Difference between Limited Liability Partnership and Partnership Firm

Limited Liability Partnership and Partnership Firm are two different concepts. The former is a form of organisation; however, the latter is a relationship among people who share mutual interest.

What is a Limited Liability Partnership?

A Limited Liability Partnership is a form of partnership where all or some of the partners have liability limited to their capital contribution. No personal property of such partners can be used for paying off the liabilities of the firm. In simple, we can say that a Limited Liability Partnership is a hybrid form of a partnership and a company. A limited Liability Partnership has features of a partnership, along with some of the features of the Company, i.e., limited liability, separate legal entity, perpetual succession, right to hold properties in the name of the firm, a common seal, etc. However, the power to conduct the business directly is restrained by the partners. So, a Limited Liability Partnership is a modified version of a partnership under which the partners can enjoy the benefits of a corporate body.

What is a Partnership?

A Partnership generally means a relationship amongst people sharing a mutual interest. In accountancy, a partnership means a business set up together by two or more persons sharing a common interest to earn a profit. The concept of partnership is a solution to the problems of the sole proprietorship, such as a single person bearing the risk, investing, and managing the capital alone. Hence, it can be concluded that a partnership is an agreement where two or more people agree to conduct a business together or any one of them acting on behalf of others, sharing risk, and investing capital together into a joint business to earn profit. In India, the partnership business is governed by The Indian Partnership Act, 1932. 

Difference Between Limited Liability Partnership and Partnership Firm

Basis	Limited Liability Partnership	Partnership Firm
Legal Identity	A Limited Liability Partnership has a separate legal identity in the eyes of law.	An Ordinary Partnership does not have a separate legal identity apart from its partners.
Applicable Act	A Limited Liability Partnership is governed under the Limited Liability Partnership Act, 2008.	A partnership firm is governed under the section of the Partnership Act, 1932.
Maximum number of partners	There is no upper limit of partners specified.	A partnership firm can have a maximum of 50 members as per the Companies Act, 2013.
Minor partner	A Limited Liability Partnership cannot have a minor as a partner.	A minor can join as a partner in a partnership firm.
Liability	In a Limited Liability Partnership, all or some of the partners shall have liability limited to their capital contribution.	Partners have unlimited liability,i.e., the personal assets of the partners can be used to pay the debts of the firm.
Establishment	A Limited Liability Partnership is created by the Law.	A partnership firm comes into existence under a contract.
Perpetual Succession	A Limited Liability Partnership continues to exist despite partners leaving or joining the firm.	A partnership agreement comes to end whenever a partner leaves or a new one joins a firm.
Common Seal	A Limited Liability Partnership has a common seal that serves as a signature of the firm.	There is no concept of the common seal. The documents are signed by the partners jointly or by any one of the partners on the behalf of the others.
Ownership of the assets	A Limited Liability Partnership can own the assets in its own name.	An asset of the firm is owned by the partners jointly.
Right to sue	A Limited Liability Partnership can sue or can be sued by others in its own name.	A partnership firm cannot sue nor can be sued by others in its own name. The partners are held responsible for all the acts of the firm.
Binding Documents	A Limited Liability Partnership is bound by an agreement.	A Partnership Deed is a major binding document.
Registration Requirement	It is mandatory to register a Limited Liability Partnership under the Limited Liability Partnership Act, 2008.	Registration of the partnership is optional.