INTRODUCTION TO LIMITED LIABILITY PARTNERSHIP IN INDIA

PARTICULARS

PARTNERSHIP FIRM

LIMITED LIABILITY PARTNERSHIP

PRIVATE LIMITED COMPANY

Statute

The Indian Partnership Act, 1932

The Limited Liability Partnership Act, 2008

The Companies Act, 1956

Regulated by

Registrar of Firms under the State Government

Registrar of Companies under the Central Government

Registrar of Companies under the Central Government

Registration Formalities

Not Compulsory.

Compulsory.

Compulsory.

Incorporation Document

Partnership Deed

Limited Liability Partnership Agreement

Memorandum of Association (MoA) & Articles of Association (AoA)

Change of Registered Office from one State to another

Allowed

Allowed – Minimum formalities

Allowed – Lot of formalities to be followed.

No. of Participants –Minimum Maximum

Two (2)

Twenty (20)

Two (2)

Not specified

Two (2)

Fifty (50) excluding past & present employees

Maintenance of Accounts & Audit

As per the Partnership Deed.

Accounts are required to be maintained.

Audit if turnover exceeds Rs. 40 lakhs.

Compulsory maintenance of accounts and audit.

Filing of Annual Return – Account, etc.

Not required

Yes.

Yes.

Liability of Participants

Unlimited, in all cases

Limited to Capital Contribution, except in case of deliberate fraud

Limited to Capital of the Company.

Admission of Minor as participant.

Minor can be admitted to the benefits of the partnership.

Minor cannot be a partner in a LLP.

Legal Guardian can hold the shares of the company on behalf of the Minor.

Separate Legal Entity

No.

Yes.

Formed as Body Corporate

Yes.

Formed as Body Corporate

Common Seal

No common seal

Optional

Compulsory

Perpetual Existence

No.

Yes. Subject to Dissolution & Winding up

Yes. Subject to Dissolution & Winding up

Suits against & by

A Registered Firm can sue & be sued in its own name.

A LLP shall always sue & be sued in its own name.

A Pvt Ltd Company shall always sue & be sued in its own name

Management

By Partners.

Working Partners Minimum 1

Designated Partners Minimum 2

Board of Directors Minimum 2

Taxation

a.   of Income of the Entity

Assessed as a separate & distinct entity under the Income Tax Act, 1961.

Assessed as a separate & distinct entity under the Income Tax Act, 1961.

Assessed as a separate & distinct entity under the Income Tax Act, 1961.

b.   Interest on Capital contribution by participants

Allowable as deduction in the hands of Registered Firm subject to limits.

Allowable as deduction in the hands of LLP subject to limits.

Not Allowed as a deduction.

c.   Management Remuneration

Allowable as deduction in the hands of Registered Firm subject to limits.

Allowable as deduction in the hands of LLP subject to limits.

Allowable as deduction in the hands of Private Company. No limits.

d.  Distribution of Profits

No tax to be paid by the Partnership on distribution.

Exempt in the hands of the partners.

No tax to be paid by the LLP on distribution.

Exempt in the hands of the partners.

Private Company to pay Dividend Distribution Tax on dividends.

Exempt in the hands of the shareholders.

e.   Loans & Advances by the Entity to participants

Not Taxable

Not Taxable.

Except in case of Private Company converted into LLP – for the first three years after conversion

Taxable as deemed dividend u/s 2(22)(e), if certain conditions are met.