Difference Between Limited Liability Partnership (LLP) and Company
Detailed Notes (English) – Comparative Table
Introduction
Both Limited Liability Partnership (LLP) and Company are separate legal entities incorporated under Indian law. However, they differ in their legal structure, management, ownership, compliance requirements, and operational flexibility.
LLP is governed by the Limited Liability Partnership Act, 2008.
Company is governed by the Companies Act, 2013.
Definition
Basis
LLP
Company
Meaning
A business organization combining features of a partnership and a company with limited liability.
A body corporate incorporated under the Companies Act having shareholders and directors.
Governing Law
Limited Liability Partnership Act, 2008
Companies Act, 2013
Nature
Hybrid form of business
Corporate form of business
Detailed Comparison
Basis
LLP
Company
Governing Act
LLP Act, 2008
Companies Act, 2013
Legal Status
Separate legal entity
Separate legal entity
Body Corporate
Yes
Yes
Perpetual Succession
Yes
Yes
Ownership
Partners
Shareholders (Members)
Management
Partners/Designated Partners
Board of Directors
Liability
Limited to agreed contribution
Limited to unpaid share capital or guarantee
Number of Members
Minimum 2 partners
Private: Minimum 2 members; Public: Minimum 7 members
Maximum Members
No maximum limit
Private Company: 200 members; Public Company: No maximum
Minimum Designated Persons
At least 2 Designated Partners
At least 2 Directors (Private) / 3 Directors (Public)
Resident Requirement
At least one Designated Partner resident in India
At least one Director resident in India
Share Capital
No share capital
Share capital required (except company limited by guarantee)
Ownership Interest
Contribution percentage
Shares
Transfer of Ownership
As per LLP Agreement
Freely transferable in public company; restricted in private company
Common Seal
Optional
Optional
Corporate Name
Ends with “LLP”
Ends with “Private Limited” or “Limited”
Separate Legal Entity
Yes
Yes
Legal Identity
Independent from partners
Independent from shareholders
Formation
Basis
LLP
Company
Incorporation Authority
Registrar of LLPs (MCA)
Registrar of Companies (ROC)
Founding Document
Incorporation Document
Memorandum of Association (MOA) and Articles of Association (AOA)
Internal Agreement
LLP Agreement
Articles of Association
Registration Certificate
Certificate of Incorporation
Certificate of Incorporation
Ownership Structure
Basis
LLP
Company
Owners
Partners
Shareholders
Ownership Unit
Contribution
Shares
Capital Division
Not divided into shares
Divided into shares
Admission of New Owners
Through LLP Agreement
Issue or transfer of shares
Management
Basis
LLP
Company
Managed By
Partners
Board of Directors
Decision Making
LLP Agreement
Board Meetings and Shareholder Meetings
Day-to-Day Control
Partners
Directors
Separation of Ownership and Management
Usually no
Usually yes
Liability
Basis
LLP
Company
Liability of Owners
Limited
Limited
Personal Liability
Only for own wrongful acts
Limited unless fraud or personal guarantee
Liability for Other Members
No
No
Compliance Requirements
Basis
LLP
Company
Compliance
Comparatively less
Comparatively higher
Board Meetings
Not mandatory
Mandatory
Annual General Meeting (AGM)
Not required
Mandatory
Statutory Registers
Limited
Extensive
Secretarial Compliance
Minimal
Significant
Audit
Basis
LLP
Company
Audit Requirement
Mandatory only if prescribed thresholds are crossed under LLP Rules
Generally mandatory for all companies (subject to applicable exemptions under law)
Cost of Compliance
Lower
Higher
Taxation
Basis
LLP
Company
Income Tax
Taxed as LLP under Income-tax Act
Taxed as Company
Dividend Distribution
No dividend concept
Dividend may be declared subject to law
Profit Withdrawal
Partners withdraw profit as per LLP Agreement
Shareholders receive dividend if declared
Raising Capital
Basis
LLP
Company
Shares
Cannot issue shares
Can issue shares
Debentures
Generally not used like companies
Can issue debentures
Public Investment
Not allowed
Public company can raise capital from public subject to law
Venture Capital Preference
Less preferred
More preferred
Transferability
Basis
LLP
Company
Ownership Transfer
Governed by LLP Agreement
