Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Partnership: unlimited liability
Partners’ personal assets are exposed, and the firm isn’t separate from the partners.
LLP: limited, separate entity
Limited liability and perpetual existence, with MCA filings (Form 8/11).
Why most new firms choose the LLP
The two look similar — partners pooling capital and effort — but differ in the things that matter when something goes wrong. A traditional partnership under the Partnership Act has unlimited liability: each partner is personally liable for the firm’s debts, and even for liabilities created by another partner’s actions, so one partner’s mistake can reach every partner’s personal assets. It isn’t a separate legal entity, so it can’t cleanly own property or sue in its own name, and it can dissolve on changes among partners unless the deed provides otherwise. An LLP fixes these: limited liability (a partner isn’t liable for another’s wrongful acts), a separate legal identity with perpetual succession, and the ability to own assets and contract in its own name. The cost is slightly more compliance — MCA registration and the annual Form 8 and Form 11. Registration of a traditional partnership is optional but advisable; an LLP’s registration is built in. For most new firms the limited liability and separate identity make the LLP the safer modern choice, with a partnership now mainly suiting very small, low-risk, trust-based ventures that prize total simplicity.