Benefits of Selecting LLP over Partnership Firm, advantages of LLP, Why it is benefit to select LLP over Partnership firm, difference between LLP and Partnership, What is LLP, Ebizfiling

A complete guide on Benefits of Selecting LLP over Partnership Firm

Benefits of Selecting LLP over Partnership Firm

In this blog, we will look at the advantages of LLP (Limited Liability Partnership), “Why it is beneficial to select LLP over Partnership Firm?”, the difference between LLP and Partnership Firm. Let’s have a look at what is LLP and Partnership Firm, before going towards the benefits of choosing LLP over Partnership Firm.


LLPs and Partnership Firms are business entities that are formed when two or more people join forces to form a single entity. In addition, the profits and losses of these firms are shared among the participants in accordance with their agreement.


What is LLP (Limited Liability Partnership)?  

A Limited Liability Partnership (LLP) is one in which some or all of the partners are limited in their liability. As a result, it can display aspects of partnerships and businesses. Each partner in an LLP is not responsible or liable for the misbehavior or carelessness of another partner.

What is a Partnership Firm?

The Partnership Act of 1932 governs partnership firms in India. A partnership is defined as an agreement between individuals who have agreed to share earnings from a business carried on by all or any one of them acting on behalf of all.

Features of LLP (Limited Liability Partnership)

  • LLP must keep annual accounts that reflect the truthful and fair status of its activities. Every LLP must file an annual statement of accounts and solvency with the Registrar.
  • The liability of the partners will be limited to the decided contribution in LLP.
  • There is a requirement of at least 2 partners, also there is a requirement to have at least 2 designated partners, from which one should be an Indian resident.
  • Because it is created through a legal process and has all of the rights of an individual, due to which an LLP can hold a separate legal entity title.

Advantages of LLP (Limited Liability Partnership)

  • The liability of the partners is limited to the amount of money they invest in a Limited Liability Partnership (LLP). Unless fraud is discovered, the partner’s personal assets are protected from the LLP’s liabilities.
  • An LLP (Limited Liability Partnership) is a separate legal entity. Due to which it gives rights to the LLP to sue and to be sued. Furthermore, one partner is not liable or responsible for the misbehavior or neglect of the other.
  • LLP (Limited Liability Partnership) is significantly easier and less expensive to administer than a Private Limited Company. While in Private Limited Company needs to appoint an auditor and needs to fulfill all requirements imposed by the Indian Government.
  • For establishing an LLP there is no requirement of minimum capital. An LLP can be founded with the smallest amount of money possible. Furthermore, a partner’s contribution can be in the form of tangible, movable, immovable, or intangible property, or any other way.
  • The process of converting LLP over Partnership Firm is easy and simple, along with that it will help partners to protect their personal assets at the time of liquidation or at the time of any crisis.

Benefits of LLP over Partnership firm, Partnership Firm, LLP Regsitration

Difference between LLP and Partnership Firm

LLP (Limited Liability Partnership)

Partnership Firm

A Limited Liability Partnership (LLP) is a type of business entity that combines the characteristics of a body corporate and a partnership.

A Partnership Firm is described as a group of people who have joined together to make money from a business that is run by all of the partners or by one partner on behalf of all of the partners.

In the case of an LLP, however, the partners are the agents of the partners.

In a partnership, the partners operate as the firm’s and the partners’ agents.

Limited Liability Partnership (LLP) has the ability to sue and be sued in its own name.

A Partnership Firm cannot sign a contract in its own name.

Limited Liability Partnership Act, 2008, is the law applicable to the LLP.

Partnership Firm needs to follow the rules and regulation set by Indian Partnership Act, 1932.

The number of partners in an LLP must be at least 2, with no higher limit.

A Partnership Firm can have a minimum of 2 participants and a maximum of 20.

LLP is considered as a legal separate entity.

A Partnership Firm is not considered as a separate legal entity.


Each partner in the partnership owns a portion of the company. This is a less expensive and more customizable company form than a company, whereas a Limited Liability Partnership (LLP) combines the benefits of both a partnership and an LLP by limiting the partners’ liability.

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Author: zarana-mehta

Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.

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