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Legal Aspects of Business

Assignment

Date: 12-11-2012

Submitted by: Ani K

AM.BU.P2MBA11006

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Partnership

A partnership is an association of two at more persons to carry on as co owners of a business and to

share its profits and losses. Section 4 of the Partnership Act defines partnership as the relation

between persons who have agreed to share the profits of a business carried on by all or any one of

them acting for all. Persons who have entered into partnership with one another are called

individual partners and collectively a firm and the name under which their business is carried on is

called the firm name.

Limited Liability Partnership

The Limited Liability Partnership (LLP) is essentially a general partnership in form, with one

important difference. Unlike a general partnership, in which individual partners are liable for the

partnership's debts and obligations, an LLP provides each of its individual partners protection against

personal liability for certain partnership liabilities.

Difference between Limited Liability Partnership and Partnership

Category Partnership LLP

Prevailing Law Partnership is prevailed by The

Indian Partnership Act, 1932

and various Rules made there

under

Limited Liability Partnershipare prevailed by The Limited

Liability Partnership Act, 2008

and various Rules made there

under

Registration Registration is optional Registration with Registrar of

LLP required.

Creation Created by Contract Created by Law

Distinct entity Not a separate legal entity Is a separate legal entity under

the Limited Liability

Partnership Act, 2008.

Name of Entity Any name as per choice Name to contain 'Limited

Liability Partnership' or 'LLP' assuffix.

Cost of Formation The Cost of Formation is

negligible

Minimum cost of Formation of

LLP is Rs. 800 only,

comparatively much lesser than

the cost of formation of

Company

Perpetual Succession It does not have perpetual

succession as this depends upon

the will of partners

It has perpetual succession and

partners may come and go

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Charter Document Partnership Deed is a charter of

the firm which denotes its scope

of operation and rights and

duties of the partners

LLP Agreement is a charter of

the LLP which denotes its scope

of operation and rights and

duties of the partners vis--vis

LLP.

Common Seal There is no concept of common

seal in partnership

It denotes the signature and LLP

may have its own common seal,

dependent upon the terms of the

Agreement

Formalities of Incorporation In case of registration,

Partnership Deed along with

form / affidavit required to be

filled with Registrar of firms

along with requisite filing fee

Various eForms and the LLP

Agreement are filed with the

Registrar of LLP along with the

prescribed Fee.

Time line It will take 7 days (approx.) to

incorporate

It will take 10 days (approx.) to

incorporate (inclusive of time

taken to obtain DPN)

Legal Proceedings Only registered partnership can

sue third party

A LLP is a legal entity can sue

and be sued

Foreign Participation Foreign Nationals cannot form

Partnership Firm in India

Foreign Nationals can be a

Partner in a LLP.

Number of Members Minimum 2 and Maximum 20 Minimum 2 partners and their is

no limitation of maximum

number of partners.

Ownership of Assets Partners have joint ownership of

all the assets belonging to

partnership firm

The LLP independent of the

partners has ownership of assets

Rights / Duties / obligation of

the Partners / Managing

Partners / Directors

Rights / Duties / obligation of

the partners are governed by

Partnership Deed.

Rights / Duties / obligation of

the partners are governed by

LLP Agreement.