{"id":51811,"date":"2023-01-18T12:37:22","date_gmt":"2023-01-18T07:07:22","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=51811"},"modified":"2023-04-11T12:33:34","modified_gmt":"2023-04-11T07:03:34","slug":"what-is-the-difference-between-llp-and-llc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/","title":{"rendered":"How to Differentiate Between LLP and LLC? \u2013 An Overview"},"content":{"rendered":"\n<p>It is essential to choose\nthe proper business structure to protect your new business from all those\nunforeseen legal and tax compliances. You must have come across the terms like\nLLP and LLC while incorporating your business. These two business forms are\ngenerally considered identical, but there are some significant variations\nbetween them. Most of us misunderstand these two, for one, as they both possess\nthe characteristics of a general partnership and business. <\/p>\n\n\n\n<p>So while choosing between\nthe LLP and LLC, one must make sure that the legal entity can be operated\nwithin your country. Since the provisions of LLC are not applicable in India,\nthis means a LLC cannot be formed in Indian Territory. So, LLP and LLC may\nshare many similarities, but there are some differences between them; let us\nlook at those differences and more detail.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#What_Is_The_Meaning_Of_LLP_In_India_%E2%80%93_LLP_and_LLC\" >What Is The Meaning Of LLP In India? &#8211; LLP and LLC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#What_is_the_meaning_of_LLC_in_India_%E2%80%93_LLP_and_LLC\" >What is the meaning of LLC in India? &#8211; LLP and LLC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#Key_differences_between_LLP_and_LLC_in_India\" >Key differences between LLP and LLC in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#What_are_the_advantages_of_an_LLP_and_LLC\" >What are the advantages of an LLP and LLC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#What_are_the_disadvantages_of_an_LLP_and_LLC\" >What are the disadvantages of an LLP and LLC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-difference-between-llp-and-llc\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_The_Meaning_Of_LLP_In_India_%E2%80%93_LLP_and_LLC\"><\/span>What Is The Meaning Of LLP In India? &#8211; LLP and LLC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>A <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/llp-registration\">limited liability partnership<\/a><\/strong>, short form LLP, is a partnership\nthat is formed by two or more owners, they called as the partners of the firm.\nAn LLP acts as a cross between a corporation and a partnership, where partners\nenjoy some limited liabilities, which means they cannot be held liable for the\nlosses of the business. The Limited Liability Partnership Act was enacted by\nthe Parliament of India in the year 2008 to govern the business arising out of\nLLPs in the country.&nbsp;<\/li><li>Like a regular\npartnership (as governed by the Indian Partnership Act), LLPs are also\nregulated through a partnership deed. The deed contains the rights, liabilities\nand the duties of all partners.&nbsp;<\/li><li><em>Section 2(m)<\/em>&nbsp;of <strong>the\nLimited Liability Partnership of 2008<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/llp-act-2008.html\"><strong>[1]<\/strong><\/a><\/sup> defines the term, foreign limited liability partnership and&nbsp;<em>Section\n2(n)<\/em>&nbsp;of the Limited Liability Partnership of 2008, defines the term,\nlimited liability partnership.&nbsp;<\/li><li>All the LLPs that\nare incorporated in India must have two (2) or more people, and one of them\nmust be the resident of India. Also, the person must be eligible to carry out\nlawful business activities. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_meaning_of_LLC_in_India_%E2%80%93_LLP_and_LLC\"><\/span>What is the meaning of LLC in India? &#8211; LLP and LLC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>An LLC, also known as\nLimited Liability Companies, is a business form that limits the liability of\nits owners or members.<\/li><li>An LLC is legally\nrecognised in many countries, although it has still to be recognised under\nIndian Laws. <\/li><li>It has been recognised as\na hybrid structure in the sense that it incorporates the characteristics of a\ngeneral partnership and a company. It is the most common type of business\nstructure in the United States, UAI, Poland, Brazil, etc. <\/li><li>The most attractive\nfeature of an LLC is that they are exempted from paying taxes, so their gains\nand expenses are directly transferred onto their members. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_differences_between_LLP_and_LLC_in_India\"><\/span>Key differences between LLP and LLC in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are the differences between LLP\nand LLC in India:<\/p>\n\n\n\n<table class=\"wp-block-table table table-bordered\"><tbody><tr><td>\n  <strong>S.\n  No.<\/strong>\n  <\/td><td>\n  <strong>LLC<\/strong><strong><\/strong>\n  <\/td><td>\n  <strong>LLP<\/strong>\n  <\/td><\/tr><tr><td>\n  1\n  <\/td><td>\n  It is a privately held business entity that\n  combines the characteristics of both corporation and of partnership.\n  <\/td><td>\n  It is a type of partnership where the liability of all the partners is\n  limited and restricted to the amount that they have contributed in the partnership.&nbsp; \n  <\/td><\/tr><tr><td>\n  2\n  <\/td><td>   This type of business entity is not recognised in   India.    <\/td><td>\n  The central government has enacted a separate law to govern the LLPs\n  in India. \n  The Limited Liability Partnership Act of 2008 talks about different\n  provisions of the LLP. \n  <\/td><\/tr><tr><td>\n  3\n  <\/td><td>\n  All the corporate relations are managed by the\n  Board of Directors of the company. \n  <\/td><td>\n  All the corporate relations are managed by the\n  partners of the firm. \n  <\/td><\/tr><tr><td>\n  4\n  <\/td><td>\n  All the rules regarding the governing of the\n  company are mentioned under the AOA and MOA\n  <\/td><td>\n  All the rules regarding the governing of the firm\n  are mentioned under the partnership deed. \n  <\/td><\/tr><tr><td>\n  5\n  <\/td><td>\n  All the companies incorporated as Limited liability companies must add LLC in the\n  end of their name. \n  <\/td><td>\n  All the firms incorporated as limited liability partnerships&nbsp;must add\n  LLP in the end of their name.