• Legal Structure

• LLP (Limited Liability Partnership):

• • Hybrid structure combining features of a company and a partnership.
  • Registered under the LLP Act, 2008.
  • Has a separate legal identity from its partners.

• Partnership Firm:

• Traditional business form governed by the Indian Partnership Act, 1932.
• No separate legal entity (partners and firm are legally the same)

• Liability

• LLP: Partners have limited liability. They’re not personally liable for business debts or misconduct of other partners.
• Partnership: Partners have unlimited liability. Each partner is jointly and severally liable for all debts and actions of the firm.

• Registration & Compliance

• LLP:

• • Mandatory registration with Ministry of Corporate Affairs (MCA).
  • Requires LLP Agreement, annual filings (Form 8, Form 11, etc), and audit if turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh.

• Partnership:

• • Registration is optional (though recommended).
  • Minimal compliance – no annual filings with MCA, audit only if applicable under Income Tax Act.

• Taxation

• Both LLP and Partnership firms are taxed similarly under the Income Tax Act: 

• • Flat rate of 30% + surcharge + cess.
  • No dividend distribution tax (unlike companies).
  • Remuneration and interest to partners allowed as deduction (subject to limits).

• Flexibility & Governance

• LLP:

• • More structured- governed by LLP Agreement.
  • Designated Partners have defined roles and responsibilities.
  • Suitable for scaling and attracting institutional investors.

• Partnership:

• Highly flexible- governed by mutual understanding or partnership deed.
• Ideal for small, closely held businesses with informal governance.

• Suitability

• Conclusion 

If you’re looking for a low-cost, low-compliance setup for a small business with trusted partners, a Partnership Firm may suffice. But if you want liability protection, credibility, and room to grow, an LLP is the smarter, future-ready choice.