What Separates an LLP from a Partnership Firm
Partners can do business through two different types of business structures: a Limited Liability Partnership (LLP) and a partnership firm. To start an LLP or a partnership firm, at least two people must be willing to become partners. A partnership firm is an old concept, whereas an LLP is a modern one.
The Limited Liability Partnership (LLP) Act, which was introduced in 2008, introduced the idea of an LLP. However, the Indian Partnership Act has been in place for establishing partnerships in India since 1932. Although establishing an LLP or partnership firm needs a collaboration between two parties, there are several variations between the two.
Limited Liability Company (LLP)
A corporate business structure known as an LLP offers the advantages of both a company and a partnership firm. It combines characteristics of both a business and a partnership firm, making it a hybrid between the two. An LLP is legally considered to be a separate legal entity and is responsible for all of its assets. The responsibility of a partner is only as much as their investment in the LLP. In an LLP, each partner is only accountable for their own conduct.
The LLP enables experts, businesspeople, and organisations involved in scientific and technological fields or offering services of any type to construct economically advantageous vehicles that meet their needs.
Partnership Firm
In India, one of the oldest types of business organisation is the partnership firm, which has enormous popularity. Since a partnership firm must adhere to a minimal set of laws and regulations, establishing one is simple.
A partnership is an arrangement between two or more people who pool their resources and money to support the business and who also agree to split the profits. When all of the partners/individuals sign a partnership agreement or deed and conduct business under the name of the partnership firm, the partnership firm is constituted.
A partnership firm does not need to be registered. Even though a partnership is not technically formed, the law recognises it, and all of the partners are liable for any damages that result.
Although an LLP and a partnership firm are similar types of companies, they differ in terms of how they operate, keep track of their finances, dissolve, etc. They are subject to several Acts and Rules. An entrepreneur can choose the best type of partnership structure for his or her business by being aware of their distinctions.
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