Question 4 (b)

Company and limited liability partnership distinguished

6 marks

Time to write: About 12 minutes
Topic: LLP: nature, features, comparisons, small LLP
Notes: Crux notes

Question

Question 4 (b) · 6 marks

Distinguish between a Company and a Limited Liability Partnership.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

12 minfor 6 marks

Read from the question

Distinguish betweenSet the differences out in a table, basis by basis, not as two separate essays.

Write it in this order

Read; underline the asks; jot your points 1 min
1 Law, owners, who may join, number, governance 3 marks 5 min
2 Name, management, minimum officers, liability 2 marks 3 min
3 Common ground: separate entity and hybrid nature 1 mark 2 min
Check: every ask answered, key terms underlined 1 min

123

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks. End with step 3 in a line or two.

Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Differences. A company limited by shares and a limited liability partnership (LLP) differ as follows:

Basis	Company	LLP
Governing law	Companies Act, 2013	Limited Liability Partnership Act, 2008
Owners	Members, who invest money in its shares	Partners, who contribute to the LLP
Who may join	Individuals, organisations, trusts or other business forms may be members	Partners may be individuals, or bodies corporate acting through nominees
Number	Private company: at least 2 and at most 200 members; public company: at least 7, with no maximum	At least 2 partners; the Act sets no maximum
Internal governance	Laid down by statute, the Companies Act, 2013	Laid down by the agreement between the partners
Name	A public company's name ends with Limited; a private company's with Private Limited	The name ends with Limited Liability Partnership or LLP
Management	By a board of directors elected by the shareholders	By the partners, including the designated partners authorised under the LLP agreement
Minimum officers	Private company: 2 directors; public company: 3 directors	At least 2 designated partners
Liability of owners	Limited to the amount unpaid on the shares each member holds	Limited to each partner's agreed contribution, except in a case of wilful fraud

Example: three Bengaluru software developers who want to share profits on their own agreed terms, with little paperwork, would find an LLP suitable; a business planning to raise money from many investors through shares would choose a company.

Common ground. Both give their owners limited liability. The LLP is a separate legal entity: it is itself liable to the full extent of its assets while its partners' liability is limited, and it combines the limited liability of a company with the flexibility of a partnership in organising its internal structure, at a low cost of compliance. For this reason it is called a hybrid between a company and a partnership.

Where the 6 marks sit

#	Component	Marks
1	Law, owners, who may join, number, governance	3
2	Name, management, minimum officers, liability	2
3	Common ground: separate entity and hybrid nature	1
	Total	6

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