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_advantages_of_an_LLP_and_LLC\"><\/span>What are the advantages of an LLP and LLC? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Both\nof these business forms have a list of pros and cons. It is very important for\nyou to consider them before making a decision to create an LLP or LLC for your\nbusiness.&nbsp;&nbsp;<\/p>\n\n\n\n<p>The\nadvantages of an LLC are as follows:&nbsp;<\/p>\n\n\n\n<ul><li>Only\n     one member is required during the incorporation;&nbsp;<\/li><li>Any\n     business can form an LLC, whether it is a small-scale business or a large\n     scale. Although in some of the countries professional cannot form an LLC\n     or be a member of it.&nbsp;<\/li><li>There\n     are so many tax advantages that are given to an LLC&nbsp;<\/li><li>All\n     the members have the limited liability, which means the member are not\n     responsible to pay off the debts of the company by using their personal\n     assets.&nbsp;<\/li><li>LLCs\n     provide more liability protection in comparison to LLPs.<\/li><li>The\n     process of incorporating an LLC is very simple and requires fewer\n     documents. <\/li><\/ul>\n\n\n\n<p>The advantages of an LLP are\nas follows:<\/p>\n\n\n\n<ul><li>To run a business form as\n     LLP, two (2) or more partners are required.&nbsp;<\/li><li>The provisions of the LLP\n     act provides the protection to one partner from the negligent act of other\n     partners<\/li><li>The operations of the LLP in\n     India are governed by a partnership deed. The deed acts as a written\n     agreement, and it talk about the profit and loss sharing ratios between\n     the partner; it also defines the liabilities, duties and rights of all the\n     partners of the firm&nbsp;<\/li><li>Partnership deeds act as a\n     piece of evidence in a court of law.<\/li><li>All the partners have the\n     authority to manage the activities of the business;&nbsp;<\/li><li>LLP has no such retraction\n     on the entry and exit of the partners from the partnership&nbsp;<\/li><li>All the members have the\n     limited liability, which means the member is not responsible to pay off\n     the debts of the company by using their personal assets.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_disadvantages_of_an_LLP_and_LLC\"><\/span>What are the disadvantages of an LLP and LLC? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following is the list of disadvantages\nassociated with LLP and LLC:<\/p>\n\n\n\n<p>The disadvantages of an LLC are as follows: <\/p>\n\n\n\n<ul><li>According to the\n     laws of many countries a professional is not allowed to form a LLC. Also\n     they are not allowed to be a member of it. <\/li><li>In many counties\n     LLCs are required to file annual reports with the state. <\/li><li>All the members are\n     required to include the profits of LLC in their personal taxes. &nbsp;<\/li><li>LLC requires more\n     capital to run than a LLP <\/li><li>A managing member\n     must keep accurate business records and maintain bank accounts that are\n     separate from their own personal accounts. <\/li><li>Creditors of the\n     firm have all the rights to male members personally liable. <\/li><li>People are wary of\n     investing in an LLC until members file their taxes<\/li><\/ul>\n\n\n\n<p>The disadvantages of an LLP are as follows:<\/p>\n\n\n\n<ul><li>As per the Indian\n     laws, an LLP must appoint minimum of 2 designated partners in the firm. <\/li><li>The process of\n     incorporation is but lengthy and requires a lot of paper work.<\/li><li>Even if LLP\n     is not performing any business activity, still it is required to file the income tax return and MCA annual return for each\n     financial year. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An\nLLC, also known as Limited Liability Companies, is a business form that limits\nthe liability of its owners or members. An LLC is legally recognised in many\ncountries, although it has still to be recognised under Indian Laws. On the\nother hand, limited liability partnership, short form LLP, is a partnership\nthat is formed by two or more owners, they called as the partners of the firm.\nAn LLP acts as a cross between a corporation and a partnership, where partners\nenjoy some limited liabilities, which means they cannot be held liable for the\nlosses of the business. <\/p>\n\n\n\n<p>Both the business forms have their cons and pros; therefore one must carefully study the structure of these business forms before starting a business.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/advantages-of-llp-over-private-limited-company\/\">Advantages Of LLP (Limited Liability Partnership) Over Private Limited Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It is essential to choose the proper business structure to protect your new business from all those unforeseen legal and tax compliances. You must have come across the terms like LLP and LLC while incorporating your business. These two business forms are generally considered identical, but there are some significant variations between them. Most of [&hellip;]<\/p>\n","protected":false},"author":48,"featured_media":51812,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[155],"tags":[3018],"acf":{"service_id":"3"},"authorName":"Astitva Kumar","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image-27.jpg","authorDescription":"Astitva Kumar is an advocate by profession and has completed her BBA. LLB from IP University. She is an avid reader, researcher, and legal writer. Her areas of interest include mediation, conflict resolution, finance, cyber laws, and taxation.","postViews":2748,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51811"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/48"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=51811"}],"version-history":[{"count":5,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51811\/revisions"}],"predecessor-version":[{"id":54886,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51811\/revisions\/54886"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/51812"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=51811"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=51811"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=51811"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}