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Fundamental Difference between a Partnership a LLP and a Private Limited Company

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An unqualified form of partnership places the entire burden of business liability on the partners of the firm. On the other Limited Liability Partnership (LLP) and a Private Limited Company do not impose as much liability as the Partnership does. An LLP is almost similar to a standard form of a partnership without unlimited liabilities on the partners. Partners’ liabilities are differently prescribed in that liability caused by any error of one partner need not affect the other partners. State registration is required but some of the states stipulate that partners should take liability insurance or has adequate assets to meet likely claims. This is very much applicable to firms of professionals like accountants, lawyers, architects. Not all states recognize them. A partner’s interest in an LLP can be assigned to third parties in which the assignee gets only the financial benefit and he can not take part in the management nor can he become a partner. There can be more than two partners. An LLP will stand dissolved on the death of a partner and on filing dissolution deed with the State authority. A clear advantage of an LLP is that it need not conduct annual meetings and maintain minutes of meetings though it has the features of a limited company. Profit is not taxable at the hands of the firm but that of the individual partners. One disadvantage is that a partner of an LLP can bind his share without the other partners. And all contributions made by a partner in the forms of money or property become the property of the firm unless otherwise stated in the partnership agreements.1 Section 13(4) of Limited Liability Partnership Act 2000 stipulates that all partners must contribute to national insurance which shall be chargeable on their shares of profit. The name of LLP displayed on all the documents must end with LLP or LLP as per schedule Part I. An LLP name with the above letters can not be registered unless it ends with them. It is an offense to use an LLP’s name if the Secretary of State so considers and if the name already exists for an LLP or a registered company.