Intra Legem

Company Vs LLP Vs Partnership

September 12, 2016

COMPARATIVE ANALYSIS BETWEEN A COMPANY, LIMITED LIABILITY PARTNERSHIP (LLP) AND TRADITIONAL PARTNERSHIP FIRM [1][2]
Introduction
An entrepreneur planning to start a new business venture has couple of questions before choosing a business entity
for its business. Its decision would be based on a number of factors, viz. nature of business, cost of registration,
number of members, extent of compliances required, benefits that each entity brings to the business, etc. Further
with the introduction of the Companies Act, 2013 and concepts like LLP and One Person Company, entrepreneurs

1 For the purpose of the comparison table,

"Company” shall refer to only private and public companies. Company limited by guarantee, One Person Companies, Section 25 companies, etc. have been excluded from the purview of the analysis.
"Partnership" would only imply a registered partnership firm. Unregistered partnership firm has been excluded from the purview of the analysis.
2 "Yes" would generally mean yes, unless prohibited, and "No"" would generally mean no, unless permitted;
"#" denotes that a particular provision maybe subject to or contains additional terms and conditions
have a wide array of business entities to choice from. Therefore, it is wise for an entrepreneur to make a comparison between a Company, a LLP and a partnership
Firm and understand the legalities, advantages and disadvantages of each of them.

We have, herein below, provided a comparison of some of the features of a Partnership Firm vis-à-vis a Limited Liability Partnership and a Company in the form of
frequently asked questions that entrepreneurs usually have prior to selecting a particular type of entity.

Company LLP Partnership Firm

What is the Governing Law? Companies Act, 2013 The Limited Liability The Indian Partnership
and applicable Partnership Act, 2008. Act, 1932.
provisions of the
Companies Act, 1956
and rules made
thereunder.
Whether registration is Yes. Registrar of Yes. Registrar of LLP. Yes. Registrar of Firms.
mandatory and if yes, which Companies.
is the authority under which
registration is required to be
made?

Whether the entity is separate Yes. Yes. No.

and distinct?
 Company LLP Partnership Firm
What are requirements To contain the To contain To contain
pertaining to the name following suffix: “Limited brackets and word
of entity?#  “Limited” in case Liability (Registered)
of public Partnership” or immediately after
company; or
“LLP”, as a suffix its name.
 “Private
Limited” in case
of private
company.
Whether the entity has Yes. Yes. No.
perpetual succession?
What are the charter / Memorandum of LLP Agreement Partnership Deed
incorporation documents Association and Article
required? of
Association
Whether the charter / Yes. Yes. Yes.
incorporation documents
are open for public
inspection?
Whether the entity is Yes. No. # No.
required to have a The said requirement
common seal? may be made
optional or omitted,
subject to the
notification of the
press release dated
December 02, 2014 in
relation to the
proposed Companies
(Amendment) Bill,
2014.
 Company LLP Partnership Firm
Whether the entity can Yes. Yes. Yes.
sue?
Whether foreign Yes. # Yes. # No. #
participation is
permitted in the
entity?
What is the minimum  Minimum 2 Minim (t part (  Minimum 2
and maximum number (two) um wo 2ner n (two)
of members and maxim ) s o persons;
membership permissible maximum 200 um  Maximum
in each entity? limit) 10 (ten)
(two hundred)
members in persons (in
case of private case of
company; and banking
 Minimum 7 business)
(seven) and 20
 members in (twenty)
case of public persons (in
company (no case of non-
maximum limit) banking
business)

Whether the entity has Yes. Yes. No.

ownership of assets,
independent from its
member/partners?
What governs the rights, Articles of LLP Agreement Partnership Deed
duties, obligation of the Association, and the Governing and the Governing
partners / managing resolution passed by Law. Law.
partners / directors? shareholders or
directors and the
Governing Law.
 Company LLP Partnership
Firm
What is the Limited to the Limited, to Unlimited.
extent amount the extent of Partners are
of required to be the severally and
liability paid-up on contribution jointly liable
of the each share. towards for actions of
partners/members forming the other
? LLP.# partners and
the firm and
the liability
extends to
their personal
assets.
Whether the Yes. Flat rate of Yes. Flat rate Yes. Flat rate
income of the 30% plus of 30% plus of 30% plus
entity is subject to surcharge as education education
tax? And if yes, applicable. cess as cess as
then what is the applicable. applicable.
rate of income
tax?#

Who acts as the Directors Partners. Partners.

