Difference Between LLP and Partnership Firm in India

When starting a business, one of the most important decisions you’ll make is choosing the right legal structure. In India, Limited Liability Partnership (LLP) and Traditional Partnership Firms are two common types of business entities. Each has its own legal identity, registration process, cost implications, and regulatory framework.

In this article, we’ll walk you through the difference between LLP and partnership, including incorporation costs, registration requirements, compliance burden, and advantages or disadvantages under Indian laws.

1. Cost and Ease of Incorporation

Partnership Firm:

  • A traditional partnership firm can be registered or unregistered.

  • Unregistered partnership firms can start with a simple partnership deed and do not require any formal registration with the Registrar of Firms.

  • Cost: Very low. In most cases, it can be set up with ₹1,000–₹2,000 including deed drafting.

  • Time: Fast and can be operational within a day.

LLP:

  • Must be registered with the Ministry of Corporate Affairs (MCA) through a digital process.

  • Requires Digital Signature Certificates (DSC), Designated Partner Identification Numbers (DPIN), name approval, and LLP agreement filing.

  • Cost: Moderate. Incorporation may cost ₹4,000–₹8,000 (excluding professional fees).

  • Time: Takes about 7–10 working days depending on document readiness and MCA approval.

Conclusion: Partnership firms are quicker and cheaper to set up, but LLPs offer a stronger legal framework.

2. Registered vs. Unregistered Partnerships

  • Unregistered partnership firms are valid, but they cannot file lawsuits to enforce rights under the partnership deed unless registered.

  • Registered partnership firms gain legal recognition under the Indian Partnership Act, 1932, and can enforce contractual rights.

In contrast, LLPs are always registered, giving them a more reliable and transparent legal identity from the beginning.

3. Cost and Ease of Compliance

Partnership Firm:

  • Compliance is minimal.

  • No mandatory annual filings with any authority (except income tax returns).

  • No requirement for audit unless turnover exceeds ₹1 crore (for business) or ₹50 lakh (for professionals).

  • Books of accounts may or may not be maintained formally.

LLP:

Conclusion: Partnership firms offer easier compliance, but LLPs ensure better accountability and structured operations.

4. Advantages and Disadvantages

LLP Advantages:

  • Limited liability: Partners are not personally liable for business debts.

  • Separate legal entity: LLPs can own property and enter contracts in their name.

  • More credible and investor-friendly structure.

  • Easier to scale compared to traditional firms.

LLP Disadvantages:

  • Higher compliance burden.

  • More documentation and regulation.

  • Cannot raise equity funding like a private limited company.

Partnership Firm Advantages:

  • Easy to form and dissolve.

  • Low cost of operation.

  • Ideal for small family-run businesses and professionals.

Partnership Firm Disadvantages:

  • Unlimited liability: Partners are personally liable for losses.

  • No separate legal identity.

  • Difficult to enforce legal rights if unregistered.

Conclusion

Both LLP and partnership firms serve different business needs. If you’re running a low-risk, closely-held business and want to keep things simple, a partnership firm might be sufficient. However, if you want limited liability, legal recognition, and future growth potential, choosing an LLP is a smarter long-term decision.

Need Help Choosing Between LLP and Partnership?

At Tradeviser, we help entrepreneurs set up the right business structure tailored to their needs. Whether you’re just starting or switching from a traditional partnership to LLP, our team ensures hassle-free registration and compliance.

Connect with our experts today and get a free consultation to build your business the right way.