Entity comparison · India · 2026
General Partnership vs Limited Liability Partnership
General Partnership vs. LLP: Pay the Extra ₹5,000
Honest, statute-cited comparison — no referral fees, no upsell. Every claim on this page ties back to the Companies Act 2013, LLP Act 2008, Income Tax Act, or the current FDI Policy.
⚠ The trap most founders fall into
The only 'advantage' of a General Partnership over an LLP is marginally lower incorporation cost. But your partner's unpaid GST becomes your personal liability. That's not a trade-off. That's a trap.
Side-by-side
General Partnership
Where it wins
- ✓Extremely easy to set up — just a Partnership Deed on stamp paper.
- ✓No mandatory MCA filings. Annual ITR-5 and GST compliance only.
- ✓Flexible profit and loss sharing between partners.
Where it hurts
- ✗Joint and Several Liability. Your partner's ₹20L fraud is 100% your personal debt.
- ✗No separate legal identity — legally indistinguishable from the partners themselves.
- ✗A single partner's death or retirement can legally dissolve the entire firm.
- ✗Cannot raise equity, issue ESOPs, or attract FDI.
Limited Liability Partnership
Where it wins
- ✓Full limited liability — partners' personal assets are legally ring-fenced.
- ✓No mandatory statutory audit if turnover < ₹40L and capital contribution < ₹25L.
- ✓Tax-efficient: profit distributions are tax-free at partner level (no Dividend Distribution Tax trap).
- ✓Annual compliance: ₹8,000–₹25,000 vs. ₹80,000 for a Pvt Ltd.
Where it hurts
- ✗VCs cannot invest. No share capital means no institutional equity funding. Period.
- ✗Cannot issue ESOPs. Attracting talent with stock options is structurally off the table.
- ✗Minimum 2 Designated Partners required from Day 1.
- ✗LLP → Pvt Ltd is not a 'conversion' — it's a full dissolution and fresh re-registration. Plan accordingly.
Head-to-head on the metrics that matter
Setup Cost (10 = cheapest)
General Partnership
9.5
Limited Liability Partnership
7.5
Annual Overhead (10 = lightest)
General Partnership
8.8
Limited Liability Partnership
7.2
Tax Efficiency (10 = least tax drag)
General Partnership
7.5
Limited Liability Partnership
7.8
Asset Protection
General Partnership
0.0
Limited Liability Partnership
8.5
VC / Funding Ready
General Partnership
0.0
Limited Liability Partnership
0.0
Exit Ease
General Partnership
8.5
Limited Liability Partnership
6.0
Scores are makeitlegit's own 0–10 ratings, published in the entity engine and updated as regulation changes.
The verdict
Which one should you actually pick?
There is no good reason to choose a General Partnership over an LLP in 2025. If cost is the objection, the ₹5,000–₹10,000 difference in incorporation fees is not worth unlimited joint liability exposure.
Next steps
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Last verified: 2026-08-04. Written by chartered accountants at Harun Raaj & Associates. We never accept referral fees from other CA firms or incorporation platforms — the recommendations on this page reflect what we'd tell a paying client. If any statute, tax rate, or MCA rule changes and this page hasn't been updated within 30 days, tell us.