agent of the entity? a
nd
u
nder certain circumstances, the Key Managerial
Personnel.
What are the Ownership is Transfer is Not
provisions relating easily gove transferable.
to transfer / transferable.# rned by
inheritance of the
rights? LLP
Agreement.
What are the Shares are The legal The legal heirs
provisions relating transmitted to heirs have the have the right
to transfer of the legal heirs right to get to get the
shares / the refund of refund of the
partnership rights the capital capital
in case of death of contribution contribution
members/partners along with along with
? share in share in
accumulated accumulated
profits, if any. # profits, if any. #
 Company LLP Partnership Firm

What are the Director

requirements is for
Designated
a Director/Designated Partner?
No requirement.
required to have Partner is
a Director required to
Identification have a
Number prior to Designated
their Partner
appointment Identification
Number prior to
their
appointment.
What is the minimum 1(one). 1(one). No requirement.
number of Directors /
Designated Partners
that are required to
obtain Digital
Signature?
What are the Can be Can be Can be by
provisions for voluntary or voluntary or agreement,
dissolution of the involuntary or involuntary or mutual consent,
entity? # by an order of by an order of insolvency,
the High Court the High Court certain
or National or National contingencies,
Company Law Company Law and by court
Tribunal (once Tribunal (once order.
incorporated). incorporated).
Whether a member / Yes. No.# No.#
partner can transfer
their
interest?
Generally, what is the By acquiring As per the LLP As per the
procedure for a shares. Agreement. Partnership
member/ Deed.
partner to get admitted
into the entity?
 Company LLP Partnership
Firm
What is the By transferring As per the LLP As per the
procedure for the shares. Agreement or Partnership
cessation as in absence of Deed.
member/ partner of the same by
an entity? giving 30
(thirty) days
prior notice to
the LLP.
What is the Directors and Designated No
requirement Key of the Partners
managerialarepersonnel
requirement.
for day-to-day administration?
Managerial responsible Partners
Personnel are for managing themselves
appointed to the day to day administer the
manage the business and business
business and other
 other statutory
statutory compliances,
compliances
on behalf of
the
members.
What is the Subject to the Subject to the Subject to the
remuneration Governing Law. LLP Agreement. Partnership
required to be paid Deed.
by the entity to the
managerial
personnel for day-to-
day
administration?
What are the Board No provision. No provision.
statutory meetings Meeti
that are required to ngs and General
be conducted? Meetings. #

How are the voting As per the As per the As per the
rights of the number and terms of LLP terms of the
members/partners nature of Agreement. Partnership
determined? shares held. # Deed.
 Company LLP Partnership
Firm
What are the The proceedings The No provision.
provisions relating of meeting of proceedings of
to maintenance of the board of meetings of the
minutes for directors / Partners
meetings of entity? shareholders are /Designated
required to be Partners are
recorded in governed by
minutes. the provisions
of the LLP
Agreement.
What are the Books of Books of Books of
provisions relating to accounts, accounts. accounts.
maintenance statutory
of statutory records registers,
under the Governing minutes etc.
Law?
What are the Annual Financial Annual No
annual filings Statement and Statement of requirement.
required to be Annual Return accounts and
made by the entity? are required to Solvency and
be filed with the Annual Return
Registrar of is required to
Companies be filed with
every year. Registrar of LLP
every
year
What is the Share certificate The interest of The interest of
proof of isthe
proof
interest
of the
of partners
the members/partners
in the partners
in the
in entity?
ownership of the firm is the firm is
shares held by evidenced by evidenced by
the members. LLP Agreement. Partnership
Deed.
Can the entity Yes. Yes. No.
enter into
compromise /
arrangements /
merger /
amalgamation?
 Company LLP Partnership
Firm

Whether there are Yes. No. No.

any provisions made
by the entity with respect to oppression and
mismanagement?

Whether the entity Stringent LLP enjoys Creditworthine

enjoys credit Compliances and higher ss is dependent
worthiness? disclosures creditworth upon goodwill
under various iness and
laws, ensures than a creditworthines
high degree Partnership but s
of credit lesser than a of its partners.
worthiness. Company.
Conclusion

Thus the above factors would aid an entrepreneur to decide between an

appropriate business entity for its business.

Contributed by:
Prem Rajani, Managing Partner: prem@rajaniassociates.net
Tejasvini Shirodkar, Partner: tejasvini@rajaniassociates.net
Pearl Boga, Senior Associate: pboga@rajaniassociates.net
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This update only contains a summary/ limited description of the topic dealt with hereinabove for general information purposes and should not be construed as a legal opinion or be relied upon in
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