Partnership firms in India are classified based on their liability and legal status. Understanding these types helps businesses choose the structure best suited to their needs and compliance requirements.
| Particular | Registered | Unregistered |
|---|---|---|
| Provisions Under Indian Partnership Act, 1932 | It is registered in accordance with the Indian Partnership Act of 1932, and all provisions of this Act apply to it. | The provisions of the Indian Partnership Act, 1932 do not apply to such firms as they are not registered under the provisions of the Indian Partnership Act, 1932. |
| Trustworthiness and Reliability | The registration of the firm ensures trustworthiness and reliability among each partner. | As these firms are not registered, trustworthiness and reliability cannot be maintained. |
| Power to File Cases Against the Third Party | The firm can file lawsuits against third parties, but the person initiating the lawsuit must be a partner in the registered firm. | It does not have the power to file cases against third parties. |
| Ability to Claim Set Off | If a third party brings a case against a registered partnership firm, the firm can assert a set-off. | The power to claim set-off is unavailable for firms that are not registered under the Indian Partnership Act, 1932. |
| Income Tax Benefits | It can claim tax benefits in accordance with the Income Tax Act provisions. | It cannot claim any tax benefits under the provision of the Income Tax Act as they are not a registered firm. |
| Particular | General Partnership | Limited Liability Partnership (LLP) |
|---|---|---|
| Liability | All partners are personally liable for the business's debts and actions. | Partners are only liable for their own contributions to the business, not for actions of others. |
| Audit | General Partnership firms only need a tax audit. | LLPs must get their accounts audited annually. |
| Annual returns | No need to file annual returns with the Registrar of Firms. | Must file annual statement of accounts, solvency, and annual return with ROC. |
| Ownership | All partners are general partners, responsibilities are spread equally. | Operations handled by general partners; limited partners are only investors. |
| Establishment | Requires only an agreement between partners, even verbal. | Requires filing a certificate of limited partnership with the state and appointing a registered agent. |
| Particulars | Partnership Firm | LLP |
|---|---|---|
| Registration | Voluntary under Indian Partnership Act | Mandatory under LLP Act 2008 |
| Registering authority | Registrar of Firms | Registrar of Companies (ROC) |
| Annual form filling | No annual returns required | Must file annual statement of accounts, solvency, and yearly return |
| Governing law | Indian Partnership Act 1932 | Limited Liability Partnership Act 2008 |
| Liability | Unlimited, partners personally liable | Limited to partner's investment |
| Legal Status | Unincorporated business, no separate legal entity | Registered corporate entity with separate legal existence |