What is Difference Between LLP and Partnership Firm

Explore the key differences between LLP and a Partnership Firm. Learn about LLP, Partnership Firms, and their comparison to make an informed choice.
Check Eligibility
Business Loan
Check Eligibility
3 min
28 September 2024

Difference between LLP and partnership firm

A Limited Liability Partnership (LLP) and a partnership firm are two distinct forms of business structures in India. An LLP is a relatively new concept introduced under the Limited Liability Partnership Act, 2008, combining the advantages of both a company and a partnership firm. In an LLP, the partners have limited liability, meaning their personal assets are protected from the firm’s debts or liabilities. This structure also offers flexibility in management, with no restriction on the number of partners. A partnership firm, governed by the Indian Partnership Act, 1932, does not provide limited liability protection. The partners in a registered partnership firm are personally liable for the firm’s debts, and their liability is unlimited. Additionally, an LLP is a separate legal entity, whereas a partnership firm is not, meaning that the firm and the partners are considered one and the same under the law.

Business Loan
Business Loan

Limited liability partnership (LLP)

  • Separate legal entity: An LLP is recognised as a separate legal entity, distinct from its partners.
  • Limited liability: The liability of the partners in an LLP is limited to the extent of their contribution to the LLP.
  • No limit on partners: An LLP can have an unlimited number of partners, unlike a partnership firm.
  • Perpetual succession: The LLP continues to exist even if the partners change.
  • Flexible management: LLPs offer flexibility in their management structure, allowing partners to manage the business as they see fit.
  • Taxation: LLPs are taxed like a partnership firm, but they benefit from exemptions available under the Income Tax Act, 1961.
  • Less compliance: LLPs have fewer regulatory compliances compared to companies, making them easier to manage.

Partnership firm

A partnership firm is a traditional business structure in India, governed by the Indian Partnership Act, 1932. In a registered partnership firm, two or more individuals come together to form a business and share profits and losses. The partners have unlimited liability, meaning they are personally responsible for the firm’s debts. The firm is not a separate legal entity, so the partners and the firm are legally considered one. Decision-making in a partnership firm is typically straightforward, with all partners having an equal say.

LLP vs Partnership firm

Criteria LLP Partnership Firm
Legal entity Separate legal entity Not a separate legal entity
Liability Limited to the extent of contribution Unlimited, personal assets at risk
Number of partners No limit Maximum of 20 partners allowed
Perpetual succession Yes No
Management Flexible management structure Equal decision-making among partners
Taxation Similar to partnership firm, with exemptions Taxed under the Indian Partnership Act, 1932
Compliance requirements Less compliance compared to other companies Minimal compliance, but partners have unlimited liability


Both LLPs and partnership firms have their own advantages and limitations. While an LLP offers the benefit of limited liability and a flexible management structure, a partnership firm provides simplicity in decision-making. Choosing the right structure depends on the specific needs and goals of the business. Entrepreneurs seeking to grow their business and access funding may also consider applying for Bajaj Finserv Business Loan to support their ventures. It’s important to compare the business loan interest rate before applying to ensure it aligns with your financial plans.

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Explore and apply for co-branded credit cards online.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements, and even get quick customer support—all on the app.
Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Related videos