partners are directors are partners are governed
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Managing Partners governed by governed by AOA by LLP Agreement.
/ Directors Partnership Deed. and resolution
passed by
shareholders or
directors.

Liability of Unlimited. Partners Generally limited to Limited, to the extent


Partners/Members are severally and the amount their contribution
jointly liable for required to be paid towards LLP, except
actions of other up on each share. in case of intentional
partners and the fraud or wrongful act
firm and liability of omission or
extend to their commission by the
personal assets. partner.

Tax Liability Income of Income of Income of LLP is


Partnership is Company is Taxed taxed at a Flat rate of
taxed at a Flat rate at a Flat rate of 30% plus education
of 30% plus 30% Plus cess as applicable.
education cess as surcharge as
applicable. applicable.

Principal/Agent Partners are agents The directors act Partners act as agents
Relationship of the firm and as agents of the of LLP and not of the
other partners. company and not other partners.
of the members

Transfer / Not transferable. Ownership is easily Regulations relating to

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Inheritance of In case of death transferable. transfer are governed
Rights the legal heir by the LLP
receives the Agreement .
financial value of
share.

Transfer of Share / In case of death of In case of death of In case of death of a


Partnership rights in a partner, the legal member, shares partner, the legal heirs
case of death heirs have the right are transmitted to have the right to get
to get the refund of the legal heirs. the refund of the
the capital capital contribution +
contribution + share in accumulated
share in profits, if any. Legal
accumulated heirs will not become
profits, if any. partners
Legal heirs will not
become partners

Director The partners are Each director is Each Designated


Identification not required to required to have a Partners is required to
Number / obtain any Director have a DPIN before
Designated Partner identification Identification being appointed as
Identification number Number before Designated Partner of
Number (DIN / being appointed as LLP.
DPIN) Director of any
company.

Digital Signature There is no As eforms are As eforms are filled


requirement of filled electronically, electronically, atleast
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obtaining Digital atleast one one Designated
Signature Director should Partner should have
have Digital Digital Signatures.
Signatures

Dissolution By agreement, Voluntary or by Voluntary or by order


mutual consent, order of National of National Company
insolvency, certain Company Law Law Tribunal.
contingencies, and Tribunal.
by court order.

Transferability of A partner can A member can A partner can transfer


Interest transfer his interest freely transfer his his interest subject to
subject to the interest the LLP Agreement
Partnership
Agreement

Admission as A person can be A person can A person can be


partner / member admitted as a become member admitted as a partner
partner as per the by buying shares of as per the LLP
partnership a company. Agreement
Agreement

Cessation as A person can A member / A person can cease


partner / member cease to be a shareholder can to be a partner as per
partner as per the cease to be a the LLP Agreement
agreement member by selling or in absence of the
his shares. same by giving 30

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days prior notice to
the LLP.

Requirement of No requirement of Directors are Designated Partners


Managerial any managerial; appointed to are responsible for
Personnel for day to personnel , manage the managing the day to
day administration partners business and other day business and
themselves statutory other statutory
administer the compliances on compliances.
business behalf of the
members.

Statutory Meetings There is no Board Meetings There is no provision


provision in regard and General in regard to holding of
to holding of any Meetings are any meeting.
meeting required to
conducted at
appropriate time.

Maintenance of There is no The proceedings of A LLP by agreement


Minutes concept of any meeting of the may decide to record
minutes board of directors the proceedings of
/ shareholders are meetings of the
required to be Partners/Designated
recorded in Partners
minutes.

Voting Rights It depends upon Voting rights are Voting rights shall be

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the partnership decided as per the as decided as per the
Agreement number of shares terms of LLP
held by the Agreement.
members.

Remuneration of The firm can pay Company can pay Remuneration to


Managerial remuneration to its remuneration to its partner will depend
Personnel for day to partners Directors subject upon LLP
day administration to law. Agreement.

Contracts with Partners are free Restrictions on Partners are free to


Partners/Director to enter into any Board regarding enter into any
contract. some specified contract.
contracts, in which
directors are
interested.

Maintenance of Required to Required to Required to maintain


Statutory Records maintain books of maintain books of books of accounts.
accounts as Tax accounts, statutory
laws registers, minutes
etc.

Annual Filing No return is Annual Financial Annual Statement of


required to be filed Statement and accounts and
with Registrar of Annual Return is Solvency & Annual
Firms required to be filed Return is required to
with the Registrar be filed with Registrar

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of Companies of Companies every
every year. year.

Share Certificate The ownership of Share Certificates The ownership of the


the partners in the are proof of partners in the firm is
firm is evidenced ownership of evidenced by LLP
by Partnership shares held by the Agreement.
Deed, if any. members in the
Company

Audit of accounts Partnership firms Companies are All LLP except for
are only required required to get those having turnover
to have tax audit of their accounts less than Rs.40 Lacs
their accounts as audited annually as or Rs.25 Lacs
per the provisions per the provisions contribution in any
of the Income Tax of the Companies financial year are
Act Act, 1956, required to get their
accounts audited
annually as per the
provisions of LLP
Act 2008.

Applicability of No Accounting Companies have to The necessary rules in


Accounting Standards are mandatorily regard to the
Standards. applicable comply with application of
accounting accounting standards
standards are not yet issued.

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Compromise / Partnership cannot Companies can LLPs can enter into
arrangements / merge with other enter into Compromise /
merger / firm or enter into Compromise / arrangements /
amalgamation compromise or arrangements / merger /
arrangement with merger / amalgamation
creditors or amalgamation
partners

Oppression and No remedy exist , Provisions No provision relating


mismanagement in case of providing for to redressal in case of
oppression of any remedy against oppression and
partner or Oppression and mismanagement
mismanagement of mismanagement
Partnership exists

Credit Worthiness Creditworthiness Due to Stringent Will enjoy


of organization of firm depends Compliances & Comparatively higher
upon goodwill and disclosures under creditworthiness from
creditworthiness of various laws, Partnership due to
its partners Companies enjoys Stringent regulatory
high degree of framework but lesser
creditworthiness. than a company.

Whistle Blowing No such provision No such provision Provision has been


is provided under is provided under made to provide
Partnership Act, the Companies protection to
1932 Act, 1956. employees &
partners, providing
useful information
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during an investigation
or convicting any
partner or firm.

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