Introduction of Partnership

Partnership is a business structure where two or more individuals come together to carry out a business activity with the aim of earning a profit. It is governed by the Indian Partnership Act, 1932. Partnership is formed by an agreement between the partners, which may be oral or written.

Difference between Ordinary Partnership and Limited Liability Partnership

Ordinary Partnership:

- In an ordinary partnership, all partners share equal responsibility for the firm's debts, losses, and liabilities.
- The liability of the partners in an ordinary partnership is unlimited, which means that their personal assets can be used to repay the firm's debts.
- The death, insolvency, or retirement of a partner in an ordinary partnership can lead to dissolution of the partnership firm.
- In an ordinary partnership, the partners are jointly and severally liable for the actions of each other.

Limited Liability Partnership:

- In a limited liability partnership, the partners' liability is limited to the amount of their investment in the firm.
- LLP is a separate legal entity, and the death, insolvency, or retirement of a partner does not affect the existence of the LLP.
- LLP is governed by the Limited Liability Partnership Act, 2008.
- LLP has perpetual succession, i.e., it can continue to exist even if the partners change.

Conclusion

The key difference between ordinary partnership and limited liability partnership is the extent of liability that the partners face. While in an ordinary partnership, the liability of the partners is unlimited, in an LLP, the liability of the partners is limited to the amount of their investment. LLP is a relatively new business structure in India, and it offers several advantages over an ordinary partnership.