A partnership is a special type of contract and is a relation between two or more persons who have agreed to share profits of a business run by all or any one of them acting for all. The essence of a partnership is a contract between partners. It is mandatory for partners to share profits among themselves.
DIFFERENCE BETWEEN LLP & PARTNERSHIP
Cost: The price for registration of LLP is generally more than the price for registration of a partnership firm.
Authority: LLPs are registered in India under the Ministry of Corporate Affairs (MCA), governed by the Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective government during which the firm is registered.
Limited Liability Protection: the most advantage of a limited liability Partnership over a conventional partnership firm is that in an LLP, one partner isn’t responsible or accountable for another partner’s misconduct or negligence.
Number of Partners: LLPs and Partnership Firms must compulsorily have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of two because of death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, just in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a replacement Partner to fill the position without dissolution of the LLP
A partnership is one of the oldest business structures in India and is governed by the Indian Partnership Act, 1932. A partnership firm does not have an independent status apart from the partners constituting it. A partnership is not a legal entity; it has a limited identity for the purpose of tax laws. Any two people who are capable of entering into a contract can start a partnership business under an agreement called a partnership deed. The partnership agreement can be oral or written. It is not mandatory to register a partnership deed, but it is advisable to do so for evidential purposes since a firm cannot file a suit against a third party if it is unregistered.
Forming a partnership firm is simple since it does not have to be registered to start operations. A partner is an agent of the firm and all other partners. Each partner is liable for the actions of the other partners.
Documents for Partnership Registration
Basic document for registering a partnership firm is the executed partnership deed.
List of Other Documents
Partnership Deed Signed by all Partners
Primary ID – Permanent Account Number (PAN)
Additional ID – Aadhaar Card
Latest Address Proof: Telephone Bill or
Electricity Bill or
Bank Statement or Bank Passbook with latest entries
Advantages of Partnership Firm
Simple to Form and Easy to Operate
A Partnership is very simple to form and easy to manage condisering the regultory requiremets of Limited Company or Limited Liability Partnership.
Registration is not Mandatory
Registration of Partnership under the Partnership Act is not Mandatory. It is optional to the partners of the Firm. However, an unregistered partnership may face difficulties in getting the agreement terms enforced under law.
Simple Compliance Needs
Regulatory compliance requirements of partnership are much simpler compared to Limited Companies and LLP. However, the compliances related to Taxation and other operational matters are equally applicable to Partnership.