Company, LLP & Partnership What is a PartnershipWhat is a CompanyCompany vs. PartnershipLimited Liability PartnershipCompany vs. LLP

Meaning :PARTNERSHIP According to section 4, Partnership Act of 1932 "Partnership is defined as the relation between two or more persons who have agreed to share the profits according to their ratio of business run by all or any one of them acting for all".

Meaning : COMPANY A company is: an association of many persons who contribute money or money’s worth to a common stock and employ it in some common trade or business and who share the profit or loss arising there from.

Company Vs. Partnership

CompanyPartnership Governing ActCompanies Act 2013Partnership Act 1932 RegistrationRegistration is compulsory Registration is optional Legal StatusIt has separate Legal Entity No separate Entity LiabilityLimited liabilityUnlimited liability Name of the EntityMust have words...Pvt Ltd /Ltd./ OPC Any name as per the choice Transfer of InterestShares are Freely Transferable Cannot transfer without the consent of the partners AgencyDirectors are the agents to company and not others. Partners are agents of the firm and other partners PowersCan only carry out objectives in the memorandum Can do anything that the partners agree to do.

CompanyPartnership CreationBy lawBy agreement Perpetual successionPerpetual SuccessionNo perpetual succession Minimum membersFor Public Company : 7 For Private Company : 2 OPC : 1 Min. Partners : 2 Maximum MembersUnlimited :Public company 200 :Private Company Banking Business: 10 Other Business : 20 Maintenance of BooksMaintenance and Auditing by qualified auditors annually No such compulsion by law Charter documentMoAPartnership Agreement

CompanyPartnership Common SealIt must have a common seal There is no concept of common seal Formalities of Incorporation MoA, Various e forms, prescribed fee With Registrar of companies Partnership deed, forms and affidavit, prescribed fee With Registrar of Firms Can it sue third partyBeing legal entity can sue Only registered firm can sue Can Foreign national enter in Indian business? Yes subject to certain laws No Ownership of assetsIndependent of the partners has ownership Partners have joint ownership of all the assets DissolutionMay take place by voluntarily, NCLT, creditors May take place by mutual agreement, insolvency, court order

CompanyPartnership Annual filing with the Registrar Annual statement of accounts, statement of solvency, annual return to be filed every year No return is to be filed Digital signatureRequired as e forms are filled electronically No requirement

Meaning :Limited Liability Partnership LLP Act, 2008 passed by Lok Sabha on 12 th of December 2008 and the President gave assent to the Bill on 7 th January Limited Liability Partnership means a partnership formed and registered under LLP Act,2008 Features : 1.Body corporate 2.Separate legal entity 3.Perpetual succession 4.Non-applicability of IPA provisions 5.Hybrid of companies & Partnerships

Company Vs. LLP

CompanyLLP Prevailing LawGoverned by The Companies act,2013 Governed by LLP act,2008 MotiveCan be formed for profit or service motive Can be formed only for profit motive Charter documentMoA defines scope of operations LLP agreement denotes the scope of operations Common sealMust have its own official signature May have its own common seal Formalities of Incorporation MoA, Various e forms, prescribed fee to be filed with the Registrar of companies LLP agreement, Various e forms, prescribed fee to be filed with the Registrar of LLP

CompanyLLP Minimum membersFor Public Company : 7 For Private Company : 2 For OPC : 1 Min. Partners : 2 Maximum MembersPublic company = unlimited Private Company= 200 No limit on maximum number of partners Liability of partners/members Generally limited to the amount stated in MoA Limited to the extent of their contribution towards LLP Transfer of share/partnership rights in case of death Shares transmitted to legal heirs Legal heirs cannot be partners but can get refund of contributed capital plus share in accumulated profits Transferability of interest Free transferTransfer subject to the LLP agreement

CompanyLLP Voting rightsAs per number of shares held by the members Decided as per LLP agreement Admission as partner/member By buying sharesAdmitted as per LLP agreement MeetingsBoard and general meetings are required to be conducted at proper time No such provision Cessation as partner/member By selling the sharesAs per the LLP agreement OR prior 30 days notice to the LLP Share certificateOwnership is evidenced by share certificates Ownership is evidenced by LLP agreement

CompanyLLP Maintenance of minutes Meeting minutes are to be recorded May decide to record meeting minutes Audit of accountsAccounts to be audited annually as per The companies act,2013 Accounts to be audited annually as per The LLP act,2008 if its turnover exceeds 40 lacs or the capital contribution exceeds 25 lacs in any financial year. Cost of formationHigh cost specially in case of public companies Comparatively less cost is involved