FreeCompliancePartnership firm vs LLP: differences that matter
A traditional partnership firm under the Indian Partnership Act, 1932 is easy to start: a partnership deed and, optionally, registration with the state Registrar of Firms. An LLP takes a little more work but gives every partner limited liability. For most new businesses with more than one owner, that single difference decides it.
Comparison
| Partnership firm | LLP | |
|---|---|---|
| Law | Indian Partnership Act, 1932 | LLP Act, 2008 |
| Registration | Optional, with state Registrar of Firms | Mandatory, with MCA |
| Separate legal entity | No | Yes |
| Liability of partners | Unlimited, joint and several | Limited to agreed contribution |
| Maximum partners | 50 (under Companies Act rules) | No limit |
| Continuity | Can dissolve on death or exit of a partner | Perpetual succession |
| Annual MCA filings | None | Form 8 and Form 11 |
| Income tax rate | 30% plus surcharge and cess | 30% plus surcharge and cess |
Tax treatment is largely the same: the entity pays tax on profit, and partners' share of profit is exempt in their hands. Interest and remuneration to partners are deductible within limits for both.
Why unregistered partnerships are risky
Registration of a partnership firm is optional, but Section 69 of the Partnership Act stops an unregistered firm from suing third parties or its partners to enforce contract rights. If you stay a partnership, register it.
Converting a partnership into an LLP
A partnership firm can convert into an LLP by filing Form 17 along with FiLLiP, with the consent of all partners. All partners of the firm must become partners of the LLP. Assets, liabilities and contracts transfer to the LLP automatically.
See LLP registration process for the forms involved.
Frequently asked questions
This guide is general information, not legal advice. Government fees and procedures change; confirm current figures before you file.
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