One of the common questions a businessman would ask is whether to form a Partnership Firm or a Limited Liability Partnership (LLP). Technically, an LLP has more advantages than a partnership firm. We could say that a Limited Liability Partnership combines some of the advantages of a Private Limited Company with those of a simple Partnership Firm. A business can register an LLP on the MCA Portal.
Features of Partnership Firm v/s LLP
| Attributes | Partnership Firm | Limited Liability Partnership |
|---|---|---|
| Separate Legal Entity | Not a separate legal entity | Separate legal entity different from its partners |
| Statute governing registration | Partnership Act, 1932 | Limited Liability Partnership Act, 2008 |
| Maximum Number of partners | Partnership Firm can have a maximum of 20 partners | LLP can have unlimited partners |
| Registration | The registration is not mandatory and can be voluntarily done with Registrar of Firms | LLP Registration is mandatory and possible online with the Ministry of Corporate Affairs (MCA) |
| Liability of Partners | The partner has unlimited liability. Even the personal assets of the partners can be annexed to pay off the debts of the partnership firm. | The liability of partner is Limited. Only the amount contributed by the partners to the firm can be used to pay off the debts of the partnership firm. |
| External Investment | Difficult to obtain | Easily Available |
| Credibility | Low | High |
| Audit of Accounts | Tax Audit as per provisions of Income Tax Act, 1961 is applicable | If Turnover exceeds Rs 40 Lakhs or contribution exceeds Rs 25 Lakhs, a statutory audit is applicable |
| Statutory Compliance | Partnership Firm need not file an annual return | LLP must finish annual compliances by filing forms on MCA Portal |
FAQs
Yes.we can convert an existing partnership firm into an LLP. You may simply comply with the provisions of the LLP Act. and fill Form 17 (MCA Form) along with Form 2 (MCA Form) for converting Partnership firm into LLP.
Yes. It is possible to can convert an existing company (Private or unlisted public company)into an LLP and take advantage of Limited Liablity . You may simply comply with the provision of the LLP Act and fill Form 17 (MCA Form) along with Form 2 (MCA Form) for converting your Private/public company into LLP.
No, only private/unlisted public company or a partnership firm can convert into an LLP