General Partnership vs Limited Liability Partnership
An LLP does what a partnership does while capping partners' exposure (LLP Act s.27–30); pick the old firm form only where a legacy contract or licence genuinely requires the 1932 Act structure.
General Partnership vs. LLP: Pay the Small Extra
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 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.
The statute table
Every row cites its instrument. Where the claim is not sourced to the on-disk statute corpus (Companies Act 2013, LLP Act 2008, Indian Partnership Act 1932, SEBI AIF Regulations), the row carries a [VERIFY] flag instead of a citation.
| Row | General Partnership | Limited Liability Partnership |
|---|---|---|
| Ownership | Partners carry on business in common with a view to profit.s.4, Indian Partnership Act, 1932 | Partners own the business per the LLP agreement; the LLP is a body corporate.s.3, s.23(1), LLP Act 2008 |
| Minimum members | 2 or more partners.s.4, Indian Partnership Act, 1932 | 2 partners; at least 2 designated partners, 1 resident in India.s.6, s.7(1), LLP Act 2008 |
| Liability | Every partner is liable jointly and severally for all acts of the firm.s.25, Indian Partnership Act, 1932 | LLP obligations bind only the LLP — except for fraud or unauthorised acts.s.27, s.30, LLP Act 2008 |
| Compliance load | Registration is optional (s.58–59); no MCA annual filings.s.58, s.59, Indian Partnership Act, 1932 | Annual statement of account and solvency and annual return.s.34, s.35, LLP Act 2008 |
| Audit trigger | [VERIFY] Tax audit above the Income-tax Act threshold; no statutory audit otherwise.[VERIFY] s.44AB, Income-tax Act, 1961 — not in on-disk corpus | Audit only where turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh in the preceding financial year.s.34(1) proviso, LLP Act 2008 |
| Conversion path | Registration optional (s.58–59); a firm may convert into an LLP under s.55, or register as a company under s.366.s.58, s.59, Indian Partnership Act, 1932; s.55, LLP Act 2008; s.366, Companies Act 2013 | Into the LLP: a firm (s.55), a private company (s.56) or an unlisted public company (s.57), with s.58 effect. Out of the LLP: registration as a company under s.366–372.s.55–58, LLP Act 2008; s.366–372, Companies Act 2013 |
| Tax treatment | [VERIFY] Taxed as a firm where s.184–186 conditions are met; partners taxed on share.[VERIFY] Income-tax Act, 1961 — not in on-disk corpus | [VERIFY] Taxed as a partnership firm; partners taxed on their profit share.[VERIFY] Income-tax Act, 1961 (s.184–186) — not in on-disk corpus |
Side-by-side
- ✓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.
- ✗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.
- ✓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.
- ✗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
Scores are makeitlegit's own 0–10 ratings, published in the entity engine and updated as regulation changes.
Three founders, three answers
The table above is law; this is how it lands for three common situations.
The Partnership Act leaves every partner jointly and severally liable (s.25), including for another partner's GST and borrowing. The LLP shifts that exposure onto the LLP itself unless fraud intervenes (s.30).
Clients verify signatures against a filed entity. The LLP files its agreement and annual returns with the RoC (s.34–35), giving counterparties a public record the unregistered firm cannot offer.
Conversion from a registered or unregistered firm follows s.55 with s.58 effect: properties and liabilities vest in the LLP. The swap is procedural — the case for switching is s.27–30, not ceremony.
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 modest difference in incorporation cost is not worth unlimited joint liability exposure.
Next steps
Registered? The quarterly TDS returns have now begun.
Any entity that deducts TDS on contractor, professional, rent, or salary payments files 24Q/26Q by 31 Jul / 31 Oct / 31 Jan / 31 May — with ₹200/day late fees under s.234E. The TDS Compliance hub covers the s.194 series, TRACES corrections, and Form 16/16A.