# LLP vs. Limited Liability Company (LLC) — A Comparative Study

## Setting the Stage

An LLP and a limited liability company (LLC, i.e., a company registered under the Companies Act, 2013) share two important features:

Both are bodies corporate.
Both confer limited liability on their members/partners.

They differ, however, on governance, naming, membership limits, management, and the source of internal rules.

## Comparative Table

#	Basis	LLP	Limited Liability Company (LLC)
1	Regulating Act	The LLP Act, 2008	The Companies Act, 2013
2	Members / Partners	Contributors are called partners	Investors who buy shares are called members (shareholders)
3	Internal Governance	Governed by the LLP Agreement between partners (contractual)	Governed by statute — the Companies Act, 2013 (largely mandatory)
4	Name	Must contain "Limited Liability Partnership" or "LLP" as suffix	Public company → "Limited"; Private company → "Private Limited"
5	Number of Members/Partners	Minimum 2; no maximum limit. Partners can be individuals or bodies corporate (through nominees)	Private Co.: Min 2, Max 200. Public Co.: Min 7, Max — no limit
6	Liability of Members/Partners	Limited to agreed contribution (except in wilful fraud)	Limited to the unpaid amount on shares held
7	Management	Managed by the partners (including designated partners authorised by the LLP Agreement)	Managed by the Board of Directors elected by shareholders
8	Minimum Number of Directors/Partners	Minimum 2 partners (and at least 2 designated partners)	Private Co.: 2 directors; Public Co.: 3 directors

## Big-Picture Differences

1. Source of Internal Rules: LLP is largely contractual (the LLP Agreement is king); a company is largely statutory (the Companies Act is king).

2. Test for Limited Liability: LLP partner → agreed contribution; company member → unpaid amount on shares.

3. Cap on Membership: LLP has none; private company is capped at 200.

4. Management Model: LLP is partner-managed; a company has a separate management organ (the Board).

## Quick Memory Hook

"LLP = agreement + partners + flexibility. LLC = statute + shares + structure."

Worked example

### Example 1

Example 1 — Membership Cap: A start-up wants to onboard 250 small investors as participants in profits. A private company is unsuitable (capped at 200 members). The start-up may consider an LLP (no cap) or a public company.

### Example 2

Example 2 — Liability Test: In an LLP, partner X agreed to contribute ₹5,00,000 but has paid only ₹2,00,000. His liability is capped at the agreed ₹5,00,000. In a company, member Y holds 1,000 shares of ₹10 each, ₹6 paid up. His liability is capped at the unpaid ₹4 per share = ₹4,000.

### Example 3

Example 3 — Governance Flexibility: The partners of an LLP can, by agreement, decide that profits are shared not in proportion to contribution but in a fixed ratio — they simply write it into the LLP Agreement. In a company, dividend rights generally follow the class of shares as governed by the Articles and the Companies Act — much less flexible.

⚠️ Common exam mistakes

Saying that an LLP's internal governance is regulated by statute — it is primarily contractual (the LLP Agreement). The statute fills gaps via the First Schedule.
Forgetting that an LLP has NO maximum cap on number of partners, while a private company has a cap of 200.
Confusing the limited liability test — for LLP it is 'agreed contribution', for a company it is 'unpaid on shares'. Examiners frequently swap these.
Saying an LLP is managed by a Board of Directors — it is not; it is managed by the partners.
Stating the minimum number of directors in a private company is 3 — it is 2 (a public company needs 3).

Reference:

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Distinction between LLP and Limited Liability Company (LLC)

Worked example

⚠️ Common exam mistakes