A Limited Liability Partnership is managed and operated by an LLP agreement, whereas a general partnership is monitored by a Partnership deed. An LLP or partnership firm is a business structure through which partners can conduct their business. To establish an LLP or partnership firm, a minimum of two individuals willing to become partners are required. An LLP is a relatively new concept, whereas a partnership firm is a concept that has been around for a long time.
The concept of LLP was first introduced in 2008 under the LLP Act, whereas partnerships in India have been established under the Indian Partnership Act of 1932. An LLP and a partnership firm both require a partnership between the parties to be established. However, there are many differences between them.
A Limited Liability Partnership (LLP) is a written document defining the agreement between the partners of a Limited Liability Partnership. It describes the roles and responsibilities of all partners towards each other and the firm. The LLP agreement contains provisions for profit sharing, admission of new members, management and decision-making, retirement, and removal from the LLP. It also contains the rights and liabilities of departing members.
A partnership deed, also known as a partnership agreement, is a formal and legal agreement among the existing partners of the firm that describes the terms and conditions of the partnership. Usually, business partners do this to avoid disputes and conflicts at the time of profit sharing or leaving the firm.
Here are some key differences between an LLP agreement and a partnership deed:
LLP Agreement
Partnership deed
Definition
The LLP agreement is the charter document of an LLP.
The partnership deed is the charter document of a partnership firm.
Under the 2008 LLP Act, registration is completed.
Under the Partnership Act of 1932, it is registered.
Agreement between partners
The LLP agreement sets forth the management, decision-making, and other operations of the LLP.
The partnership agreement sets down the management, decision-making, and other operations of the partnership.
Flexibility and Formalities
An LLP agreement typically offers more flexibility in terms of governance and decision-making compared to a partnership deed. LLPs have fewer mandatory formalities and fewer legal restrictions, allowing partners to structure the LLP based on their specific needs.
Partnership deeds, on the other hand, may require more detailed provisions and formalities, depending on the jurisdiction.
Number of partners and requirements
As per the LLP agreement, there is no maximum partner count and a minimum partner count of 2.
As per the Partnership Deed, members of the partnership firm can have a minimum of 2 partners and a maximum of 20 partners.
The partnership deed holds significant importance in a partnership for several reasons:
The importance of an LLP agreement lies in the following aspects:
In conclusion, both a partnership deed and an LLP agreement are important for any business with two or more partners to make sure that their business is going smoothly and without hindrance throughout the life of the business. Both terms are different, but both hold key value in a business environment.
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Dharmik Joshi is a student currently pursuing Business Management and Administration. He is passionate about presenting his thoughts in writing. Alongside his academic pursuits, Dharmik is actively involved in various extracurricular activities. He enjoys communicating with people and sharing things with others. He is more focused on the learning process and wants to gain more knowledge.