Through transfer of shares
Ease of Transfer
Relatively difficult
Easier, especially in public companies
Meetings
Basis
LLP
Company
Board Meetings
Not compulsory
Mandatory
Annual General Meeting
Not required
Mandatory (where applicable)
Extraordinary General Meeting
Not required by statute
May be required
Statutory Documents
Basis
LLP
Company
LLP Agreement
Mandatory
Not applicable
MOA
Not applicable
Mandatory
AOA
Not applicable
Mandatory
Decision Making
Basis
LLP
Company
Governed By
LLP Agreement
Companies Act + AOA + Board Resolutions
Flexibility
High
Comparatively lower
Dissolution
Basis
LLP
Company
Closure
Simpler
More complex
Winding Up
LLP Act and Rules
Companies Act and Insolvency laws (where applicable)
Conversion
Basis
LLP
Company
Can Convert From
Partnership Firm, Private Company, Unlisted Public Company
LLP can convert into company subject to applicable law and prescribed conditions
Legal Procedure
LLP Act Schedules
Companies Act and relevant Rules
Advantages of LLP
Advantage
Explanation
Limited Liability
Personal assets generally protected
Separate Legal Entity
Independent legal identity
Less Compliance
Lower regulatory burden
Flexible Management
Partners manage directly
No Mandatory AGM
Saves time and cost
No Mandatory Board Meetings
Simplified governance
Suitable for Professionals
Popular among CA, CS, Advocates, Architects, Consultants
Disadvantages of LLP
Disadvantage
Explanation
Cannot Raise Public Capital
No public issue of shares
Limited Investment Opportunities
Venture capital may prefer companies
No Share Capital
Restricts equity-based funding
Ownership Transfer
More restrictive
Advantages of Company
Advantage
Explanation
Easy Fund Raising
Shares and securities can be issued (subject to law)
Better Credibility
Preferred by investors and banks
Perpetual Succession
Continues despite changes in ownership
Transfer of Shares
Easier ownership transfer
Professional Management
Board of Directors manages company
Disadvantages of Company
Disadvantage
Explanation
High Compliance
Numerous statutory requirements
Higher Cost
Formation and compliance costs are greater
Mandatory Meetings
Board and shareholder meetings required
Extensive Record Keeping
Many statutory registers and filings
Similarities Between LLP and Company
Point
LLP
Company
Separate Legal Entity
✔
✔
Body Corporate
✔
✔
Limited Liability
✔
✔
Perpetual Succession
✔
✔
Can Own Property
✔
✔
Can Sue and Be Sued
✔
✔
Registered Entity
✔
✔
LLP vs Company – Quick Revision Table
Basis
LLP
Company
Law
LLP Act, 2008
Companies Act, 2013
Owners
Partners
Shareholders
Managers
Partners
Directors
Ownership
Contribution
Shares
Internal Document
LLP Agreement
MOA & AOA
Compliance
Low
High
AGM
No
Yes (where applicable)
Board Meetings
No
Yes
Audit
Threshold-based
Generally mandatory
Capital Raising
Limited
Extensive
Public Issue
No
Yes (Public Company)
Best For
Professionals, Startups, Small Businesses
Large Businesses, Investors, Listed Entities
Practical Examples
Business Type
Suitable Form
Reason
Law Firm
LLP
Flexible management and limited liability
Chartered Accountant Firm
LLP
Professional practice with lower compliance
Tech Startup Seeking Venture Capital
Company
Easier equity investment and funding
Manufacturing Company
Company
Better access to capital and structured governance
Family Business
LLP
Simpler compliance and operational flexibility
Listed Corporate Enterprise
Company
Public shareholding and regulatory framework
Memory Trick
LLP = “PACT”
P – Partners own and manage
A – Agreement governs internal affairs
C – Compliance comparatively low
T – Threshold-based audit
Company = “SHARE”
S – Shareholders are owners
H – Higher compliance
A – AOA & MOA govern structure
R – Raise capital through shares
E – External investors preferred
Frequently Asked Examination Questions
Question
Answer
Which law governs an LLP?
Limited Liability Partnership Act, 2008
Which law governs a company?
Companies Act, 2013
Can an LLP issue shares?
No
Who owns an LLP?
Partners
Who owns a company?
Shareholders
Is AGM compulsory for an LLP?
No
Is AGM compulsory for a company?
Yes, where applicable under the Companies Act
Which has lower compliance costs?
LLP
Which structure is preferred for raising equity investment?
