Limited Liability Partnership (LLP)
What is an LLP?
In short
An LLP (Limited Liability Partnership) is a business registered under the LLP Act, 2008 that is a separate legal entity, with flexible profit sharing and limited liability for every partner.
An LLP (Limited Liability Partnership) is a business structure that is a separate legal entity, where two or more partners share profits as they agree and each partner's liability is generally limited to their agreed contribution. It combines the flexibility of a partnership with the protection of a company, and is governed by the Limited Liability Partnership Act, 2008.
LLPs are registered with the Ministry of Corporate Affairs (MCA) and file yearly returns with the Registrar. This chapter explains what makes an LLP different from the two structures it is most often compared with: the traditional partnership firm and the Private Limited Company.
How is an LLP different from a partnership firm?
- Separate legal person — the LLP owns assets, signs contracts and can sue or be sued in its own name.
- Limited liability — a partner's liability is limited to their agreed contribution, and one partner is not liable for another partner's misconduct.
- Perpetual succession — the LLP continues even if partners change.
In a partnership firm, by contrast, the firm and its partners are the same in the eyes of the law, and every partner can be personally liable for all of the firm's debts. A partnership firm is registered (where registered at all) with the state Registrar of Firms, while an LLP is registered with the MCA.
How is an LLP different from a Private Limited Company?
- No shares — partners contribute capital and share profits as per the LLP Agreement.
- No board meetings or AGM required by law.
- Statutory audit only above the turnover or contribution limits (turnover above ₹40 lakh or contribution above ₹25 lakh).
- Fewer annual forms.
| Feature | Partnership firm | LLP | PVT. LTD. |
|---|---|---|---|
| Law | Indian Partnership Act, 1932 | LLP Act, 2008 | Companies Act, 2013 |
| Separate legal entity | No | Yes | Yes |
| Owners' liability | Unlimited | Limited to agreed contribution (with exceptions for fraud) | Limited to unpaid share capital (with exceptions) |
| Minimum owners | 2 | 2 partners | 2 shareholders |
| Can issue shares or ESOPs | No | No | Yes |
| Statutory audit | Not under partnership law | Only above set limits | Every year |
Tax audit under the Income-tax law is a separate test for all three, based on turnover and other conditions.
What does "limited liability" mean in an LLP?
If the LLP cannot pay its debts, creditors look to the LLP's own assets, not the partners' personal assets. A partner's risk is generally what they agreed to contribute. The protection is not absolute: a partner who acts fraudulently, or signs a personal guarantee for a loan, can still be personally liable.
Who usually chooses an LLP?
- Professional and consulting practices.
- Family businesses and trading firms run by partners.
- Businesses that will be funded by the partners themselves.
An LLP is less suitable if you plan to raise equity from angel investors or venture capital funds, because they invest by buying shares. That trade-off is covered in When an LLP is the wrong choice.
Key takeaways
- An LLP is a separate legal entity with limited liability.
- Profit sharing is flexible and set by the LLP Agreement.
- Lighter compliance than a company, but no share-based investment.
MCA data · Financial Year basis
LLP in No’s
- Registered since FY 2016-17
- 5,18,847 (24.0%) of all 21,61,174 companies and LLPs
- FY 2025-26
- 95,965 (27.9%) of that year's registrations
- FY 2026-27 so far (Apr–Sep)
- 59,849 (30.7%) of registrations this year
About 1 in every 4 registrations since FY 2016-17 was an LLP — and the share is rising: from (23.1%) in FY 2016-17 to (27.9%) in FY 2025-26, and (30.7%) so far in FY 2026-27.
See the year-by-year table and charts →PVT. LTD. vs LLP: what 10 years of data shows →Which businesses register in India →
Source: Ministry of Corporate Affairs monthly incorporation data. FY 2021-22 excludes three months the MCA did not publish (Nov 2021, Jan 2022, Mar 2022).
Frequently asked questions
Is an LLP a separate legal entity in India?
Yes. Under the Limited Liability Partnership Act, 2008, an LLP is a body corporate with a legal identity separate from its partners. It can own property, open a bank account, sign contracts and sue or be sued in its own name. It also has perpetual succession, which means the LLP continues to exist even when partners join, leave or pass away.
What is the difference between an LLP and a partnership firm?
A partnership firm is not separate from its partners, and every partner has unlimited personal liability for the firm's debts. An LLP is a separate legal entity registered with the Ministry of Corporate Affairs, and each partner's liability is generally limited to the agreed contribution. An LLP also files yearly returns with the Registrar, which a partnership firm does not.
Is an LLP better than a Private Limited Company?
Neither is better for everyone. An LLP has fewer compliance requirements, no board meetings or AGM, and audit only above set limits, so it suits professional practices and partner-funded businesses. A Private Limited Company can issue shares and ESOPs, so it suits businesses that plan to raise equity funding from angel investors or venture capital funds.
Who should register an LLP?
An LLP usually suits two or more people who want to run a business together with limited liability and simple compliance. Common examples are consulting and professional practices, family businesses, trading firms and small service businesses that will be funded by the partners themselves rather than by outside equity investors.
How many partners are needed to start an LLP?
An LLP needs at least two partners, and there is no maximum limit. At least two of the partners must be individuals who act as designated partners, and at least one designated partner must be resident in India. A partner can be an individual or a body corporate, such as a company or another LLP.
